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As per the recent Housing Affordability Report, it has been revealed that the rise in rental and housing value in 2024 has fostered an affordability crisis. This has further resulted in the growth of apartment prices, keeping pace with houses. The report has further claimed an increase in capital city unit prices by 0.9 percent within 3 months.
This has increased to 0.8 percent over the same period and suggested a growing preference among buyers and investors. Recent modelling from Australian National University and Carelogic has estimated that Australia’s latest gross median household income is almost $101,000 per year from $98,500.
It has been further noted that the growth has lagged behind the 8.5 percent rise in the median dwelling value and 9.6 percent increase in the median rent over. Those who are looking forward to buying a house have shifted their focus to “affordable” parts of the market, pushing attention to apartments, which have witnessed low levels of prices.
Here’s What Buyers are Doing!
As per the report, the median dwelling value to income has surged to 8.0 percent, rising from the past 20 years and matching the highest record set in 2022.Further, it has been mentioned that the median income household requires almost 10.6 years to save for a 20 per cent deposit on median priced dwelling. Following this, a median household income has gone towards servicing new home loans and recorded the need for 33 percent to cover median rent.
Insight From the Head of Carelogic
Head of Research and Author, Eliza Owen has mentioned the “extreme” median value to income metrics. Eliza further stated, “people are finding other means to get into the market” like purchasing more affordable properties and choosing lower deposit loans for securing a mortgage.Adding more, “the median income household might buy something of lower value than the median dwelling and buyers in the market may be less leveraged and have high income”.
Dwelling Values Tend to Rise Across the Smaller Capitals
Dwelling value has increased about 65 percent across Perth, Adelaide, and Brisbane between 2020 to 2024, outpacing the growth in Sydney, Hobart, and Melbourne. In comparison to others, Sydney has been highly affordable, it’s had high dwelling value prior to the pandemic in March 2020. In contrast, Adelaide has been reported to witness a significant decline in housing affordability with the median dwelling value to income ratio rising from 5.9 to 8.9 percent.Due to its growth, Adelaide was noted to be the second least affordable market to purchase in, with 56.2 percent of income to service a new mortgage while being the least affordable rental market with 34.6 percent needed to cover median rent.
Furthermore, the dwelling value of Hobart marked a significant improvement, currently registering 11.9 percent lower than the city’s record high in 2022. Melbourne’s dwelling value got down for seven consecutive months, dropping 5.1 percent from the peak in 2022, making it the sixth least expensive capital city with a median dwelling value under $780,000. Owens has further highlighted that even high-income households are getting squeezed at the national level.
Futuristic View for Price Growth
ANZ economist, Madeline Dunk has highlighted that “the bank has seen demand for housing getting softened in the recent months, with high interest rates, cost of living pressures, and elevated home values deterring buyer competition”. It was also added that “in some markets, this has contributed to value falls”.
Apart from this, the report has also emphasized that the cyclical downturns do not lead to long-term improvements in housing affordability. Also, as it declines eventually buyers draw it without an increase in housing supply.If we look towards 2025, Dunk has mentioned that housing affordability may “slightly improve from a mortgage payment perspective as the cash rate moves down”. This can further reduce the national metric of income required for a new home loan.
Lastly, Dunk stated that “ANZ research is expecting the Reserve Bank of Australia to start easing in February. We can see 75 bp of easing in total, taking the cash rate to 3.6 per cent by the end of 2025”.