Housing affordability has continued to decline with the proportion of income required to meet repayments jumping by 0.4% to 34.6%, according to the latest figures from the Real Estate Institute of Australia.
Armed with its latest findings, the REIA plans to attend the Government’s Tax Summit next month and lobby for structural change to how property taxes are calculated, including the collection of stamp duty.
The group has also called on the Reserve Bank to deliver a cut to the official interest rate, saying this would revive confidence in the sector.
“[We need a rate cut] as soon as possible. I think there are a lot of factors the RBA takes into consideration, but with unemployment creeping up and inflation pressures, there are factors to keep in mind,” says interim president Pamela Bennett.
The REIA joins the growing number of business groups and business experts calling on the RBA to deliver a rate cut before the end of the year.
The newest REIA-Deposit Power Housing Affordability Report states that the average percentage of income required to meet mortgage payments has risen to 34.6%.
The Australian Capital Territory has remained the most affordable state or territory, with just 18.8% of income required, but New South Wales has recorded the largest decline in affordability, with 38.7% of income required.
New South Wales has also remained the least affordable state or territory for the past 15 years.
The Northern Territory, Western Australia and Victoria saw improvements, but Victoria has actually recorded the biggest decline over the year, to 35.2% of income, and is the second least affordable state behind New South Wales. Queensland requires 33%, Tasmania 29.5% and South Australia 34.5%.
Bennett says the group is concerned that affordability has continued to deteriorate.
“I think the market has retracted. Of course, affordability is a major impediment to purchasing, and if you look at the statistics, having 35% of income required to meet repayments is a significant figure.”
“We were extremely pleased to see interest rates stay on hold, and very pleased to see there wasn’t an increase. We really do need a cut to interest, and an improvement in affordability.”
The call from the REIA comes as the housing market is expected to remain flat over the next year. Recent figures form SQM Research showed prices may fall by 7% over the next year in some capital cities if interest rates remain on hold, providing ample choice for first home buyers.
This is also bolstered by recent figures that showed an increase of 10.6% in the total number of housing loans in the June quarter. However, Bennett says these numbers must be taken with caution.
Deposit Power manager Keith Levy said in the report that moving into the spring selling season, potential buyers should keep an eye out for good deals.
“Whether a home buyer or an investor, consider capitalising on median house prices being steady and making a purchase before the market heats up again.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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