If you live in Australia, affording a home can be tough. Home prices are high and with interest rates on the rise, it only makes affordability more difficult. This week, the Housing Industry Association (HIA) released data that shows an ever so slight improvement of 3.6% for the third quarter this year. While this may sound promising affordability is still way down in 2010, coming in to date at 18.3%. With a recent rise in interest rates, the reprieve is expected to be short lived.
Affordability is expected by many to continue downward into 2011.
The criteria
Home loan affordability is calculated by looking at the average household income in a particular city compared to the median home price. Ratings are based on 100 and the lower the overall rating for a particular city, the less affordable housing is.
Melbourne property markets perform poorly
If you are a looking to purchase a home, you really have to dig deep into your pocketbook, and in some cities housing affordability may be completely out of your reach. The HIA in its report also released figures on the best and worst cities when it comes to Australian housing affordability. Coming in as the worst city was Melbourne. Melbourne swapped places with Sydney back in March of this year as being the least affordable city to purchase a home and has stayed there ever since. Melbourne had many strikes against them with housing prices having steadily inclined in 2009 and in the first few months of 2010. Add an increase in interest rates and lower than average income and Melbourne easily tops the list.
Melbourne VS. Sydney
Current housing prices in Melbourne with the lower average income make it particularly difficult for first time homeowners to purchase a home. Other cities across the country however did not fare much better. The next least affordable cities were Perth, ACT, Brisbane and Adelaide coming in at 54.9, 57.8, 58.1 and 59.4 respectively.
Cheaper housing solutions
If you are looking for the most affordable city to purchase a home in Australia, Hobart is the city for you. They received the highest affordability rating of 71.9. The median income in Hobart comes in at $60,500 with the median house price being considerably lower than many other cities, coming in at $325,000.
What the future holds
As we look towards 2011, there very likely could be a flip flop in the two worst cities. It is predicted that Sydney will most likely take over the top spot again. Why? The housing prices in Melbourne have stabilised and if Sydney’s continue to rise a switch is most likely inevitable.
Mr. Harley Dale, the chief economist for HIA said that government could play a role in helping to make homes more affordable by lowering stamp duties. He thinks that the government relies on stamp duties too much as a form of revenue. He said in a statement that, "given homes are the most important asset most people will buy, they are a form of shelter as well as being assets, you would hope that over time the governments would reduce their reliance on them as a form of revenue."
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