Housing affordability has once again declined in Australia, according to REIA Deposit Power Housing Affordability Report for the March quarter 2010.
During the first quarter of 2010, housing affordability decreased across all Australian states and territories, with the proportion of income required to meet loan repayments increasing nationally from 30.7 per cent in the December quarter 2009, to 32.6 per cent in the March quarter 2010.
Real Estate Institute of Australia (REIA) President David Airey said that it has now been twelve months since there has been any improvement in housing affordability.
"In March 2009, the proportion of income required to meet loan repayments was 28.8 per cent", Airey said.
"Nationally, the average Australian household is now spending an extra $143 per month on their mortgage, compared to the previous quarter."
The Australian Capital Territory remained the most affordable state or territory in which to own a home. The proportion of income required to meet loan repayments increased 0.2 percentage points to 17.9 per cent; 14.7 percentage points below the national average.
New South Wales remained the least affordable state or territory in which to own a home. The proportion of income required to meet loan repayments increased 0.9 percentage points to 34.5 per cent; 1.9 percentage points above the national average.
During the quarter, the Reserve Bank of Australia (RBA) raised the cash rate by 0.25 percentage points.
This resulted in a rise in average standard variable rates and average fixed rates. At the same time the spread between average cash rates and average mortgage rates widened.
Deposit Power National Manager Keith Levy remarked that another issue facing the industry is the level of competition in the mortgage market.
"There is ongoing speculation over whether changes in lending policies towards lower loan to value ratios (LVRs) and higher minimum savings requirements could lead to the re-emergence of non-bank and other securitised lenders, looking to compete with the major banks", Levy said.
Over the March quarter, the total number of loans (excluding refinancing) decreased by 22.2 per cent, taking the number of loans to 103,459.
"The number of loans to first home buyers dropped by 38.4 per cent to 25,539, which can be explained by tighter lending rules, higher property prices, higher interest rates and the cessation of the FHOG Boost", Airey added.
"This is the highest quarterly drop recorded since December 1991", he concluded.