Rate hikes a ‘significant blow’ to housing affordability

Among the states and territories, Canberra saw the most unfavourable change in affordability at – 11.4 per cent, while affordability worsened by 10.5 per cent in Melbourne and 3.3 per cent in Sydney.

Darwin was the only capital city to record improved affordability during the quarter.

“The unilateral increase in the major banks’ variable mortgage rates, which came despite the absence of any change in the official cash rate, has delivered a significant blow to housing affordability,” HIA senior economist Shane Garrett said.

“Combined with double-digit dwelling price growth in cities like Sydney and Melbourne, the shock jump in interest rates has pushed home affordability to its least favourable position in over three years.”

Mr Garrett said the affordability challenge has been intensified by the slow pace of earnings growth “which means that the buyer power of households has not kept pace with dwelling prices”.

“The increase in mortgage interest rates during November was an unpleasant surprise for home owners, and housing affordability will be damaged even further if this tactic is repeated,” Mr Garrett added.

“Governments must play their part too. Stamp duty is a huge source of woe for those trying to come up with the funds for a home.

“HIA research has shown how the typical stamp duty bill of around $20,000 eventually costs home buyers about $50,000 over the course of the mortgage due to higher LMI premiums and mortgage interest costs. It’s time for this inefficient tax to be addressed.”

[Related: Property outlook for 2016 revealed]