This article is from the Australian Property Journal archive
HOUSING affordability continued to deteriorate over the June quarter, with shrinking stock and rising interest rates taking their toll on both the renters’ and buyers’ markets.
According to REIA’s latest Housing Affordability Report, without intervention from state and federal governments, lack of housing supply will likely continue put pressure on affordability.
Results from the June quarter reveal that lack of supply in the market is the number one issue impacting affordability, with the proportion of income required to meet median rents increasing 0.4% over the quarter to 22.9%, which is an annual increase of 1.2%.
“Over the quarter 1 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,” said Hayden Groves, president at REIA.
“The decline in housing affordability over the June quarter (down 2.7 percentage points) outpaced the decline in rental affordability(down 0.4 percentage points).”
The report also revealed that new loans have dropped by 17.2% to 93,956 over the last year, with first home buyer loans falling by an even greater 32.6% to 29,127.
Loan values were also found to have increased over the year, making the average loan size $612,079.
While the proportion of income needed to meet average loan repayments have also increased, reaching 38.4% for the June quarter, an increase 4.7% over the last year.
“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),” added Groves.
At the same time, PEXA Insight’s latest report found that over one million Australians have refinanced their home loan over the last 12 months.
The research found that Australians who refinanced their home loan over the period are saving an estimated $1,524 per year on average.
“More and more Australian consumers are hunting out the most competitive interest rates, leading to record high levels of refinancing. This momentum is set to continue, as mortgage holders are investing on average six weeks into researching options that best suit their circumstances,” said Mike Gill, head of research at PEXA Insights.
Those refinancing their mortgage to a new lender were found to be saving an estimated $1,908 per annum on average compared those who saved $384 per annum on average by refinancing with their existing lender.
Despite this, 55% of recent refinancers stayed with their existing lender.
In the face of the current economic backdrop, PEXA’s report found Australia has been experiencing report refinancing activity, with almost 2.3 million Australians considering refinancing in the next two years.
With almost eight million mortgage holders across the country, analysis suggests that 31.2% of borrowers are in a “refinancing mindset”, with 81% of those who have recently refinanced expected to do so again within the coming two years.
“Our consumer research confirms there is a level of uncertainty felt by mortgage holders, with an estimated 71% feeling anxious about the prospect of rising interest rates, 49% worried about their job/financial security, and 73% are regularly reviewing their interest rate against market trends,” added Gill.
Meanwhile, Groves added that with listings for both rental and home sales still sitting at historical low rates, it can only be forecast that supply will continued to hold at their current constrained levels.
With this limited stock being reinforced by ongoing challenges to the supply chain, rising costs of materials and labour shortages.
“Whilst the outlook for housing affordability remains relatively gloomy 1 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,” concluded Groves.
