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Housing affordability best since 1999

Housing affordability is the best it’s been in 20 years, according to the latest HIA figures.

HIA Senior Economist Geordan Murray said the figures, gathered from the HIA Affordability Index for the June 2019 quarter, are thanks to a combination of lower home prices, improvements in wage growth and lower interest rates.

“For a home buyer with an average income purchasing a median priced dwelling (assuming a 10 per cent
deposit), mortgage repayments will consume the smallest proportion of their earnings since 1999,”
Mr Murray said.

HIA’s Affordability Index is calculated for each of the eight capital cities and regional areas on a quarterly
basis and takes into account the latest dwelling prices, mortgage interest rates and wage developments.

“The main reason the HIA Affordability Index today is comparable with the level in 1999, despite house
prices rising significantly faster than incomes, is that interest rates are 4.6 per cent today compared with
6.7 per cent in 1999,” Mr Murray explained.

“Average earnings have increased by 113 per cent over the 20 years to 2019, while the median home
price has increased by 228 per cent but the lower interest rates have kept the cost of servicing a loan
the same.”

He said there were also a number of initiatives that do not feed into this Affordability Index that would assist with
first home buyers entering the market.

“The reduction in income tax, the easing of APRA restrictions on mortgage lending and the Australian government’s First Home Loan Deposit Scheme are likely to be important considerations for households,” Mr Murray said.

“Despite a significant improvement in affordability Sydney remains the least favourable market in the
country, requiring 1.8 times the average income to service a mortgage on a typical Sydney home.”

All eight capital cities saw an improvement in the affordability index over the quarter to June 2019. Darwin
saw the greatest improvement, its index up by 4.8 per cent. This was followed by Melbourne (+3.0 per
cent), Perth (+2.6 per cent), Brisbane (+2.6 per cent), Sydney (+2.4 per cent), Canberra (+ 2.4 per cent),
Hobart (+ 2.2 per cent) and Adelaide (1.0 per cent).

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