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A new report has cemented what many already know to be reality: housing affordability is on the decline.
A new report from ANZ and CoreLogic has revealed the latest declines have been driven by simultaneous increases across housing values, rent values and interest rates.
The ANZ CoreLogic Housing Affordability Report flagged that in the year to September 2023, the time taken to save a 20 per cent deposit climbed to 10 years across the country.
Honing in on Australia’s most expensive market, the time taken has leapt to 12.6 years, with the harbourside capital also taking the crown for the highest percentage of income being required to service a new loan, sitting at a whopping 58.1 per cent.
It’s not quite so grim a picture for Melbourne, with the report noting that some aspects of affordability have improved in the Victorian capital over the past five years – the time to save a deposit is now sitting at 9.6 years, down from 10.2 years back in September 2018.
While acknowledging a relative “under-performance” in Melbourne dwelling values, the improvements in affordability have been linked to “more supply of dwelling completions over the past 15 years” – drawing on the ABS building activity data which highlighted Victoria saw 21 per cent more dwelling completions than NSW did over the same period.
Units versus houses
Housing types are also seeing an increased divergence in their affordability, according to ANZ senior economist Adelaide Timbrell, who highlighted that “the time to save a 20 per cent deposit has only shifted by around two months nationally for units since the onset of COVID-19, while for houses the time to save has blown out by almost two years”.
“This presents a clear shift for those hoping to enter the housing market, as units have stayed within a reasonable price range for new home buyers, while houses have become more out of reach.”
The affordability difference between house and unit values is sitting at “elevated” levels of 28.6 per cent. It’s a far cry from the situation prior to the pandemic, where the decade-average difference between house and unit values nationally sat at 7.3 per cent.
Weighing in on the findings, CoreLogic head of Australian research Eliza Owen expressed the belief that the situation of decreasing affordability is unlikely to remedy itself in the new year, even if there is a reprieve from rate wise.
In fact, from her perspective, “in 2024, housing affordability is likely to get worse before it gets better”.
She argues that “dwelling supply will continue to be strained by the high interest rate environment, which has reduced approvals and potential for new housing development in 2024”.
“Demand will probably be the only thing can adjust in the short term, so we may see average people per household rise.”
Will affordability woes lead more people to the regions?
And lastly, while the regions have long been considered a haven for home owners and renters looking for more affordable options, Ms Owen is wary of continuing such a perception.
“Regional Australia is often thought of as a more affordable alternative for housing, a way to reduce housing costs by compromising distance to major employment hubs,” she explained.
But, “the COVID-boom in regional migration and values means it’s really not that much more affordable now, and there’s very little difference in the combined regional and capital city affordability metrics”.
According to the report, as of October 2023, the regional Australian dwelling market has witnessed a 44.4 per cent uplift in dwelling purchase values since the start of COVID-19.
In contrast, there’s been just a 26.4 per cent uplift across the capital city dwelling markets.
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