The latest national housing affordability report by the Real Estate Institute of Australia (REIA) has some positive news for the property market.
Despite recent media headlines about Australia having some of the most unaffordable real estate in the world, the report showed that in parts of Australia, housing affordability is improving.
The report showed that comparing the December 2015 quarter to the December 2014 quarter, housing affordability improved in Queensland, South Australia, Western Australia, Tasmania, the Northern Territory and the Australian Capital Territory.
The only states where housing affordability declined over the past year were New South Wales and Victoria, which was largely due to the housing booms in Sydney and Melbourne.
This growing trend of improving housing affordability in regional areas is highlighted by the fact that in the NT it takes 21.2 per cent of an average family income to service a home loan compared to 39.4 per cent in NSW.
The survey shows that the ACT is the most affordable region in Australia to buy a property, requiring just 19.9 per cent of an average family income to service a home loan.
Affordability has always been a key factor in determining the health of a property market, and the fact that a large number of property markets outside the Sydney-Melbourne axis are becoming more affordable is good news for Australian property sector.
Affordability is also a signpost to future capital growth because when properties become very affordable, buyers tend to become more active in these markets, pushing up prices.
The NT, for example, now has some of the most affordable housing in Australia, and with a small population and huge natural resources, the prospects for future capital growth in this housing market looks very promising.
Astute property buyers and investors should also take a micro approach towards buying real estate in more affordable housing markets.
This is because the real estate market does not move in a uniform way. In Queensland, where around 27.6 per cent of an average family income is needed to service a home loan (compared to 32.4 per cent nationally), several areas – such as the Gold Coast and parts of Brisbane – are primed for capital growth.
Overall, the improving affordability of real estate in many parts of Australia now creates more opportunities for astute property buyers to purchase prime real estate with the view of capitalising on capital growth moving forward.