Affordable housing in major capitals has shown signs of improvement in recent months, helping buyers to enter the market. However, as prices continue to rise, affordability could begin to deteriorate next year, according to an analysis by Moody's Investors Service.
New borrowers needed to allocate a smaller portion of their household income to ensure repayment of their mortgage in recent months, indicating an increase in affordability. In fact, the share of household income needed to manage mortgages in Sydney decreased by 3.8 percentage points to 30.5%.
Read also: The subsidence of land values ​​could improve affordability
This improvement is due to the 4.3% drop in the median housing price in the city until September. However, the capital of New South Wales has begun to record monthly gains since July.
"Financial accessibility has been further improved in Sydney than in any other Australian capital during the year, although Sydney remains the least affordable city in Australia for housing," said Alena Chen, Senior Analyst of Moody's Investor Service.
Melbourne has the same story: in order for new borrowers in the city to pay mortgages, they had to split 26.9% of their household income, down 29.3%.
During the same period, housing prices in Melbourne declined by 1.5%. The 3.2% growth in average weekly income also promoted affordability in the city.
"Housing affordability for new mortgage borrowers has improved on average in Australia because of mortgage interest rate declines and housing price declines," Chen said. .
Read also: Sydney and Melbourne on the rebound?
However, soaring housing prices, particularly in Sydney and Melbourne, could indicate early warning signs of a decline in affordability.
"We expect housing affordability to deteriorate in 2020 as housing prices continue to rise, and the risk of default and default on new mortgages will increase as the cost of housing increases. "Affordability will deteriorate," said Chen.
According to a separate report from the Housing Industry Association (HIA), the Australian housing market appears to be at its most affordable level for more than five years, despite a rebound in prices recorded these last months.
"Interest rate cuts have more than offset the rise in home prices to ensure continued improvement in housing affordability," said the chief economist from HIA, Tim Reardon.
He said that the reduction of interest rates, even though it was not fully passed on to the major lenders, has increased the ability of households to cope with the service of mortgage lending.
"All of these factors were combined in favor of first-time home buyers, which allowed this cohort to account for almost one-third of all new home loans – a record," said Reardon.
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Geelong West
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St Kilda West
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Wiley Park
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