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Stressful time for buyers and sellers "ANOTHER severe blow was dealt to home buyers in the December quarter 2007, with interest rate rises biting hard and home loan affordability deteriorating across Australia, except in Western Australia," says Noel Dyett, President of the Real Estate Institute of Australia (REIA).The proportion of family income required to meet average home loan repayments rose to 37.4 per cent in the December quarter 2007, the highest level reached during the 22 years that REIA has recorded home loan affordability data. REIA data relates to all new home loans in a quarter, and excludes refinancing. Keith Levy, National Manager, Deposit Power believes that despite record income and employment levels, the rising costs of food and petrol combined with interest rate rises have left consumers with little spending power. "Even though family income and national employment are at record levels, competitive pressures within the mortgage industry have left many people with debts that they may not be capable of maintaining," he said. Five of the states and territories have recorded the highest proportion of income ever needed to meet loan repayments this quarter, while Tasmania recorded its second highest proportion and Canberra recorded its third highest proportion. "As the published data relates to the December quarter 2007, it does not take into account the February 2008 interest rate rise. While there are expectations of further interest rate rises during 2008, this is unlikely to have a significant dampening effect on house prices, because of the ongoing shortage in housing stock which continues to put upward pressure on prices. "It is therefore likely that home loan affordability will continue to worsen during 2008," says Noel Dyett. "Measures announced by the Government to address affordability are welcome, but will not have immediate effect. Buyers can expect the pain to continue for some time. Government should act immediately to provide more assistance to first home buyers, by increasing the First Home Owners Grant. "For those caught in the rental market as a home purchase moves out of reach, or for those who make an economic choice to rent rather than buy, newly published REIA data on rental affordability is also not a source for optimism," Mr Dyett concluded. Overall in Australia, renting families required 23.9 per cent of their median family income to meet rent payments in the December quarter 2007. This compares with 22.4 per cent of family income required for rent in December 2006, and 23.3 per cent in September 2007. Renters in Tasmania are in the worst position, requiring 28.4 per cent of family income to meet rent payments in the December quarter 2007. This is because the Tasmanian median income is the lowest in Australia, yet rents are relatively high at $280 per week for the December quarter. Renting in Darwin is now more expensive than buying. The proportion of family income required to meet rent payments is 26.1 per cent, compared with 23.3 per cent required for home loan repayments. Darwin rents are the highest in Australia. "Again,the clear message is that more housing supply is needed to ease financial and social stress, particularly at a time when other basic necessities in life are increasing in price," says Noel Dyett. |
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