- Capital city prices may have taken off in recent years, but so has housing affordability according to the Housing Industry Association (HIA).
- Its latest index shows that property is at its most affordable in more than a decade, both nationally and across all eight capital cities, due largely to falling interest rates.
- However, with little more room for further cuts, it’s unlikely to keep improving without government policies to cut red tape and taxes, according to HIA.
It sounds like the kind of doublespeak that would make Orwell squirm.
Property prices are going up, but so is housing affordability, according to the residential building industry group, the Housing Industry Association (HIA)
“Despite recent house price increases, all eight capital cities experienced an improvement in affordability,” chief economist Tim Reardon said in a note on Thursday.
While anyone living in Sydney or Melbourne would be rightly incredulous, HIA has shown its working. The group’s affordability index offsets price growth with wage growth and dwindling mortgages rates.
“The cuts to interest rates have more than offset the rise in home prices to ensure an ongoing improvement in housing affordability,” Reardon said, noting it improved by 2.2% in the September quarter.
The gain puts national affordability at its highest point in more than a decade. Perth led the charge gaining 15.3% on the index. It was followed by Darwin (13.5%), and the eastern capital cities Sydney (11.9%), Melbourne (11.6%) and Brisbane (7%). However, the improvement might be nearing a natural ceiling with the official interest rate at 0.75%.
“With little opportunity for interest rates to be reduced further, improvements in affordability will require the right economic conditions with a strong volume of new homes, low interest rates and supportive policy settings from state and federal governments,” Reardon said.
“Up to 50% of the cost of a house and land package can be red tape and taxes. Reducing the tax on homes and ensuring an adequate supply of homes is an ongoing challenge for governments.”
That echoes the calls of Domain chief economist Trent Wiltshire who earlier this year urged the federal government to replace stamp duty with a broad-based land tax.
The government is yet to back the policy, with Wiltshire for his part suggesting the government doesn’t have many policies at all.
Then again, if affordability is improving – and that’s a big if, frankly – maybe it doesn’t need to.
Business Insider Emails & Alerts
Site highlights each day to your inbox.