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The housing market is in considerably better shape than it was a year ago with affordability improving dramatically in line with the low interest rate cycle.
The latest Housing Industry Association (HIA) and Commonwealth Bank (CBA) First Home Buyer Affordability Index released yesterday showed affordability for first timers increased by an enormous 39.2 per cent in the December quarter.
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The improvement reflects the significant reduction in interest rates in recent months, the boost to the first home owners grant and a softening in property prices across the country.
According to the Index, average home loan repayments now sit at $2,056 per month – 26 per cent less than the $2,796 recorded for the September quarter last year.
Peter Bromley, general manager of LJ Hooker Financial Services, said the improvement in affordability was great news for the market and was already apparent in January business levels.
“We’ve seen first home buyer activity increase nationwide, on both the east and west coasts,” he told Mortgage Business.
“Our January result has been very encouraging with sales this January up around 12 per cent on January 2008.
I would expect a very strong February and March to follow.”
Lee Dittmer of Who Finance in Victoria was also pleased by the news.
“I’m not surprised at all,” she said. “Enquiry levels and activity are certainly picking up.”
While the current improvement in affordability could open home ownership up for more Australians Ms Dittmer said it was important brokers ensured clients’ loans remained affordable if market conditions changed.
“While it’s all good news, it’s important not to place customers into a loan they can only just afford, particularly with first home buyers.
“You need to make sure they will still be able to afford the loan if rates revert to 8 or 9 per cent.”
As long as borrowers didn’t stretch themselves too far and considered the long term, Ms Dittmer said they’d be “crazy not to jump into the market now”.
