Kathryn Lee - 19 Jun, 2019

New research has found housing affordability is at its best since 2016

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New research has found housing affordability is at its best since 2016, with some cities faring better than others.

The ANZ-CoreLogic Housing Affordability Report found it is a prime time for first home buyers, thanks to a drop in house prices coupled with consistently growing household incomes… in most areas, that is.

While Sydney and Melbourne (and Hobart!) remain slightly elusive to many, other capital cities are ripe for the picking – or investing.

With this killer combo of housing affordability and low interest rates, it’s a perfect time to enter the market, but that doesn’t mean existing homeowners should be too concerned. ANZ-CoreLogic researchers believe the price drop will steady towards the end of the year, and gradually increase from 2020.

So, where should you start looking for your first home?

NSW housing affordability

Although marginally improved from two years ago, buying remains difficult for many in Sydney, with renting being the cheaper option. The most affordable areas are in the city’s west, as well as Paramatta and Camden.

In fact, you would have to head quite far from the CBD to find areas where it’s easier to buy. Regions like the Upper and Lower Hunter, Lithgow, Tamworth, Wagga Wagga, Dubbo and beyond ranked well in the research, so lovers of country life are in for a win.

Unfortunately, NSW still has the least affordable regional areas compared to the other states.

How affordable is housing in Victoria?

While Melbourne remains the second least affordable housing market after Sydney, increasing incomes have helped level the playing field for some. While it’s still more viable to rent in most parts of the city, the heart of the CBD is an exception, where buying a property might work out better. Port Phillip, Casey and Wyndham also rated well in the affordability metrics.

According to the report, housing values were rising faster than incomes in regional Victoria. While dwelling values rose 65.2% over the past decade, household incomes rose only 39.8%. The Grampians, LaTrobe Valley, Shepparton and Wellington floated towards the top of the affordability scale.  

The price of property in Queensland

It’s all good news for Brisbane folks, who are experiencing the most affordable housing market in a decade. The main reason is that household incomes have risen a lot quicker than house prices in this capital city. Brisbane East and North look quite good for inner city areas, but not as good as suburbs a bit further out, such as Ipswich, The Hills District and Springfield-Redbank.

The situation in regional Queensland is similar, but slow-rising house prices mean investments aren’t golden. It is, however, marginally cheaper to buy than rent. Keep an eye on Townsville and Port Douglas, if you can afford it.

ACT housing affordability

Thanks to high average incomes, Canberra is very affordable when it comes to capital cities. The research found that it should take just under seven years to save a 20% deposit by saving only 15% of your income, less than the 10 to 12 years it would take Melbournians or Sydneysiders.

Having said that, household incomes rose at less than half the rate of dwelling values toward the end of 2018, so you might want to get in quick if this trend continues. This is also a place where rents are rising rapidly too.

How affordable is housing in South Australia?

When it comes to housing affordability, Adelaide suffers thanks to relatively low household incomes. House prices have risen slightly quicker than earnings, resulting in an unfavourable tilt when it comes to housing affordability, but you’re still slightly better off than a decade ago. Having said that, Gawler, Adelaide Hills, Playford and Salisbury all rated well among Adelaide suburbs.

When it comes to regional SA, it is typically more expensive to rent than buy. Fleurieu and Kangaroo Island are glaring exceptions and are the least affordable areas in what is considered regional SA.

Western Australia house prices

In Perth, rents have started to rise again over the past year following a period of downward spiralling, post mining boom. However, this era of lower rents and house prices has meant that Perth is much more affordable now than it was only half a decade ago thanks to strong income growth. Side note: Cottesloe is the least affordable area, so don’t start your search for a home there.

On average, regional WA fared better than most parts of Australia (other than Darwin). The report found it should take less than five-and-a-half years to save a deposit (that compares to over nine-and-a-half and seven years for Sydney and Melbourne respectively), and it would take around 22% of your income to service your mortgage.

The price of property in NT

Darwin leads the pack of capital cities in rental and housing affordability thanks to high incomes and declining property prices. It is also the only capital city where it is more expensive to rent than to buy! House prices have dropped significantly since 2014, which may not be great news for existing owners, but it’s not a bad time for first home buyers.

Regional areas of the territory echo these findings, however, household incomes aren’t rising at any substantial rate. It is also significantly cheaper to buy a home in regional NT than to rent one.

Housing affordability in Tasmania

Hobart really is the dark horse of Australia’s housing market. In the last quarter of 2018, dwelling values rose at twice the pace of household incomes, meaning Hobart is at its least affordable since 2002.

Thanks to low household incomes and soaring rents, it is the least affordable capital city in the country when it comes to rental costs. ANZ-CoreLogic reports rental prices in Hobart have risen by 7.1% in the past year alone.

This is opposite to regional parts of Tassie, where incomes have risen more than house prices. It is on average better to buy than rent in these areas, most notably in Launceston (albeit marginally).

Note: The ANZ-CoreLogic results were reached through a combination of research methodologies, including the ratio of dwelling values to annual household income, the number of years it takes to save a 20% deposit, the proportion of household income required to service and 80% LVR mortgage, and the proportion of household income required to pay rent.

Words by Rebecca Mitchell.

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