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Believe it or not- Sydney housing affordability best in years

Housing affordability is clearly improving in Sydney although the outlook for first home buyers remains bleak.sydney

Sydney’s property owners have enjoyed another positive year overall for prices growth although results have been typically mixed between regions, price ranges and dwelling types.

The key driver of the surge in Sydney house prices over recent years has been the steep decline in mortgage rates that has provided home buyers with historically favourable borrowing conditions.

Since the beginning of the current easing cycle in official interest rates in November 2011, the Sydney property market has clearly outperformed the other capitals with the median house price now over $1.1 million.

Affordability improving

Despite nation-leading prices growth, housing affordability for home buyers has improved recently as underlying prices growth in the Sydney market has declined.sydney job car traffic

The latest data from the ABS reports that the average loan for a home purchaser in New South Wales increased by 4.5 percent over October to $474,647.

October’s result however remained 0.4 percent below that recorded over October 2015 and well below the peak average loan of $484,571 recorded over November 2015.

The Sydney Home Loan Affordability Index that measures the proportion of income required for the average home loan repayment has also improved lately with the index falling to 91.5 over the September quarter.

This was the lowest measure since June 2015 and well below the recent peak of 102.6 recorded over the December quarter 2015.

 The Index results reflect the relationship between the proportion of the average home buyer loan to the Sydney median house price which has also fallen sharply recently with the September quarter result now at just 41 percent – the third lowest result over the past decade.

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The Sydney median house price has surged by 69.3 percent since the December quarter 2011 fuelled by the lowest interest rates on record.

Despite boom-time market conditions, the average NSW loan for home buyers has increased by just 32.7 percent over the same period.Sydney map

NSW home buyers remain active despite record prices with the number of home buyer loans approved over the year ending October 2016 increasing by 1.9 percent or 2327 higher than the number approved over the same period the year before.

Although the Sydney housing market remains positive for home owners, the strong prices growth of recent years has clearly marginalised first home buyers who generally face a bleak outlook with affordability for this group continuing to decline.

The ABS reports that just 1327 NSW first home buyer loans were approved in October which was the lowest number on record for that month.

The September result was also the lowest recorded for that month in the series.

The number of first home buyer loans approved over the first 10 months of 2016 was 9.2 percent lower than that recorded over the same period in 2015.

And the average NSW first home buyer loan now stands at $396,500 – the highest monthly result ever recorded and $20,000 higher than borrowed over October the year before.

Source: Domain



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About

Dr Andrew Wilson is Australia’s leading housing market expert. As senior economist for Fairfax-owned Domain Group, Dr Wilson is one of the nation’s most respected real estate analysts and Australia’s highest profile housing market commentator. Visit his blog at Domain


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