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The latest ANZ CoreLogic Housing Affordability Report for November has revealed a "triple whammy" effect on prospective home buyers in Australia.
Affordability has worsened for not only buyers but also mortgage holders and renters, and unfortunately, the situation is predicted to deteriorate further by 2024.
Rents on the Rise
One of the key challenges faced by prospective home buyers is the significant rise in rents. This surge in rental costs makes it increasingly difficult to save up enough money for a deposit on a property. In fact, according to CoreLogic, it currently takes the average household around 10 years to save up a 20% deposit on the median priced Australian home.
Home Values Pushing the Dream Further Away
The rising trend in home values is another obstacle preventing many Australians from achieving home ownership. As these values continue to soar, the prospect of owning a home becomes even more distant for the average buyer.
Mortgage Rates on the Rise
Finally, the ongoing increase in mortgage rates exacerbates the challenges faced by home buyers. Higher interest rates make it more difficult for buyers to secure a mortgage on affordable terms.
The gap between what the median buyer can afford and the actual median price is currently at its widest level in over 20 years:
For instance, while the median capital city home in Australia is valued at $741,000, the median household with a 20% deposit could realistically afford to pay only up to $479,000 to avoid mortgage stress.
According to Eliza Owen, CoreLogic’s Head of Australian Research:
"There's probably more challenges than ever for first home buyers trying to get into the market. The median dwelling value, for the median income, is not really serviceable with a 20% deposit at the moment. If you don’t own housing already, it’s very difficult for incomes to keep pace with the movement of values, particularly for houses."
Adelaide Timbrell, ANZ senior economist, further adds that the housing affordability situation is expected to worsen in the coming year as house prices and rents continue to rise:
"We’re not seeing any reason to think there's going to be a turnaround in housing affordability any time soon."
Unfortunately, the Australian Dream of owning a home is drifting further out of reach. The record immigration program implemented by the Albanese government is compounding the issue, leading to increased house prices, rents, and interest rates.
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Knowledgebase
Mortgage: A loan in which the borrower (the mortgagor) offers a property and land as security to the lender (the mortgagee) until the loan is repaid. Repayments of the loan are usually made on a monthly basis over a long period of time, typically 25 years.
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