Housing affordability will continue to be hammered by rising interest rates, a report by the Real Estate Institute of Australia (REIA) and Deposit Power has found.
According to the report, housing affordability had declined in the September quarter even before the subsequent three rate rises had been factored in.
REIA president David Airey said although marginal, the decline in affordability in September was not positive news for potential homebuyers or homeowners paying off a mortgage.
“Since economic recovery showed those first green shoots, the REIA has continually warned that despite the early and promising signs, rapid interest rate increases have the potential to dampen the market and stifle recovery. With this in mind, housing affordability could decrease even further in the next quarter, which is a major disappointment for Australians,” Mr Airey said.
“We also have the issue of a housing supply shortage, which is not helped by higher rates. It’s a big issue for the Federal Government who will be aware of the potential damage these sudden rate increases will cause not only to the 200,000 first home buyers who have bought a home in the last year, but also to developers and builders.
Deposit Power national manager Keith Levy agreed that the tables have turned quickly in the Australian housing market.
“From a period of extremely low interest rates and high housing affordability, we appear to again be facing escalating interest rates, and no ease in sight for property prices,” Mr Levy said.
The September quarter report has also recorded a slowdown in the total number of housing loans, particularly those to first home buyers, who have benefited from the First Home Owners Grant Boost.