HIA housing affordability jumps

The HIA has released its quarterly housing affordability index and it has jumped above the brief moment enjoyed by the handful of buyers that bought in the months during the GFC:

The good news on housing affordability continued in the September 2012 quarter with improvements evident across all geographical areas, said the Housing Industry Association, the voice of Australia’s residential building industry.The HIA-CBA Housing Affordability Index increased by 5.3 per cent in the September 2012 quarter to be up by 15.0 per cent compared to the same quarter in 2011.”This is the seventh consecutive quarter where we have seen an improvement in the headline affordability index,” said HIA Chief Economist, Dr Harley Dale. “The run of consecutive improvements in some regional indices is even longer, in some instances showing affordability has reached levels not seen since the early 2000s.”

“Housing affordability has been improving on the back of steadily growing incomes, falling interest rates,and easing dwelling prices,” said Harley Dale. “At the same time, however, transactions volumes have remained historically low as economic uncertainty has weighed heavily on households’ willingness to engage in the residential property market.

The good news is more muted for the vast majority of us living in cities, note the light blue line.

Still, the headline index has improved even on the longer term horizon:

Though I question whether property represents the same level of affordability that it did in 1994…

HIA National Release September Qtr 2012


  1. Interestingly, the HIA report says that affordability has improved 15% since the Sep 2011 quarter. Over that time, the cash rate has been reduced by 1.25% (not including the most recent cut in October).

    My home loan rate (UBank) has fallen from 6.59% to 5.62% in that time, a reduction of…wait for it…15%. So basically the reduction in interest rates explains the entirety of the improvement in affordability. Hardly a reason to be celebrating. I’d be happier if the ratio of income to prices had improved, as that would indicate a more fundamental improvement in affordability.

  2. I would much prefer high interest rates but lower house prices.

    The price one pays for a house stays constant while interest rates on the other hand can fluctuate wildly during the length of a mortgage.

    The banks of course prefer debt slaves and higher profits.

    • low interest rate just means people will pay more for homes in real terms, because repayment will remain high as percentage of income over the longer period.

  3. “Though I question whether property represents the same level of affordability that it did in 1994…”

    I’m not convinced on face value either – though I do note that typical mortgage rates in 1994 were aound 9% while today they are under 7%. That’s a significant improvement, though what other factors the HIA uses to derive it’s index I don’t know.

    I take it that a rising index equals improving affordability? Interest rates rose significantly over the time that the index rose from around 65 to 90. Were prices falling at that time?

  4. they mean unaffordability?

    $3.9k monthly repayment for a median home in Sydney.
    Mortgage repayment alone more than 80% of an average full-time adult net wage income. That is more than 95% of median full-time adult net wage income.

    To buy median home (not median house) somebody who is earning median full-time wage has to give 100% of his income. So, average single earner families have no chance of every buying a home.

    A median household with two earners has to spend more than 60% of their net income on mortgage repayment for a median home. So, average dual earner families have no chance of every buying a home.

    So who is buying?

    • Well, to be fair, the median wage of the entire working population isn’t the same as the median wage of the average home buyer. Home buyers will naturally tend to be older with better earnings.

      • home buyers who need 90% LVR mortgage that is used to calculate this index (see methodology) tend to be younger with wages below average.

        calculating affordability for somebody who already owns a home and wants to move, upgrade or downgrade is pointless anyway.

      • I think you misunderstand my comment, which is not about the index it’s about who’s actually buying houses.

        I’m saying that the people buying a median house tend to have above median income because they are a subset of the population that generally excludes the young and the lowly-paid, all of whom would be in the population that comprises the median wage.

        So saying that a couple on the median wage couldn’t buy the median house doesn’t necessarily mean that the system is broken, although it may be for other reasons.

      • If above median income people are buying median homes, who is buying above median homes?
        If people who earn substantially above than median are buying above median homes, who is buying substantially above median homes? etc.

        It’s clear that the whole segment of population is missing so system is broken.

      • Wrong me thinks, Australians and Mexicans, i.e. Australians prepared to over leverage themselves to buy over priced property and now in midst of a “Mexican standoff”. For first time noticed a Melbourne (Docklands) apt. in most heavily discounted list, maybe Chinese investor/owner (but now less temp residents from elsewhere eligible to purchase), gone from 850K to 550K…… these HIA and other intra industry indexes, stats, clearance rates have bene developed by PR and spin doctors….. and about as meaninful as AFL football scores…..

  5. reusachtigeMEMBER

    These so called “affordability” indices are totally misleading and should be called “Home Loan Serviceability Indices”

  6. Yeah houses are becoming so afforable we can now “afford” to buy that new car and take that OS holiday.


    • What? aint they a part of the package deal when you buy an ‘affortable home’?
      you are being ripped off.

      • If not packaged we can just put the car/holiday on the “equity mate” ATM.

        Same Same.

        It’s an LVR party