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Weak earnings growth and last year’s home loan rate hikes are preventing a significant improvement in housing affordability, according to a recent report.
The latest Housing Industry Association (HIA) Affordability Report indicated that although housing affordability improved slightly over the first quarter of the year, various factors continue to curb a more notable improvement.
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The report showed that affordability experienced an improvement during the first three months of 2016, driven by a fall in the national median dwelling price.
Sydney saw the largest improvement in affordability with an increase of 8.9 per cent, followed by Perth (4.9 per cent) and Darwin (4.4 per cent).
Hobart also experienced an increase in affordability of 2.9 per cent, as did Melbourne (2.0 per cent).
However, affordability declined in Brisbane by 1.2 per cent, Adelaide (0.2 per cent) and Canberra (0.3 per cent).
Despite some positive results nationally, HIA senior economist Shane Garrett said there could have been a more significant improvement.
“Had it not been for the shock increase in variable mortgage interest rates late last year, the improvement in affordability would have been even better,” Mr Garrett said.
“Earnings growth has been held back by slack in the economy and this situation has also worked against improving affordability.”
Mr Garrett said the most durable way of improving affordability is to more effectively facilitate the supply of affordable new housing.
“Planning delays, land supply shortages and the heavy tax burden are all making the achievement of housing affordability much more difficult.”
[Related: Rising home loans largely behind affordability decline]
