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Buying a home is set to become even harder THE decision by the Reserve Bank of Australia to lift interest rates by 0.25 per cent is very unwelcome news for already stretched home buyers, says Real Estate Institute of Australia (REIA) President Graham Joyce.The Deposit Power/REIA Home Loan Affordability Report found that Australian families needed 34.8 per cent of their family income to pay an average home loan in the March quarter 2007. "This interest rate rise will put further pressure on home loan affordability. "While all borrowers should budget for potential changes in interest rates, there is no doubt that a 0.25 per cent rate (or an average $50 per month) increase puts pressure on buyers already stretched to their financial limit and locks out many potential first homebuyers," says Graham Joyce. "As well as being a deterrent to new entrants to the market, the critical investor segment of the market will also look unfavourably at today's decision. Without more investors willing to purchase affordable properties for rent, tight vacancy rates will continue to push rents up, putting the squeeze on renters. "While the REIA has called on Federal, State/Territory and local Governments to embrace a range of measures which will assist in bringing balance to the housing supply and demand equation, the most critical factor is a sound economy with stable interest rates. "This decision to lift interest rates stable is yet another loud warning bell to all Governments that cooperative action must be taken now to address housing affordability through various supply and demand levers, including reform of planning processes, development of infrastructure, access to voluntary superannuation for a home deposit, review of the First Home Owners Grant and reduction of state property taxes. "Importantly, the Federal Government should appoint a Federal Housing Minister and Ministerial Council to develop a cooperative strategic plan in consultation with industry to address housing affordability. "The Government considered that there was a national problem in 2004 when it asked the Productivity Commission to review the plight of first home owners. Nothing happened, except that the problem worsened," says Graham Joyce. |
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