Housing Finance Values Reach Record Highs
It follows the eighth consecutive month of growth.
It follows the eighth consecutive month of growth.
The value of new loan commitments for housing has grown for the eighth consecutive month, reaching another record high across the country according to statistics from the Australian Bureau of Statistics’ January 2021 Lending to Households and Business figures and the Real Estate Institute of Australia (REIA).
The report shows that new loan commitments for owner-occupier housing rose 10.5% in January and follows a 44.3% rise for the past 12 months. A rise was seen in all states and territories, with the exception of the Norther Territory.
Further, the value of new loan commitments to owner-occupiers rose 10.9% which marks the largest monthly increase since August 2020.
According to Adrian Kelly, President of the Real Estate Institute of Australia: “The number of owner-occupier first home buyer loan commitments increased by 9.6 per cent for the month and is 70.8 per cent higher than twelve months earlier. This is the highest level since May 2009, when the Commonwealth Government’s response to the GFC included the temporary increase in the first home-owner grant.”
Owner-occupier first home buyer loan commitments accounted for 36.5 per cent of all owner occupier commitments excluding refinancing.
Further, investors had also increased their activity with loans also increasing for the eighth consecutive month.
“The value of loan commitments for investor housing increasing by 9.4 per cent for the month, the largest rise since September 2016, and 22.7 per cent for the year on the back of improving rental market conditions. The largest increase in the value of new loan commitments to investors was in Victoria with an increase of 12.9 per cent in January,” added Mr Kelly.
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New research suggests spending 40 percent of household income on loan repayments is the new normal
Requiring more than 30 percent of household income to service a home loan has long been considered the benchmark for ‘housing stress’. Yet research shows it is becoming the new normal. The 2024 ANZ CoreLogic Housing Affordability Report reveals home loans on only 17 percent of homes are ‘serviceable’ if serviceability is limited to 30 percent of the median national household income.
Based on 40 percent of household income, just 37 percent of properties would be serviceable on a mortgage covering 80 percent of the purchase price. ANZ CoreLogic suggest 40 may be the new 30 when it comes to home loan serviceability. “Looking ahead, there is little prospect for the mortgage serviceability indicator to move back into the 30 percent range any time soon,” says the report.
“This is because the cash rate is not expected to be cut until late 2024, and home values have continued to rise, even amid relatively high interest rate settings.” ANZ CoreLogic estimate that home loan rates would have to fall to about 4.7 percent to bring serviceability under 40 percent.
CoreLogic has broken down the actual household income required to service a home loan on a 6.27 percent interest rate for an 80 percent loan based on current median house and unit values in each capital city. As expected, affordability is worst in the most expensive property market, Sydney.
Sydney
Sydney’s median house price is $1,414,229 and the median unit price is $839,344.
Based on 40 percent serviceability, households need a total income of $211,456 to afford a home loan for a house and $125,499 for a unit. The city’s actual median household income is $120,554.
Melbourne
Melbourne’s median house price is $935,049 and the median apartment price is $612,906.
Based on 40 percent serviceability, households need a total income of $139,809 to afford a home loan for a house and $91,642 for a unit. The city’s actual median household income is $110,324.
Brisbane
Brisbane’s median house price is $909,988 and the median unit price is $587,793.
Based on 40 percent serviceability, households need a total income of $136,062 to afford a home loan for a house and $87,887 for a unit. The city’s actual median household income is $107,243.
Adelaide
Adelaide’s median house price is $785,971 and the median apartment price is $504,799.
Based on 40 percent serviceability, households need a total income of $117,519 to afford a home loan for a house and $75,478 for a unit. The city’s actual median household income is $89,806.
Perth
Perth’s median house price is $735,276 and the median unit price is $495,360.
Based on 40 percent serviceability, households need a total income of $109,939 to afford a home loan for a house and $74,066 for a unit. The city’s actual median household income is $108,057.
Hobart
Hobart’s median house price is $692,951 and the median apartment price is $522,258.
Based on 40 percent serviceability, households need a total income of $103,610 to afford a home loan for a house and $78,088 for a unit. The city’s actual median household income is $89,515.
Darwin
Darwin’s median house price is $573,498 and the median unit price is $367,716.
Based on 40 percent serviceability, households need a total income of $85,750 to afford a home loan for a house and $54,981 for a unit. The city’s actual median household income is $126,193.
Canberra
Canberra’s median house price is $964,136 and the median apartment price is $585,057.
Based on 40 percent serviceability, households need a total income of $144,158 to afford a home loan for a house and $87,478 for a unit. The city’s actual median household income is $137,760.
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