outer western sydney real estate

How affordable is housing compared to 10 years ago?

After experiencing two years of property price declines we are starting to see the market bounce back, with predictions that we could see peak levels again in 2020.

While this probably comes as good news for those that own a home, escalating property prices does bring up the concern of housing affordability, however new research has found that it is actually easier to buy a home now than it was 10 years ago.

According to the latest ANZ-CoreLogic Housing Affordability report, the national median dwelling value has risen by 3% annually in the last 10 years, up from $382,650 to $516,710.

At the same time we have seen household incomes rise slightly faster, up 3.1% annually, from $59,020 to $79,872. Households have also been able to enjoy lower mortgage rates, with the average rate dropping from 5.1% to 4.1%.

The report found that the proportion of income needed to repay an 80% loan-to-value mortgage was 34.4% in June 2019, which is the lowest it’s been since 2004.

However, it’s not the same story everywhere…

Some cities are less affordable

Unsurprisingly, some cities have seen property prices outpacing wage growth.

Most notable is Sydney, where the median property value has gone up by 5.5% per annum, while household income has only seen a 3.3% per annum rise.

Households in Sydney need to allocate 43.7% of their income to service a home loan, compared to 37.7% ten years ago.

Believe it or not though, when mortgage rates reached around 9% in early 2008, a whopping 54.2% of household income was needed to make mortgage payments.

Sydney homeowners have been getting a reprieve of late thanks to the downturn and low interest rates, but the divergence in dwelling values and household incomes makes Sydney the nation’s least affordable housing market.

How to combat affordability?

In a think piece in The Real Estate Conversation, CoreLogic’s head of research Tim Lawless suggested taking a look at supply and demand, as well as tax reforms, to improve the nation’s affordability.

“On the supply side, ensuring infrastructure programs, land release and town planning policies are keeping pace with population growth is important. On the demand side, population growth drives housing demand, as do stimulus measures such as first home buyer grants and tax concessions,” Lawless said.

Lawless also believes people should be encouraged to move to more affordable areas through incentivising jobs growth and providing infrastructure improvements.

“Removing stamp duty would also help to improve housing affordability and housing mobility by lowering the transactional costs associated with purchasing a home,” he said.

The full Housing Affordability report can be downloaded by clicking here.

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