According to HIA Chief Economist, Tim Reardon, the cuts to interest rates have more than offset the rise in home prices to ensure an ongoing improvement in housing affordability. HIA’s Affordability Index is calculated for each of the eight capital cities and regional areas on a quarterly basis and takes into account the latest dwelling prices, mortgage interest rates and wage developments.
“Despite recent house price increases, all eight capital cities experienced an improvement in affordability,” said Mr Reardon. “The HIA Affordability Index improved by 2.2 per cent in the September 2019 quarter due to the reduction in interest rates and ongoing wage growth. Australians are still a nation that aspires to own a home. Over 90 per cent of renters want to own their own home, partly due to the financial stability it provides in retirement. With little opportunity for interest rates to be reduced further, improvements in affordability will require the right economic conditions with a strong volume of new homes, low interest rates and supportive policy settings from state and federal governments.”
Mr Reardon said up to 50 per cent of the cost of a house and land package can be red tape and taxes.
“Reducing the tax on homes and ensuring an adequate supply of homes is an ongoing challenge for governments,” said Mr Reardon.
All of the eight capital cities saw improved affordability over the year to September 2019.