Housing Industry Association     Published on  20/05/19

Extract from HIA Affordability Report

Source: Housing Industry Association (HIA) Affordability Report1, March 2019 Quarter. Published Friday 17th May 2019

The national HIA Affordability Index rose in the March 2019 quarter, signalling an improvement in affordability, rising by 2.1 per cent to 79.0 in the March quarter this year (a significant improvement of 5.4 per cent when compared to March 2018 quarter). This is the largest improvement in the affordability index for 12 months since September 2013.

Affordability improvements were driven mostly by housing price declines but also slight upticks in wages growth.

The improvement in affordability is most significant in east coast capital cities

By virtue of their size, Sydney and Melbourne have been driving affordability improvements at the national level.

These improvements have been driven by the influx of new housing supply and tight credit conditions which have put downward pressure on home prices.

While affordability in Sydney remains the most challenging for home buyers, the affordability index has been improving since mid-2017 and is now above its 20-year average.

Sydney experienced the strongest annual improvement in housing affordability in the December 2018 quarter.

Relief for First Home Buyers

This relief from the ongoing deterioration in affordability is welcome news for first home buyers who are an increasingly important component of the new home market.

Unfortunately, as the supply of new homes starts to slow toward the end of 2019, the downward pressure on house prices will start to ease and the improvement in affordability will also start to moderate, unless wage growth accelerates.

Read the full HIA report here

1) The HIA Affordability Index is designed so that a result of exactly 100 means that precisely 30 per cent of earnings are absorbed by mortgage repayments.

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