Housing affordability declines in June quarter

By Michael Mata



Housing affordability continued to decline in the June quarter, according to HIA’s latest Affordability Index. This is largely due to the rise in the median dwelling price of 9.1% to a record high of $540,200.

The index is produced quarterly and utilises a range of data, including wages, house prices, and borrowing costs to provide an indication of the nationwide affordability of housing. A higher index result indicates a more favourable affordability outcome.

The growth in house prices in the June quarter outstripped the growth in wages, resulting in the deterioration of affordability. As a result, the Affordability Index for Australia dropped by 0.3% in the June quarter.

New South Wales saw the most significant negative influence on the results, with affordability in the state capital declining past a critical level (Sydney’s declined by -0.7% and the rest of NSW’s by -2.2%). Obtaining and servicing a mortgage in Sydney now requires more than two standard Sydney incomes.

Affordability in Melbourne improved marginally in the June quarter, but remains 6% less affordable than this time last year.

Affordability improved in six of the eight capital cities in the June quarter. The biggest improvement was noted in Darwin (+4.3%), followed by Adelaide (+2.9%), Hobart (+1.6%), Brisbane (+1%), Canberra (+0.8), and Melbourne (+0.8%).

Of the capitals where deterioration worsened, the greatest deterioration was in Perth (-1.3%) and Sydney (-0.7%). While Perth’s deterioration may appear to contradict the soft conditions in that market, the drop in average wages in the WA capital in the June quarter outweighed the positive impact on affordability from the fall in home prices.