Housing affordability has continued its downward spiral, sinking almost 2 per cent in the final three months of last year to yet another record low, figures show.
A report published by the Commonwealth Bank of Australia and the Housing Industry Association (HIA), released today, shows housing affordability fell by 1.7 per cent in the final three months of 2007.
Housing affordability conditions in the December quarter were 5.2 per cent lower than the same period a year earlier, and the lowest since the report was first published in 1984.
The report pointed to higher interest rates and strong growth in established house prices as the chief reasons behind the deterioration in affordability.
"This latest fall was a result of a 1.4 per cent increase in the median first-home price, and a 0.25 percentage point increase in interest rates in November, both of which offset strong household income growth for the quarter,'' the report said.
As a result, the monthly loan repayment needed on a typical first-home mortgage rose from $2595 to $2689, an increase of 3.6 per cent, the report said.
And with the threat of more interest rate rises in the year, the situation is set to worsen.
The RBA, in its latest quarterly statement on monetary policy released yesterday, warned higher inflation meant "monetary policy is likely to need to be tighter in the period ahead''.
HIA chief economist Harley Dale said higher interest rates would led to affordability declining further in early 2008.
"The growing shortage of housing stock is placing significant upward pressure on established house prices and is generating a further tightening in rental markets,'' he said.
Mr Dale said a number of Federal Government initiatives aimed at boosting the stock of existing housing in Australia would eventually offer some relief.
''The Federal Government has a number of policies on the table that will ensure a greater supply of new housing, which in turn will relieve this pressure,'' Mr Dale said.
He said the recently announced first-home saver accounts scheme would provide an important platform to promote and reward saving among aspiring first-home buyers while also reducing inflationary pressures.
"The speedy implementation of measures to complement this policy, by way of boosting housing supply, will counter the downward spiral in home affordability,'' Mr Dale said.
