The latest release of the Housing Industry Association’s (HIA) Housing Affordability Index shows record-low interest rates have been the driver behind a hike in housing affordability.
The HIA survey showed a prolonged period of low interest rates, combined with falling house prices and a growth in earnings over the March quarter, led to the most favourable conditions for housing affordability since March 2002.
The HIA-CBA Index outcome follows the Reserve Bank of Australia confirming the popular view that interest rates will remain at record lows for the foreseeable future.
The RBA board agreed at its recent monthly meeting the 2.5 per cent cash rate was “likely to be appropriate for some time yet”.
The HIA-CBA Index recorded an increase of 2.1 per cent during the first quarter of 2014, making affordability 10.8 per cent more affordable than it was a year ago.
The HIA said while there has been strength in property prices, the impact of lower interest rates along with continual earnings growth has meant affordability has improved over the past year.
“The HIA-CBA Index showed that in the March 2014 quarter, affordability improved in two of the six surveyed capital cities – Sydney and Perth – while remaining unchanged in Melbourne,” the HIA said in a statement.
“[However] affordability deteriorated in Brisbane, Hobart and Adelaide,” it added.
According to the HIA, the results mean first-home and existing buyers considering a new purchase may be in a better position to buy than they would have been a year ago.
“However, while rates have been earmarked to remain unchanged in the short term, it is believed that at some point the RBA will need to lift them, with expectations for this happening at least by the middle of 2015,” it added.