Australian housing affordability talks as first time home buyers priced out of the market
14/03/2012 
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House prices are fast becoming out of for most first time home buyers.
Debate is raging in the community about housing affordability and the official statistics show first-home buyers today are faced with fewer choices than their parents.
The State Government has offered some mortgage duty relief to homebuyers .
In a bid to counter the affordability crisis, mortgage duty will also be phased out over two years and land tax thresholds changed to reduce the cost of buying properties.
First-home buyers are already exempt from duty on mortgages up to $250,000, and are taxed at a lower rate on larger amounts.
Michael Matusik, property market analyst, says Queensland homebuyers are paying on average 35 per cent of income to service a mortgage, compared to 40 per cent in NSW.
Another measure of housing cost is to plot the median house price as a multiple of median incomes.
Over the past 50 years, Mr Matusik says people spent three to four times their median household income on buying a house, now it was 6.2 times in Brisbane.
Sydney at present has a median multiple of 8.5 times, Perth 8, Hobart 7, and Melbourne and Adelaide 6.5.
“This began to accelerate rapidly over the last decade and especially over the last five years,” Mr Matusik says.
“All of the Australian cities above rank in the top 25 most expensive places to live in the world. Sydney is now ranked the seventh least affordable city in the world, beaten by six American cities including California, San Diego, San Francisco and Honolulu.”
Mr Matusik says there is simply not enough developable land within urban areas and more needs to be released.
“We believe that land supply is a key issue with regard to affordability and it is no accident that the top 25 most expensive places in the world have little or no land left to develop, however the public does not think so.
“The second solution involves improving development assessment that is clearing backlogs and fast-tracking standard applications.”
Mr Matusik says Australia’s tax system also needs a complete overhaul.
“Contrary to popular opinion, there are not enough residential investors, and owner-residents are more often than not (and increasingly so) speculators.
“The average time between sales of an owner-residence is approaching six years and was over 15 years just a generation ago.
“More than half of the owner-residences resold over the last five years had undergone a substantial renovation (meaning more than $50,000 was spent on the property) between sales.”
The average new home loan in Queensland broke through the $300,000 mark in May, up from $288,000 in April, according to AFG, Australia’s largest mortgage broker.
“The $300k Club now comprises Queensland as well as NSW, where the average new mortgage is $382,000, and Western Australia ($359,000),” Mark Hewitt, AFG general manager of sales, says.
The AFG Mortgage Index also shows fixed-interest home loans have fallen from a peak of popularity in November 2006, when they represented a quarter of all new home loans, to 20.3 per cent in May. Property buyers may be less concerned about rate hikes than they have been in the past.
Wizard’s Tomorrow’s First Home Buyers series reveals the number of Australians intending to purchase their first home in the next 12 months jumped six per cent to 523,000 in the March quarter.
Wizard chairman Mark Bouris says the growth was largely driven by first-home buyers with higher household incomes keen to capitalise on their financial gain through property investment.
“We are seeing the emergence of a new breed of higher-income first time home buyer with their sights set firmly on the property market as a way to build their wealth,” Mr Bouris says.
Source: Courier Mail
Rick Adlam has been helping clients with home loan finance since 1985 when he was home consultant with AV Jennings. Rick started Equity Home Loans in 1996 to help homeowners become property investors. Rick currently consults in the development of Mr Mortgage for mortgage brokers and HomeMate for new home buyers.
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