Despite the news that the Reserve Bank of Australia is keeping the cash rate at 1.5% and banks are more likely to be less strict when it comes to their lending policies, the housing affordability remains a pricey phenomenon in Australia.
Housing affordability remains high
The 14th annual report released by Demographia ranked Sydney as the “second worst” with house prices that are said to be 13 times higher than the median household income. When compared to the global housing affordability in major cities it was beaten by Hong Kong which has property prices that are about 20 times higher than the household income.
Other major cities in Australia still carry a hefty price tag that sees many Australians paying through their nose. Melbourne’s price was 10 times higher than the median household income, followed by Adelaide, Brisbane, and Perth with house prices that were six times more than incomes.
Experts have tussled with these findings saying that Demographia has overstated the numbers, but the fact remains that there is an affordability crisis that faces many Australians. Prime Financial backs this up with the fact that Australian households continue to labour under extreme levels of indebtedness which is 200% of income.
What are Australians really paying for their mortgages?
If you own property in cities such as Sydney you would pay an average 48% of your household income towards paying off your mortgage. While someone who owns property in Melbourne will fork out 40% of their household income to pay their home loan. Depending on where you reside the price is most likely to increase or drop between 28 and 35%.
If there is one thing that could ease the financial burden of Australians is when the interest rates for mortgages comes down, but experts see this as unlikely since there could be a possible increase for mortgage rates for home owners being pushed higher due to new requirements coming from Basel III which could result in higher capital requirements.
Checking your current home loan will be advisable to see if it still matches your financial needs. If not, then there are plenty you can compare online. Refinancing is also another option many Australians can look forward to which will help them meet the mortgage needs to ease the financial burden.
Dwelling approvals decrease
Construction in the property market took a tumble in December, with building approvals going down by 20%. According to ABC news, the cause for the drop was due to the volatile apartment sector which dropped by 40% in the previous month.
The overall property market is showing signs of cooling down, but places that have been overlooked are making a come back in the Australian property market. One way to know if you are still getting your money’s worth is to keep tabs on the various property markets in Australia instead of focusing solely on the events that happen in the major cities. There are plenty of hidden gems that can see a good return on investments if researched thoroughly.