Housing Affordability Slightly Improves
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Housing Affordability Slightly Improves

Despite mortgage serviceability ratios at decade highs in some capital cities.

By Kanebridge News
Wed, Aug 31, 2022 11:43amGrey Clock < 1 min

With the recent decrease in house prices has come the first measurable signs of an improvement in affordability across the property market.

Yet despite the downturn, the pressure on interest rates has kept mortgages — proportionate to incomes — at the highest level they have been since June 2011 according to the latest ANZ/CoreLogic Housing Affordability Report.

The new research found that with property values decreasing, the time it takes to save for a home deposit has also dropped across the combined capital cities by 11 days to 11.11 years in the three months to June 2022.

In Sydney, the time needed to save a deposit was at 17.1 years while Melbourne came in at 13.6 years.

Further, the ratio of dwelling values to household income has also dropped slightly across the combined capitals, down by 0.1 point to 9.3 over the June quarter.

Despite this, the proportion of annual household income required to service a new mortgage nationally is up to 44% from 40.4% the previous quarter.

In Sydney and Melbourne, where property values declined 2.8% and 1.8% respectively, mortgage serviceability is higher with the share of income needed to service a home loan in Sydney up 3.3% to 66.1% and 2.3% to 52.7% in Melbourne.

“There’s a bit of a perception that if house prices fall, then mortgage affordability will improve but actually, on our interest rate forecasts, prices would have to fall another more than 25 per cent for mortgage serviceability to improve, and we don’t think that prices will fall that far, certainly not a national level,” said ANZ senior economist, Felicity Emmett.

“So with higher interest rates, we are seeing a big increase in how much people have to pay to service their mortgage and that means on that measure, affordability will deteriorate”

 

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RMIT expert says a conflation of factors is making the property market hard than ever to predict

By Robyn Willis
Thu, Oct 6, 2022 9:52am < 1 min

A leading property academic has described navigating the current Australian housing market ‘like steering a ship through a thick fog while trying to avoid obstacles’.

Lecturer in RMIT’s School of Property Construction and Project Management Dr Woon-Weng Wong said the combination of consecutive interest rate rises aimed at combating high inflation, higher property prices during the pandemic and cost of living pressures such as the end of the fuel excise that occurred this week made it increasingly difficult for those looking to enter or upgrade to find the right path.

“Property prices grew by approximately 25 percent over the pandemic so it’s unsurprising that much of that growth ultimately proved unsustainable and the market is now correcting itself,” Dr Wong says. “Despite the recent softening, the market is still significantly above its long-term trend and there are substantial headwinds in the coming months. Headline inflation is still red hot, and the central bank won’t back down until it reins in these spiralling prices.” 

This should be enough to give anyone considering entering the market pause, he says.

“While falling house prices may seem like an ideal situation for those looking to buy, once the high interest rates, taxes and other expenses are considered, the true costs of owning the property are much higher,” Dr Wong says. 

“People also must consider time lags in the rate hikes, which many are yet to feel to brunt of. It can take anywhere from 6 to 24 months before an initial change in interest rates eventually flows on to the rest of the economy, so current mortgage holders and prospective home buyers need to take this into account.” 

 

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