Latest CoreLogic Housing Affordability Report

In June 2018, the dwelling price to income ratio across the combined capital cities was recorded at 7.2 times, the lowest reading since March 2017.

house-pricesThe improved affordability position is the result of lower housing prices against a subtle rise in household incomes.

For houses the ratio was 7.8 times, down slightly from the 7.9 times peak the previous quarter.

For units, the ratio was recorded at 6.4 times which is down from the peak of 6.5 times in 2015 and the ratio is currently trending lower.

Сapital cities overview: years to save a deposit

To save a 20% deposit, based on households saving 15% of their gross income, capital city households will typically be required to save for 9.7 years.

With detached housing more expensive, households would take 10.4 years to save for a house and for a unit it takes 8.5 years on average.

Five years ago it took 8.7 years to save a house deposit and 7.9 years for a unit deposit and a decade ago it took 9.0 years and 7.8 years respectively.

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Сapital cities overview: share of income required for repayments

Repaying an 80% LVR mortgage takes, on average, 39.0% of a household’s gross annual income.

For the median household to service the mortgage on a house would require an average of 41.7% of household income in June 2018, while repaying a unit required 33.9% of income.

The peak in the share of income required for repayments was a year ago when it required 53.5% of income to repay a house and 46.2% to repay a unit.

Сapital cities overview: rent to income ratio

Renting remains much cheaper than taking out a mortgage, with capital city households dedicating, on average, 26.3% of their annual income towards paying the landlord.

Weekly rents have increased slightly faster than household incomes over the past year which has seen the capital city trend record a modest rise over the past twelve months.

Renting a capital city house now requires an average of 26.9% of household income and renting a unit requires 26.3%.

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Regional areas overview: price to income ratio

The dwelling price to income ratio across the combined regional areas was recorded at 6.2 times in June 2018, which is level with a year ago but slightly lower relative to the previous two quarters.

For houses, the ratio has fallen slightly over the quarter to reach 6.3 times and is down from a peak of 6.6 times in 2008.

The unit price to income ratio is recorded at 5.8 times and is unchanged over the quarter and down from its peak of 6.5 times in 2008.

Income TaxRegional areas overview: price to income ratio

Regional households saving 15% of their income will typically need to save for 8.2 years in order to accrue a 20% deposit.

To save for a house deposit it currently takes 8.5 years compared to it taking 8.1 years five year ago and 8.7 years a decade ago.

For regional units, it currently takes 7.7 years to save a deposit which is up from 7.2 years five years ago but down from 8.6 years 10 years ago.

Regional areas overview: share of income required for repayments

In order to repay a mortgage on a regional dwelling it currently requires 33.0% of gross household income, substantially lower than a decade ago when regional home owners were dedicating 51.8% of their household income to service an 80% LVR mortgage.

For houses the proportion is higher, at 33.8, while ten years ago (at the peak) servicing an 80% LVR mortgage required 52.1% of household income.

For a unit, it currently takes 30.9% of gross household income to service a mortgage compared to 51.3% at the peak in June 2008.

Rental Property CorelogicRegional areas overview: rent to income ratio

Renting a regional dwelling required 28.9% of gross annual household income in June 2018, slightly higher than a year ago when households were dedicating 27.6% of their incomes towards paying their rent.

Renting a regional house typically required 28.9% of gross household income in June 2018 which is lower than how much it requires to service a mortgage.

It is a similar story for regional units which require 28.0% of a household’s income to service the mortgage.

Affordability measures across the regions as at June 2018

The above data highlights how Sydney, Melbourne and regional NSW are significantly less affordable places in which to own a property than other parts of the country.

With dwelling values across these three markets now falling it should lead to an improvement in affordability however, the cost of housing would have to reduce substantially over a number of years to see these affordability metrics more closely align with the other major regions of the country.

Region Price to income ratio Yrs of household income required for a 20% deposit on a dwelling % of household income required to service an 80% LVR mortgage % of household income required to rent a home
Sydney 9.1 12.1 48.4% 30.2%
Melbourne 8.1 10.8 43.3% 26.7%
Brisbane 6.0 8.0 31.9% 25.4%
Adelaide 6.4 8.5 33.9% 27.0%
Perth 5.9 7.8 31.3% 22.3%
Hobart 6.1 8.1 32.4% 30.4%
Darwin 4.0 5.3 21.1% 19.9%
Canberra 5.1 6.8 27.1% 21.4%
Regional NSW 7.2 9.6 38.5% 31.7%
Regional VIC 5.5 7.4 29.6% 25.5%
Regional QLD 6.3 8.4 33.6% 28.1%
Regional SA 4.6 6.1 24.6% 23.7%
Regional WA 4.6 6.2 24.7% 24.6%
Regional TAS 5.2 6.9 27.6% 27.4%
Regional NT 5.2 7.0 27.9% 29.2%
Combined capital cities 7.3 9.7 39.0% 26.3%
Combined regional areas 6.2 8.2 33.0% 28.9%

Although regional markets are more affordable than capital cities, the substantial falls in values in Darwin and, to a lesser extent, Perth over recent years coupled with gradually rising incomes have resulted in affordability improvements across these regions, with Darwin now the most affordable capital city housing markets market.

Rental affordability has tracked in the opposite direction relative to affordability measures for purchasing a home or servicing a mortgage, apart from Hobart where rental rates have been surging higher.

Outside of Tasmania, rental markets have generally seen rents rising at a rate close to income growth and inflation which has seen rental affordability improve relative to five years ago across most regions.

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About

Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au


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