While weakening home prices may alarm some economists and industry professionals, the latest Housing Industry Association (HIA) report provides another perspective, and sends good news to prospective buyers.
“Easing house price pressures are providing some affordability relief for home buyers,” affirms Diwa Hopkins, HIA Economist.
The HIA Affordability Index for the June 2018 quarter scored 74.9, up by 0.4% over the quarter and up by 0.8 % compared to 2017, when affordability rate moved to its lowest level in almost six years.
“Previous strong price increases were met by an unprecedented level of building which is now starting to come online. This is providing much-needed additional supply in key markets, helping to reduce price pressures,” shared Hopkins.
HIA also assessed home values in relation to rents, scrutinising the balance in housing supply and demand in the capital cities, and how they have changed over the recent past.
The balance between supply and demand is an essential driver of home prices and affordability.
The report found that most markets are evenly balanced. In Sydney and Melbourne, rental price hikes have been steady while dwelling prices are dropping. This indicates that the overall supply matched the demand.
Hopkins further explained that with an even balance in overall housing supply and demand in these foremost markets, the current decline in house prices is unlikely to be long lasting or to reach an extremes
“We could expect this downturn in prices to play out like previous cycles. They typically last 12 to 18 months, with the size of the fall modest relative to the immediately preceding expansion.
“In the meantime, declining prices will continue to drive improvements in affordability particularly in the Sydney and Melbourne markets,” she said.
Within the period covered by the report, housing affordability improved in five of Australia’s eight capital cities. Perth was named most affordable capital city, followed by Darwin and Hobart.
Over the year through June, five of the eight capital cities saw improved affordability. The largest figure recorded was in Darwin (+7.4%) followed by Sydney (+6.8%) and Perth (+6.2%). There were minor progressions in both Brisbane (+2.1%) and Canberra (+1%).
The largest downturn occurred in Hobart (-10.5%), while affordability fell in Adelaide (-1.7%) and Melbourne (-1.3%).