Rising rates and dwindling supply impact both buyers and renters
Housing affordability continued to worsen for both buyers and renters in the June quarter thanks to a lack of supply and skyrocketing interest rates, according to the Real Estate Institute of Australia.
REIA president Hayden Groves said that lack of supply has become the number-one concern.
“Affordability is expected to worsen unless supply constraint is urgently addressed by state and federal governments,” he said.
Over the year, new loans have decreased 17.2% to 93,956, with loans to first-home buyers falling by 32.6% to 29,127, REIA reported. Loan values fell by 11.6% over the year, with the average loan size now $612,079.
Rental affordability also declined in the June quarter, with the proportion of income required to meet median rent rising to 22.9%. This was an increase of 0.4 percentage points over the quarter and 1.2 percentage points over the last 12 months, according to REIA.
“Over the quarter, rental affordability improved in Victoria but declined in all other states and territories, with the least affordable state or territory in which to rent a property being Tasmania,” Groves said.
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The decline in housing affordability over the June quarter – down 2.7 percentage points – outpaced the decline in rental affordability.
“Nationally, the proportion of income required to meet average loan repayments increased to 38.4%, an increase of 4.7 percentage points over the past year,” Groves said. “This is due to a combination of rising interest rates and higher average loans, with average loan repayments increasing over the past year by $621 per month. Housing affordability has declined in all states and territories over the past year, with New South Wales having the largest decline – down 5.7 percentage points.”
Groves said that with rental and sale listings both hovering at historically low levels, supply will continue to be an issue for the foreseeable future.
“Supply chain challenges, rising building costs and labour shortages mean the pipeline of new homes for sale and rent will remain under long-term average levels,” he said.
Groves pushed for the elimination of stamp duty, long an issue for REIA.
“The phase-out of stamp duty could increase listings on the market by up to 50%, and it is in these big-picture economic and productivity reforms we must invest in during the 47th Parliament in an effort to address housing supply shortages,” he said. “While the outlook for housing affordability remains relatively gloomy, the next REIA Affordability Report, to be released in December 2022, should paint a clearer picture of the long-term impacts of inflation control measures.”
