The AIP Housing Affordability Index for the September Quarter 2022 has been released. It shows record repayment unaffordability over the history of the index although it is a little easier to save the deposit.To download click here.
It is currently slightly easier to save a deposit than it was when house prices were at their highest in Q4 2021 with the index dropping by 13% from 212.2 to 184.5. The difficulty of meeting repayments has steadily increased over the same period rising from 160.2 to 173.3, a jump of 8%.
Median house prices have fallen for the last three quarters, reporting a drop of -8.4% in the Q3, 2022. All markets fell, with Canberra, Sydney and Melbourne falling the most, and Brisbane, Darwin and Adelaide the least.
Housing transfers data also indicate a decline in relative market activity with all states reporting a drop when compared to figures from the 2nd quarter of 2021. This was strongest in Sydney and Melbourne who now only make make up less than 46% of all housing transfers for the quarter, a far cry from pre-covid levels in Q4 2019 where they represented 57% of house transfers. Over the last 12 months there has been a drop of 29% in house transfers across all of Australia.
The relative unaffordability of housing is obviously impacting market activity with fewer potential purchasers being prepared to pay asking prices and few vendors being prepared to drop their expectations.
That the greatest declines in sales are apparent in the markets which dropped the least in value suggests that buyers are resistant to sell at lower prices, suggesting that at this time last year owners were not suffering a high degree of stress, even with the interest rate increases.
This may have changed in the intervening period as interest rates have increased by 0.75% since then, and the RBA has indicated further rises are to come.
Highlights
- Interest rates have pushed repayment unaffordability levels back to a record high with the index at 173.3, which is higher even than the 3rd quarter of 2008 just before the GFC when it hit 171.84.
- Every capital city experienced an increase in the index (which indicates a decrease in affordability) between Q2 and Q3 last year. The largest increases were Adelaide (20.5), Brisbane (14.5), Perth (13.7), Hobart (13.6) and Darwin (11.2) above the weighted average increase of 8.9.
- Sydney (8.6), Melbourne (8.4) and Canberra (5.2) were below it.
- Deposit affordability increased in all markets as a result of drops in house prices, with Hobart falling by 33.90 points, Canberra falling 27.59, Melbourne 22.40 and Sydney 18.60 – above the average fall of 17.35. Darwin (-13.96) and Brisbane (-13.63) were closest to the average. Prices in Adelaide (-4.19) and Perth (-2.96) held up.