Affordability relief may be on the way for property investors and owner-occupiers, according to the latest Housing Industry Association (HIA) report, which found decreasing house prices across Australia.
In the June 2018 quarter, the HIA Affordability Index posted 74.9, up by 0.4% over the quarter and up by 0.8 % compared to 2017, when affordability dipped to its lowest level in almost six years.
“Previous strong price increases were met by an unprecedented level of building which is now starting to come online. This is providing much-needed additional supply in key markets, helping to reduce price pressures,” said HIA Economist Diwa Hopkins.
HIA also analysed dwelling values in relation to rents, examining the balance in housing supply and demand in the capital cities, and how they have shifted over the recent past.
The balance between supply and demand in a home market is an important driver of dwelling prices and, of course, affordability.
The report revealed that most markets are evenly balanced. In Sydney and Melbourne, rental price increases have been steady while dwelling prices are weakening. This implies that the overall supply is well matched with the demand.
Hopkins also highlighted that with an even balance in overall housing supply and demand in these major markets, the current decrease in house prices is unlikely to be long-term or severe.
“We could expect this downturn in prices to play out like previous cycles. They typically last 12 to 18 months, with the size of the fall modest relative to the immediately preceding expansion.
“In the meantime, declining prices will continue to drive improvements in affordability particularly in the Sydney and Melbourne markets,” she said.
Housing affordability improved in five of Australia’s eight capital cities in the June 2018 quarter. Perth is Australia’s most affordable capital city, followed by Darwin and Hobart.
Over the year through June, five of the eight capital cities saw improved affordability. The largest improvement was in Darwin (+7.4%) followed by Sydney (+6.8%) and Perth (+6.2%). There were minor progressions in both Brisbane (+2.1%) and Canberra (+1%).
The largest declines occurred in Hobart (-10.5%). Affordability trended lower in Adelaide (-1.7%) and Melbourne (-1.3%).
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