Affordable and Steady as She Goes

13 Dec 2011 - Enzo Raimondo from http://www.domain.com.au

The affordability of housing for Victorian owner-occupiers has barely changed in the past year, according to the most recentREIA Deposit Power Housing Affordability Report.

The report shows that the proportion of family income needed to meet average loan repayments in the September quarter last year was 35.7 per cent, compared with 35.6 per cent in the September quarter this year.

There is no doubt housing has become less affordable in recent years. Victorians have generally needed more than a third of an income to pay the average loan for the past seven years (with the exception of the GFC).

Between 1999 and 2004, Victorians generally needed a quarter of an average income to pay the average loan.

The significant reduction in affordability was a direct result of the state's population growth doubling between 2005 and 2010 and not being matched by an increase in housing construction.

This suggests that the solution to affordability is primarily through ensuring enough houses. When compared with the other states, Victoria is the second-least affordable - only in New South Wales is a greater proportion of income needed, at 37.1 per cent.

Renters, however, are in a better position. In Victoria they needed 22.7 per cent (same as a year ago) of an average family income to meet the average rent.

This was more affordable than in any other state except Western Australia.