Housing affordability took another hit as house prices in Melbourne, Brisbane and Adelaide rose sharply in the third quarter of 2007, raising affordability issues for these cities, Westpac says.
In a paper published yesterday, the bank’s senior economist Andrew Hanlon says the latest data shows Melbourne, Brisbane and Adelaide had the fastest annual house price growth since 2002-04.
Mr Hanlon says house prices in Melbourne, Brisbane and Adelaide looked to be rising by 18.9, 18.6 and 16.7 per cent respectively this year.
Sydney was hit by an “affordability crunch” in late 2003 and Perth house prices reached a similar point in late 2006.
The bank says Perth suffered a significantly larger deterioration in affordability than Sydney, when its house prices doubled in three years.
The surge in prices and rising interest rates are leading to another significant deterioration in housing affordability, Mr Hanlon says.
He says the price hikes and rising interest rates threaten to push other markets — Brisbane, Melbourne and Adelaide — into an affordability crunch.
He says that in Sydney and Perth, dwelling approvals had peaked 13 months before the housing affordability problems.
“This suggests that a crunch doesn’t appear to be under way just yet in Brisbane, Melbourne and Adelaide, as approvals are holding their ground,” he says.
Mr Hanlon writes that even if the latest price surge does not lead to a “crunch” in these markets, the scope of future price gains is limited.
“Our estimates suggest price growth of over 10 per cent a year in Brisbane, Melbourne and Adelaide will be difficult to sustain.”
He says approvals, not prices, are the early indicator of housing market conditions.
Sydney remains the least affordable housing market. It would take a further 15 to 20 per cent rise in house prices in other main capital cities to put them near Sydney’s level of low housing affordability.
Mr Hanlon concludes that, ordinarily, a housing shortage of the scale Australia is now experiencing is more than enough to lead the sector into a strong and sustained upturn.
But with affordability still stretched tight and interest rates potentially rising further in the year ahead, Australia’s unusual housing downturn looks set to be followed by an equally unusual upturn.
Westpac also notes that housing finance to owner-occupiers strengthened in August, rising 1.6 per cent. It says the 0.25 percentage point interest rate rise is likely to have had a limited impact.
Source: The Australian
|
About: Rick: Rick Adlam has been involved in mortgage finance since 1996 with Equity Home Loans as a Founding Partner. Rick created Mr Mortgage™ in 1999, one of Australia's first online mortgage brokers. As a mortgage introducer Rick specializes in helping his clients get approved for low interest mortgage loans with no ongoing fees and charges, and low doc home loans for the self employed.
|
About the Author
Rick Adlam Has Written 139 Articles For Us!
Rick Adlam has been involved in mortgage finance since 1996 with Equity Home Loans as a Founding Partner. Rick created Mr Mortgage™ in 1999, one of Australia's first online mortgage brokers. As a mortgage introducer Rick specializes in helping his clients get approved for low interest mortgage loans with no ongoing fees and charges, and low doc home loans for the self employed.
Related posts:
- Real estate prices on the rise in Melbourne
- Housing affordability falls to lowest recorded index as home loans rise and house values defy gravity
- Brisbane & Gold Coast home loan/housing bubble unlikely to burst
- Australian housing affordability talks as first time home buyers priced out of the market
- Labor’s $500M plan to address housing affordability, as taskforce says $110,000 is creamed from new home lots for infrastructure
