Australian housing affordability the best in a decade – yet the shortage of new housing continues

By Angus Raine
The federal election is now thankfully behind us, yet many real estate markets around the country continue to poll well, as the combination of improved housing affordability, lower interest rates and a shortage of homes for sale augurs well for Australian real estate markets. 
For example, the June Quarter 2013 edition of the Adelaide Bank/REIA Housing Affordability Report, released in September, revealed an improvement in housing affordability with the proportion of income required to meet loan repayments falling by 1.2% to 28.7% – the lowest mark since the June quarter of 2003.
Add the prospect of low interest rates to the shortage of listings and already we’re seeing more committed buyers making a move this Spring, with clearance rates averaging around 75% in our major population centres – it’s as much as 85% in auction hotspots such as Sydney and Melbourne. I’d even go as far as to say we haven’t seen a Spring market like this since the global financial crisis half a decade ago.
However, the current levels of affordability will not last indefinitely. In trend terms, home prices are already 5.2% higher in the year to 25 August, according to recent research from ANZ Bank. In the past year, Perth and Sydney posted the strongest trend price growth (up 9.4% and 6.8% respectively), with more modest gains in Melbourne (4.6%) and Brisbane (1.7%). Only Adelaide posted negative trend price growth in the last year (-0.6%).
At the same time, the shortage of quality homes for sale and the prospect of improved buyer demand makes the remainder of 2013 a great time for those looking to sell a property. So, if you haven’t contacted your local Raine & Horne real estate agent for an appraisal of the value of your home, it might be time to pick up the phone. 
Looking ahead, and although the Reserve Bank quite rightly left interest rates on hold in September to give it time to consider the impact of the Federal Election result, another interest rate cut, which some economists are tipping, would really make the market hum by attracting more activity – particularly entry-level buyers.
Long-term, the lack of quality housing stock remains an issue. In August, the latest Australian Performance of Construction Index (Australian PCI)  from the Housing Industry Association (HIA) registered 43.7, down slightly (by 0.4 points) on the July reading, with readings below 50 indicating a contraction in building activity. 
The index has now been in negative territory for 39 consecutive months, which is a sorry indictment on the red tape facing property developers in this country. If this sorry state of affairs persists, the HIA has calculated that Australia’s cumulated housing shortage would reach 466,000 dwellings by 2020. This might be good for capital values but will do nothing to help housing affordability over the longer-term, which our governments need to address sooner rather than later. 

Angus Raine is a leading commentator on the Australian property industry and has been CEO of the Raine & Horne property group since 2006.

Mr Raine started his real estate career over twenty six years ago, previously working with three blue-chip international real estate firms, before becoming director of Raine & Horne Holdings Pty Limited in 1998.
Mr Raine is an accomplished real estate specialist and his academic and industry qualifications include a Diploma of Business (Valuation) and a Diploma of Business (Franchising). He is also a registered valuer, a Fellow of the Australian Property Institute, Member Royal Institution of Surveyors (MRICS), and a licensed real estate, stock and station business agent.
Angus is a Graduate of the Harvard Business School’s Owner/President Management Programme, and has a professional certificate in Advanced Corporate Real Estate (API/UWS).
Since 2000, Mr Raine has been a committee member of the Family Business Association’s New South Wales chapter.