First time homebuyers in Australia increased market share by 50.4% in 2020

 

The most recent home Affordability Report (HAR) from the Real Estate Institute of Australia (REIA) reveals that, despite overall year-over-year improvement of 0.7 percentage points, home affordability in Australia decreased nationally in the December 2020 quarter.

According to REIA President Adrian Kelly, rising home prices and bigger loans are mostly to blame for the reduction in affordability.

"The market bucked the doomsday forecasts, with national median house prices increasing in 2020, primarily due to demand from first-time homebuyers. Due to low mortgage rates and the variety of first-home buyer incentives offered, Australian first-time homebuyers boosted their market share by 50.4% over 2020.

Given the difficulties many tenants and investors endured during the epidemic, the move towards home ownership is especially encouraging. However, unless efforts to increase supply are taken, rising house prices could cause housing affordability to vanish. Particularly in Australia's rural regions, this is true.

According to Mr. Kelly, the percentage of revenue needed to cover debt repayments rose to 34.8%, or 0.9 percentage points.

The increase in the percentage of income needed to cover loan repayments, which is the indicator of home affordability, varied from 0.1 percentage points in Victoria to 2.3 percentage points in New South Wales.

The state with the highest cost of living is New South Wales, where loan repayments take up 44.6% of income. With a payback need of 21.9% of income, the Northern Territory has the lowest cost of living. In the Northern Territory, buying is now more inexpensive than renting, he claimed.

According to Mr. Kelly, the affordability of renting decreased throughout the quarter, with a 24.0% increase in the amount of income needed to cover rent.

Rent affordability nationwide increased by 0.4 percentage points over the previous 12 months, but it decreased by 0.2 percentage points over the quarter.

"Tasmania is now the least affordable state to rent, with the proportion of income required to meet rent repayments now at a staggering 29.5%, 5.5 percentage points higher than the national level."

Despite an increase in the percentage of income needed to cover median rents to 17.8%, he said that Western Australia still had the lowest cost of living.