Affordability Trends Better In Most Capitals

Posted on 25/01/2019  
Affordability Trends Better In Most Capitals

Australia’s record home-building boom continues to improve housing affordability, according to HIA Senior Economist Geordan Murray. Affordability in six of the eight capital cities is now better than the 20-year average.

The HIA Affordability Index for Australia’s capital cities registered 75.4 in the December 2018 Quarter. This is a level that is 1.5% higher than in the previous quarter and 3.3% higher than a year earlier.

“2018 was the fifth consecutive year where the industry commenced construction of over 200,000 homes and it was a record year in terms of new dwelling completions,” Murray says.

“This strong flow of new housing supply is one of the key factors behind the moderation in price pressures in housing markets across the country, which has ultimately improved housing affordability.”

The other key factor has been the modest improvement in wages growth. Strong growth in employment over the last two years has boosted demand for workers. “We are seeing the early signs that this tightening in the labour market is translating into rising wages,” he says.

The combination of declining home prices in some cities, growth in wages and historically low interest rates creates a situation where the HIA Affordability Index shows that affordability in six of the eight capital cities is more favourable than the 20-year average. Melbourne and Hobart are the only exceptions.

“Despite the improvement in affordability over recent quarters, housing in Sydney and Melbourne remains far from affordable for average households,” Murray says. “We will need to see wage growth continue to exceed home prices in order to restore more appropriate levels of affordability.”

Sydney continues to record the greatest improvements to affordability, with its index up by 11.3%. This was followed by Melbourne (+5.9%), Perth (+5.7%), Darwin (+3.2%) and Brisbane (+0.8%). Affordability deteriorated in the cities with the strongest price growth in 2018: Hobart (-9.3%), Canberra (-3.6%) and Adelaide (-3.3%).

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