The December quarter of 2016 saw housing affordability deteriorate sharply, driven by further gains in dwelling prices, new research has revealed.
The HIA Affordability Report from the Housing Industry Association (HIA) was released earlier this week and results showed that housing affordability across Australia fell by 7.3 per cent overall during the December quarter.
According to HIA senior economist Shane Garrett, the decline was due to the recent uplift in dwelling prices.
“Nationally, housing affordability has managed to move in the wrong direction in many major cities despite the fact that interest rates are at very low levels. The sluggish pace of earnings growth in the economy has been an impediment to better affordability,” he added.
Affordability worsened in six of the eight capital cities during the December quarter. Melbourne witnessed the largest deterioration with its affordability index falling by 11.6 per cent, followed by Canberra (-10.7 per cent) and Sydney (-7.3 per cent).
The HIA findings also showed that affordability has also become more difficult in Darwin (-3.8 per cent), Brisbane (-2.9 per cent) and Adelaide (-2.3 per cent) during the December 2016 quarter.
Meanwhile, Perth and Hobart saw affordability improve during the quarter by 2.1 per cent and 1.2 per cent respectively.
Further, according to the HIA Affordability Index scores for December 2016, affordability conditions are the most challenging in Sydney (54.7), followed by Melbourne (66.0) Canberra (76.6), Brisbane (85.3) and Darwin (85.3).
Hobart is considered by the HIA to be the most affordable city with an index score of 117.8. Perth is considered the second most affordable capital on 96.6, followed by Adelaide (93.0).
“Achieving sustained improvements in affordability requires stepping back and looking at the bigger picture…whilst there is no single solution, there are some key policy levers that government could use to provide some relief,” Mr Garrett concluded.