Rate reductions are beginning to affect the housing market, according to the latest accessibility study by Real Estate Institute of Australia (REIA).
In the study, REIA found that affordability of housing was improved across the country, with the housing market having the highest percentage of first-time homebuyers in eight years in the September quarter.
"Although the average amount of loans has increased, the increase in family income and falling interest rates have offset this increase," said REIA President Adrian Kelly.
In fact, the number of new loans to first-time homebuyers increased by 13.6% in the quarter and 6.8% over the year. The share of loans granted to first-time homebuyers in total home loans is 29.4%, the highest percentage since the 30.3% recorded in December 2011.
The graph below shows the distribution of loans for the purchase of a first home in each state:
Loan data indicate that Victoria was the most in-demand state for first-time homebuyers during the quarter, about one in every three loans came from the state. New South Wales followed with 27.5% of all outstanding loans. The Northern Territory is the least attractive country for first time homebuyers.
These results already take into account the consecutive rate cuts of the Reserve Bank of Australia in June and July, which reduced the cash rate to 1%. Three months later, the RBA decided to lower its key rate by 0.75%.
Housing affordability has improved in all states except Tasmania. This means that the proportion of income needed to meet loan repayments has decreased. The affordability of rents has also improved in all areas.
In New South Wales, homeowners must allocate 36.2% of their income to the services of their mortgage. This represents a 0.9 percentage point decrease over the quarter. However, New South Wales remains the least affordable state to buy a home.
The most affordable housing markets are found in the Northern Territory, where it only takes 19.2% of a household's income to secure repayment of loans.
The table below shows the improvement in affordability of housing in each state:
Housing Affordability – Quarter of September 2019
State
Income share required to meet mortgage repayments
New South Wales
36.2%
Victoria
32.2%
Queensland
27.3%
South Australia
26.2%
Western Australia
22.1%
Tasmania
26.2%
Northern Territory
19.2%
Territory of the Australian Capital
19.5%
Source: REIA
As for rents, the most affordable state is Western Australia, where the share of family income needed to cover the median rent is only 16.3%.
On the other hand, the most expensive state to rent a home is New South Wales. If affordability has already improved in this state, tenants still have to spend 27.8% of their income to pay average rents.
It is interesting to note that mortgage service costs less than renting a house in Tasmania. In that state, the share of income needed to repay loans is only 26.2%. Households renting in Tasmania spend 29.6% of their rental income.
The table below shows the affordability of rental in each state and territory:
Affordability of Rental Housing – September 2019 Quarter
State
Share of revenues needed to cover median rents
New South Wales
27.8%
Victoria
22.7%
Queensland
21.7%
South Australia
21.8%
Western Australia
16.3%
Tasmania
29.6%
Northern Territory
19.1%
Territory of the Australian Capital
18.3%
Source: REIA
Top suburbs:
Narara
,
Ferntree Gully
,
Darlington
,
Tuart Hill
,
Keperra
Get help for your investment property
Do you need help in finding the right loan for your investment?
When you invest in real estate, it is important to make sure that you do not have it only. The lowest available rate that you can get, but you also have the loan features tailored to your needs. What features or types of loans are suited to your needs? We will even help with the paperwork. In addition, an appointment is free.
We value your privacy and treat all your information seriously – you can check
our privacy policy here
