Affordability challenges for Gen X, Y

Across Australia, home loan affordability declined by 3.9 per cent over the quarter and by 8.0 per cent over the year, worsening in all States and Territories except Tasmania over the December quarter. The largest decline in affordability over the quarter occurred in South Australia, while Western Australia recorded the largest decline over the year.

`A generation has grown up thinking that a property purchase may be out of reach - home loan affordability statistics seems to support this perception. However this generation may start to realise that soon, renting may also be out of their reach,' said Denise Bofill, General Manager of Consumer Products, including Deposit Power at Vero.

`With the erosion of home loan affordability, it is not surprising that home ownership amongst 25 - 34 year olds has fallen, and that first home buyers only represent 17.7 per cent of total homebuyers financed, well below the ten-year average of almost 22 per cent,' said Mr Joyce.

`Home ownership is not only essential for Gen X and Y now, but also into the future as they will be required to self-fund their retirement with superannuation and voluntary savings. Retirees who do not own their home need about $300,000 of additional savings yielding 5 per cent pa to meet median rents across Australia.

`All levels of Government must address this serious issue now - reducing state property taxes and increasing concessions and the First Home Owners Grant for first homebuyers would be a good starting point,' said Mr Joyce.

Nationally, borrowers now need 35.2 per cent of family income to meet average loan repayments, the highest proportion required in almost 17 years.

New South Wales remains Australia's least affordable location, with 37.2 per cent of family income required to meet average loan repayments. Affordability declined by 2.2 per cent over the quarter and by 1.9 per cent over the year.

Victorians required 34.3 per cent of family income to meet average loan repayments in the December quarter. Home loan affordability deteriorated by 5.3 per cent over the quarter by 10.8 per cent over the year. This is the lowest level of affordability since March 1990.

Queenslanders required 36.3 per cent of family income to meet average loan repayments in the December quarter. Home loan affordability deteriorated 3.9 per cent over the quarter and 7.0 per cent over the year.

In South Australia, 31.9 per cent of family income is required to meet loan repayments. Home loan affordability deteriorated by 6.5 per cent over the quarter and by 10.8 per cent over the year. This is the worst result for South Australia since September 1990.

The most significant decline in home loan affordability over the year occurred in Western Australia, down 18.5 per cent, reflecting the major increase in house prices in that state. There was a decline over the quarter of 5.0 per cent. 33.8 per cent of family income is now required to meet average loan repayments. Home loan affordability is now at its lowest point since March 1980.

In Tasmania, home loan affordability improved over the quarter 1.8 per cent, but deteriorated over the year by 7.3 per cent. 32.7 per cent of family income is required to meet average loan repayments.

Home loan affordability in the Northern Territory deteriorated 4.3 per cent over the quarter and 13.4 per cent over the year, with 21.5 per cent of family income required to meet average loan repayments.

Home loan affordability is best in the ACT, attributable primarily to median family income being greater than all other localities. 19.8 per cent of family income is required to meet average loan repayments. Home loan affordability deteriorated by 3.8 per cent over the quarter, but improved by 0.3 per cent over the year.

Source: www.mortgagebroker.com.au Get smart, Get Educated