Acording to HIA, although the mortgage rate is decreased, the housing affordability is still low. Because interest rate are high plus the amount of taxes by the local,state and federal government and other charges on a new house puts extreme pressure on the individual buying a house for the first time.
The HIA is of the opinion that housing affordability is very low. The lowest it has reached in 24 years. They do not see much hope of it improving even if there is a fall in mortgage rates, which is very unlikely. The home loan repayment hovers around $2830 a month.
The HIA-CBA First Home Buyer Affordability Index has gone up by 0.3 per cent during the quarter of the June 2008. In spite of this the figure is still 6% lower than the previous year. The independent rise in borrowing rates by the banks has done nothing to improve the situation.
The slight increase in the affordability rate just means that now the consumer can invest in a small first home. Ben Phillips who is a member of the association is of the opinion that the average income of the Australian People six years ago was much more than what was required, nearly double.
Today the scenario is such that almost thirty percent of the family income goes for mortgage repayment which amounts to almost $ 2830 a month averaged. The financial institutions and small banks raised the interest’s rates independent of the Reserve Bank during the June quarter of 2008.This increased the average home loan repayment by almost one percent.
The median first home price increased from Dollar four million twenty four thousand six hundred $ in the March quarter to $425000 in the June quarter. Mr. Harley Dale Chief Economist of HIA says that even if the mortgage rate is decreased marginally in the second quarter of the year it will not have big impact on the affordability rate. Though, it can ease the strain a little bit.
The interest rate are high plus the amount of taxes by the local, state and federal government and other charges on a new house puts extreme pressure on the individual buying a house for the first time. Another threat that the HIA fears is that of shortage of skills. It will also pose to be a big problem in the affordability of housing.
According to the report it was not easy to afford a house in Melbourne, regional Queensland Adelaide, Hobart, Sydney and regional South Australia during the June Quarter. It will be only by the year 2009 -2010 financial year that one can expect to see any improvement in the housing affordability.
Housing can become affordable if interest rates come down and the supply too becomes better. In order to increase supply of houses, the construction of houses should become easier. All this will add to make the housing affordability within reach of first time house buyers.
It is not easy constructing a house. The land cost, Stamp duties, government fees and the different taxes laid by the state and federal government is high all put together raises the cost of constructing the house. The government at all levels must cooperate to reduce charges. They must also lessen bureaucracy to speed up approvals.
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