Housing affordability falls, but spring looms as boom period for home sales

Housing affordability continued to fall during the June quarter as prices for established homes increased, according to the latest results from the Housing Industry Association-Commonwealth Bank First Home Buyer Affordability Report.

But while the affordability index has fallen on a quarterly basis, the HIA points out that it is still 44 points higher than during the same time last year.

During the June quarter, the median price for a first home was at $419,000, with the average monthly payment at $1,983, leading a housing affordability index rating of 152.5.

This is a drop from the March results, which recorded a median first home price of $386,400, with an average monthly payment of $1,843 and an index reading of 161.

Comparatively, during the June quarter 2008, the median first home price was at $417,000, with a monthly repayment of $2,777 and a housing affordability index rating of 108.3.

HIA chief economist Harley Dale says that overall the result is good despite the quarterly drop in affordability, and that access to housing is still at the best conditions in several years.

“You have seen a little bit of a fall in affordability in the June quarter, and that’s because we did see some house price growth. But that hasn’t prevented us seeing affordability up 40% from where it was 12 months ago, and this is still the second highest reading in the last seven years.”

Dale dismisses claims that recent growth in housing prices will lead to a bubble, but echoes the concerns of Reserve Bank of Australia governor Glenn Stevens that construction of new housing must keep up with demand.

“I think those fears are a little bit overplayed. On the one hand you could talk about these fears being realised over a number of years, but you’ve also got fears of this happening in the next six to 12 months.”

“I think if you look at this over the next few years, this is a reasonable point to make if we don’t continue to find ways to boost the supply of new housing, then we will get more pressure on housing prices than otherwise would have been the case.”

Dale also says Australia is lucky enough to have escaped the property crashes seen in the US and Britain, and that such a crash would have seen the country dragged into a recession.

“If in Australia you had a price crash along the lines of what people said we would experience, then we would be in a recession right now and unemployment would probably be over 7%, not at just under 6%. It’s all well and good to have a price correction, but if no one can buy the housing without a job, then what’s the point?”

The new data comes as results from RP-Data showing that 34,000 pre-listing reports have been prepared during the last two weeks, indicating spring will be a hot time for property.

The findings are a 5% increase on July pre-listings, and are an increase of 36% when compared to the same period during 2008. Queensland recorded a 4% increase in pre-listings.

The results come as auction results around the country are on the rise, with Melbourne recording over 12 consecutive weeks of rates over 80%.

“Based on our findings, the CMA is one of our most popular reports undertaken by real estate agents when they are pitching to list a property for sale. The report provides examples of recent comparative home sales as well as demographic and market statistics. In several states the CMA is considered industry best practice and legislated as being mandatory,” executive general manager David Williams said in a statement.

“Our latest results on product usage, particularly for CMA’s, on the rpdata.com website suggests that vendors and real estate agents are preparing for a bumper spring selling season.”