Harder to afford home loans
PEOPLE are finding it harder to afford home loans, with higher interest rates taking their toll on first home-buyers in particular, a new report shows.
A home loan affordability report by loan deposit guarantee provider Deposit Power in conjunction with the Real Estate Institute of Australia (REIA) found home loan affordability worsened in every state and territory in the June quarter, with the exception of Tasmania where it was unchanged.
REIA president Tony Brasier said the results for the three months to June had hit first home buyers, who were expected to have struggled further following the August rate rise.
The Reserve Bank of Australia (RBA) increased interest rates by a quarter of a percentage point to 5.75 per cent in May.
However, the June quarter report pre-dates the rate rise in August, which pushed the official cash rate up to six per cent.
“The May 2006 interest rate rise had an immediate impact on first home buyers with their share of all dwellings financed falling from a much improved figure of 19.1 per cent in April 2006, down to 17.4 per cent in May and 17.0 per cent in June,” he said.
“The August 2006 interest rate rise is likely to have a further negative impact on first home buyer sentiment.”
The report found NSW remained the least affordable location with home loan affordability deteriorating 4.6 per cent in the June quarter and 0.7 per cent from a year ago.
Affordability in Victoria fell 1.8 per cent over the quarter and 2.1 per cent over the year, while in Queensland affordability dropped 0.7 per cent over the quarter and 2.0 per cent over the year.
Affordability was down 4.9 per cent over the quarter and 7.3 per cent over the year in South Australia, the second largest fall behind Western Australia, where affordability dropped 7.4 per cent from the last quarter and 15.5 per cent over the year.
In the Northern Territory, affordability was down 1.1 per cent from the March quarter and 3.5 per cent over the year, while the quarterly figure remained unchanged in Tasmania, but fell 5.1 per cent from a year ago.
Mr Brasier said steps needed to be taken to improve housing affordability, including changes to the first home buyers’ grant and property taxes.
“To further improve housing affordability, REIA continues to call on governments to index the first home owners grant, reduce or abolish state property taxes and improve land release,” he said.
“In particular, REIA calls on state governments to explain how they might use property taxation to improve affordability.”
