First-home buyers see their market share rise even as affordability continues to decline
First-home buyers saw their market share spike even as affordability continued to decline, according to a new report by the Real Estate Institute of Australia.
Housing affordability declined nationally in the December quarter, although it improved by 0.7% over the year, according to REIA’s latest Housing Affordability Report. REIA President Adrian Kelly said the decline in affordability was driven largely by higher house prices and larger loans.
“The market defied the doomsday predictions, with median house prices rising across the country in 2020 with demand driven mostly from first-home buyers,” Kelly said. “Australian first-home buyers increased their market share by 50.4% over 2020, motivated by low interest rates and the range of first-home buyer incentives on offer.”
Kelly said the trend in conversion to homeownership was “particularly great news given the challenges many tenants and investors faced over the pandemic.”
“However, surging house prices could see affordability obliterated unless measures to improve supply are implemented,” Kelly said. “This particularly applies to regional parts of Australia.”
The average proportion of income required to meet loan repayments has increased 0.9 percentage points nationally 34.8%, Kelly said.
“The measure for housing affordability – the proportion of income required to meet loan repayments – ranged from an increase of 0.1 percentage points in Victoria to an increase of 2.3 percentage points in New South Wales,” he said.
New South Wales was the least affordable state, with the proportion of income required to meet loan repayments at 44.6%. The Northern Territory was most affordable, with the proportion of income required to meet loan repayments at 21.9%.
“It is now more affordable to buy than rent in the Northern Territory,” Kelly said.
Rental affordability also declined over the December quarter, with the proportion of income required to meet rent payments increasing to 24% nationally. While rent affordability declined by 0.2 percentage points over the quarter, it increased 0.4 percentage points year over year.
“Tasmania is now the least affordable state to rent, with the proportion of income required to meet rent repayments now a staggering 29.5%, 5.5 percentage points higher than the national level,” Kelly said. “Western Australia is the most affordable, despite the proportion of income required to meet median rents increasing to 17.8%.”
