Housing affordability declines
The Australian May 6, 2016 12:00am
Kylar Loussikian
Housing affordability has continued to deteriorate over the past year, with households spending on average nearly 30 per cent of their monthly income to meet mortgage repayments.
However, housing costs may have peaked, according to analysts at ratings agency Moody’s.
Sydney remains the most unaffordable city, with a two-income household still putting an average of 35.6 per cent of their monthly income towards mortgage repayments — this figure remained steady for the year ending March because of slower price growth and strong income growth.
The report, authored by Moody’s analyst Natsumi Matsuda, found two-income households devote 27.6 per cent of their monthly income to mortgage repayments, a rise from the 27 per cent figure reported at this time last year.
“Nevertheless, housing prices fell during the three months to March, suggesting that repayment costs may have peaked,” Mr Matsuda said.
The data comes just days after the Reserve Bank lowered the official cash rate to a record low of 1.75 per cent.
Concerns remain that a lower rate will drive more people into the real estate market and begin to drive prices higher just as they have begun to soften.
The largest drop in housing affordability was in Melbourne, with the Moody’s figures showing an increase in average monthly mortgage payments from 27.2 per cent of monthly household incomes to 30 per cent.
The deterioration in affordability could hurt banks, with mortgages more than three months in arrears increasing 22 per cent for Westpac in the past six months alone.
Analysis by PwC released yesterday suggested lending for the major banks increased 6.4 per cent.
“There’s no sign of the margin pressure abating any time soon,” PwC’s financial services leader Julie Coates said.