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Housing affordability pressures to continue
January 04, 2008
THE pressures impacting on housing affordability, especially for first home buyers, are likely to worsen in 2008, the Real Estate Institute of Australia (REIA) warns.
Rising interest rates, population growth and price increases caused by a shortfall in the supply of new homes are contributing to a 22-year low in affordability.
As a result many home buyers are considering medium and higher density housing as more affordable options, institute president Noel Dyett said in a statement.
"In 2008, the main challenges facing the real estate market will be low home loan affordability, the possibility of more interest rate rises, the ongoing fallout from the US sub-prime problems, and an extremely tight rental market driving rents up,'' he said.
During 2007 the real estate market was split between established home owners, who enjoyed a "vintage'' year, and new entrants who experienced a "less fortunate'' time.
The institute's outlook for 2008 suggests house prices will continue to rise in all states except NSW, where the market is more subdued, and Western Australia, where activity has settled.
The Australian weighted average median house price was $442,758 in the September quarter 2007, the REIA said.
Sydney had the highest median price at $538,400 followed by Perth ($455,000), Melbourne ($431,000), Canberra ($425,000), Darwin ($400,000), Brisbane ($383,500), Adelaide ($320,00) and Hobart ($317,00).
"Well-located property, close to employment opportunities and infrastructure will continue to perform well,'' the outlook says.
"The upward movement in prices for other dwellings suggests that many home buyers are considering medium and higher density housing as more affordable options in a market where affordability is very low.
"It is likely that this sector will experience ongoing price growth during 2008.''
The institute says price rises are being driven by population growth, demand for newer and more environmentally-sustainable housing in areas close to employment and essential services, and a shortfall in the supply of new dwellings.
The transfer of infrastructure costs into the pricing of new homes was also pushing up prices of established homes.
The institute says dwelling approvals are not keeping pace with the demand for additional housing stock.
"Approvals fell by 2.8 per cent in October 2007 and the November interest rate rise is likely to have a further negative effect on approvals,'' it said.
"The much-needed upturn in building approvals will not occur while there is uncertainty around interest rate rises, reducing the demand for housing finance and while the construction sector is constrained by skills and labour shortages.''
The institute says sales activity has fallen steadily for the past five years.
In 2006-07 there were 467,737 sales across the country - down nearly 16 per cent on volumes four years earlier.
The institute says the reduction in sales activity and declining affordability prompted many home owners to re-invest in their own properties.
Finance for alterations and additions rose steadily during 2007 driving much of the investment in housing nationwide.
"The prospect of higher interest rates will potentially see this continue into 2008 with an accompanying tightening of sales volume, as people become more resistant to selling,'' the REIA said.
First home buyer numbers have fallen below the long-term average and the institute says the outlook does not look positive.
"The federal government's proposed policy solutions may offer some relief in the medium to long term but first home buyers can expect more of the same - challenges to secure a deposit to buy a home, and challenges in meeting monthly loan repayments,'' it said.
January 04, 2008
THE pressures impacting on housing affordability, especially for first home buyers, are likely to worsen in 2008, the Real Estate Institute of Australia (REIA) warns.
Rising interest rates, population growth and price increases caused by a shortfall in the supply of new homes are contributing to a 22-year low in affordability.
As a result many home buyers are considering medium and higher density housing as more affordable options, institute president Noel Dyett said in a statement.
"In 2008, the main challenges facing the real estate market will be low home loan affordability, the possibility of more interest rate rises, the ongoing fallout from the US sub-prime problems, and an extremely tight rental market driving rents up,'' he said.
During 2007 the real estate market was split between established home owners, who enjoyed a "vintage'' year, and new entrants who experienced a "less fortunate'' time.
The institute's outlook for 2008 suggests house prices will continue to rise in all states except NSW, where the market is more subdued, and Western Australia, where activity has settled.
The Australian weighted average median house price was $442,758 in the September quarter 2007, the REIA said.
Sydney had the highest median price at $538,400 followed by Perth ($455,000), Melbourne ($431,000), Canberra ($425,000), Darwin ($400,000), Brisbane ($383,500), Adelaide ($320,00) and Hobart ($317,00).
"Well-located property, close to employment opportunities and infrastructure will continue to perform well,'' the outlook says.
"The upward movement in prices for other dwellings suggests that many home buyers are considering medium and higher density housing as more affordable options in a market where affordability is very low.
"It is likely that this sector will experience ongoing price growth during 2008.''
The institute says price rises are being driven by population growth, demand for newer and more environmentally-sustainable housing in areas close to employment and essential services, and a shortfall in the supply of new dwellings.
The transfer of infrastructure costs into the pricing of new homes was also pushing up prices of established homes.
The institute says dwelling approvals are not keeping pace with the demand for additional housing stock.
"Approvals fell by 2.8 per cent in October 2007 and the November interest rate rise is likely to have a further negative effect on approvals,'' it said.
"The much-needed upturn in building approvals will not occur while there is uncertainty around interest rate rises, reducing the demand for housing finance and while the construction sector is constrained by skills and labour shortages.''
The institute says sales activity has fallen steadily for the past five years.
In 2006-07 there were 467,737 sales across the country - down nearly 16 per cent on volumes four years earlier.
The institute says the reduction in sales activity and declining affordability prompted many home owners to re-invest in their own properties.
Finance for alterations and additions rose steadily during 2007 driving much of the investment in housing nationwide.
"The prospect of higher interest rates will potentially see this continue into 2008 with an accompanying tightening of sales volume, as people become more resistant to selling,'' the REIA said.
First home buyer numbers have fallen below the long-term average and the institute says the outlook does not look positive.
"The federal government's proposed policy solutions may offer some relief in the medium to long term but first home buyers can expect more of the same - challenges to secure a deposit to buy a home, and challenges in meeting monthly loan repayments,'' it said.
