MELBOURNE could overtake Sydney as the least affordable Australian city to buy a home in if trends showing housing affordability plummeting to near-record lows continue.
A combination of interest rate rises and property price growth has seen housing affordability worsen more in Melbourne than other capital cities over the past year.
The deteriorating situation for first home buyers and young Australians was revealed in the latest Housing Industry Association affordability survey for the June quarter.
The HIA-CBA Housing Affordability Index fell 9.1 per cent over the last three months to be 32 per cent lower compared to the same period last year, showing a worsening situation nationally.
Affordability in regional Victoria fell by 9 per cent. In Melbourne, it dropped by 6.7 per cent, down 39.8 per cent on a year ago.
The index combines interest rates, household incomes, home prices and other factors, such as the removal of the first home buyers’ impetus to determine housing affordability.
It doesn’t give a suburb-by-suburb breakdown of the most or least affordable places in capital cities or regions.
According to property analysts RP Data, the most expensive electorate to buy a home is Wentworth in NSW. It includes Sydney’s wealthiest suburbs: Point Piper, Bellevue Hill, Vaucluse, Double Bay and Dover Heights.
On a more simple measure of affordability, the median house price of the marginal Liberal seat held by Malcolm Turnbull – which needs a swing of 3.9 per cent to change hands – is a staggering $1.65 million.
By contrast, Julia Gillard’s safe Labor seat of Lalor – held by a margin of 15.5 per cent – has a median house price of $300,000 and is the most affordable metropolitan electorate in Australia, RP Data analyst Tim Lawless said.
It includes the suburbs of Laverton, Point Cook, Werribee, Rockbank and Melton.
Neither main political party has released significant policies addressing home affordability or high house prices, despite the federal election being two days away.
“There has been a dire lack of commitment in this federal election campaign to address the substantial hurdles aspiring home owners face,” said HIA chief economist Harley Dale.
In Melbourne, affordability dropped year on year by 39.8 per cent. Affordability in Sydney, by contrast, dropped 33.5 per cent. ”If that trend were to persist then you would rapidly be approaching a situation where Melbourne is on a par with Sydney in terms of [least] affordability,” Mr Dale said.
Housing affordability reached a record low in March 2008 when bank interest rates were above 9 per cent. The latest score on the affordability index in Melbourne is one point above the low of 2008.
The largest falls for the June quarter were recorded in Sydney (-9.1 per cent), Regional Victoria (-9.0 per cent), Regional Tasmania (-8.8 per cent) and Adelaide (-8.7 per cent).
Story by Simon Johanson domain.com.au