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Higher interest rates and house prices caused housing affordability to plummet at the end of last year, a new report has found.
According to the HIA-CBA First Home Buyer Affordability Report, released yesterday, housing affordability tanked in the December 2009 quarter dropping 18.4 per cent to be 22.3 per cent lower than 12 months ago.
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HIA senior economist Ben Phillips said while first home buyers had a small window of favourable affordability conditions to enter the market prior to the December quarter, that window is now closing with affordability retreating to 2008 levels when interest rates were significantly higher.
“Australia’s fast growing population is pushing new dwelling requirements to record high levels. Without the required new home building to keep up with underlying requirements house prices and rents are expected to continue pushing upwards through 2010,” Mr Phillips said.
“With housing affordability heading backwards, housing policy must be front and centre of the policy debate as Australia heads towards a federal election later in the year.”
HIA is forecasting a moderate housing recovery through 2010 with around 152,000 dwelling commencements, still well down on the 190,000 required by increases in the level of Australia’s population.
Affordability deteriorated in all capital cities and regional areas in the December quarter. The largest falls were recorded in Sydney, Brisbane, Hobart, and Canberra.
