The amount a property costs in terms of the burden of ownership has fallen over the last 3-years. Many financial experts suggest that this is due to interest rate cuts, but note that this trend is changing.
Housing affordability, according to the HIA-Commonwealth Bank Housing Affordability Index, became more affordable during the period from December 2010 to September 2013. This was associated with falling interest rates and moderate home price growth. However, housing affordability over the last quarter has declined by 0.4 percent.
Australian capital cities recorded mixed results with housing affordability falling in some areas and rising in others. Housing affordability fell in Hobart by 9.2 percent, Sydney by 4.4 percent, Perth by 2.5 percent, Brisbane by 1.0 percent and by 1.2 percent in the Australian Capital Territory. While housing affordability rose in Adelaide and Melbourne by 5.5 percent.
Why Did Housing Affordability Fall?
The falls in housing affordability were said to be associated with rises in property prices in these areas. Interest rates over this time have remained steady, and in some cases, have been reduced. However, rises in the median home prices of these areas have outweighed costs of lower borrowing.
The governor of the Reserve Bank of Australia (RBA), Glenn Stevens, recently said that dwelling prices had risen by over 10 percent over the last 12-months. Home prices were now said to be some 5 percent more than their peak in 2010.
In addition, the Affordability Index stated that the dollar value of monthly mortgage repayments for median priced property had risen from $2,458 to $2,500 over the last quarter. Median home prices had also increased by $11,400 to $470,400.
Economists expect the housing market to continue growing in value during 2014. Though many believe that it will be much slower than 2013 growth rates due to unemployment and household earnings.
Housing Prices are Expected to Continue Rising Along with Affordability
Very few economists are saying that there will be more rate cuts in the future Those who previously said another rate cut, possibly two, in 2014 was possible, have since changed their minds. Most economists feel rates will hold steady until the end of 2014, possibly early 2015, before they start to climb back up.
Housing prices are expected to rise throughout 2014 and well into 2015. This, and the prediction that interest rates will rise, is expected to reduce housing affordability further.
Housing Affordability rises will make it more difficult for those looking to get into the property market. Prospective home buyers will need to either save a larger deposit or will need to consider buying a home worth less so that they can break into the property market.
Do you want to know more about housing affordability and how it can affect you? Then contact eChoice today.
Written by eChoice