IMPROVING housing affordability is the silver lining in WA’s ongoing property market woes.
The state, which was already the most affordable market in the country, experienced the greatest improvements in affordability in the September quarter 2019 according to the HIA.
It’s Housing Affordability Index* rose 6.2 per cent in Perth to 126.3 and 8.8 per cent in regional WA to 145.9 over the past three months.
This means less than 0.8 incomes are required in Perth to service an average mortgage and under 0.7 incomes in the regions.
Sydney remains the least affordable capital city with an index of 61.6 and more than 1.6 incomes to service a mortgage, followed by Melbourne at less than 1.4 incomes and an index of 73.5.
Over the past 20 years, every capital city has recorded an improvement in affordability, led by Perth (+60.7 per cent) and Darwin (+60.3 per cent) as house prices continue to suffer the fallout from the mining and resources downturn while wages continue upwards and interest rates decrease.
During September quarter Perth property prices fell 2.1 per cent and were down 8.6 per cent over the year, contributing to improved affordability, and three interest rates cuts this year see the cash rate sitting at an historic 0.75 per cent.
While the rate cuts have not been passed on in full, mortgage repayments have still fallen.
In Perth a typical monthly mortgage repayment is now $1969 per month and represents 23.7 per cent of earnings, compared with $2218 and 27.4 per cent a year ago.
A typical mortgage repayment in Sydney is $3961, which represents 48.7 per cent of earnings.
While still high, it is an improvement on the 54.5 per cent recorded in the September quarter 2018.
*An index reading of 100 indicates the threshold for ‘affordable’ market whereby mortgage repayments account for exactly 30 per cent of average earnings under current market conditions.
An index level above 100 indicates an affordable market while level below 100 indicates an unaffordable market.
When the index level is rising affordability is considered to be improving while a decline in the index indicates a deterioration in affordability.