Housing affordability improves in Australia and new starts at record high
Housing affordability across Australia experienced improvement during the first three months of 2016, according to the latest affordability report.
Affordability improved by 2.7% quarter on quarter and was 0.4% more favourable than the same period a year earlier, the data from the report by the Housing Industry Association shows.
Aggregate capital city housing affordability was 4.1% more favourable during the quarter, while regional markets experienced 0.1% improvement.
‘The national median dwelling price fell during the March 2016 quarter and this was the main factor behind the improvement in affordability during the first quarter of the year,’ said HIA senior economist, Shane Garrett.
‘Had it not been for the shock increase in variable mortgage interest rates late last year, the improvement in affordability would have been even better. Earnings growth has been held back by slack in the economy, and this situation has also worked against improving affordability,’ he explained.
‘At the end of the day, the most durable way of improving affordability lies in facilitating the supply of affordable new housing more effectively. Planning delays, land supply shortages and the heavy tax burden are all making the achievement of housing affordability much more difficult,’ he added.
A breakdown of the figures show that the largest improvements in affordability were in Sydney with a rise of 8.9%, Perth up 4.9% and Darwin up 4.4%. Affordability also saw improvement in Hobart with a rise of 2.9% and Melbourne where it was up 2%.
However, affordability worsened in Brisbane with a fall of 1.2%, was down 0.2% in Adelaide and down 0.3% in Canberra.
Meanwhile, the latest data from the Australian Bureau of Statistics show that the number of dwellings approved rose 0.6% in March 2016, in trend terms, and has now risen for four months in a row.
Approvals increased in the Australian Capital Territory by 18.9%, in Western Australia by 1.1%, in Queensland by 0.8% and in Victoria by 0.2% in trend terms. Dwelling approvals decreased in the Northern Territory by 18.1%, in Tasmania by 1.5%, in New South Wales by 0.3% and in South Australia by 0.1% in trend terms.
In trend terms, approvals for private sector houses rose 0.3% in March. Private sector house approvals rose in Victoria by 1.7% but fell in South Australia by 0.8%, in Western Australia by 0.7% and in Queensland by 0.2% Private sector house approvals were flat in New South Wales.
In seasonally adjusted terms, dwelling approvals increased 3.7% with private sector house approvals up 2.6% while private sector dwellings, excluding houses, rose 6.7%.
The value of total building approved fell 0.9 per cent in March, in trend terms, and has fallen for eight months. The value of residential building rose 0.4% while non-residential building fell 3.9%.
Final ABS results for 2015 confirm that last year was the strongest ever for new home building activity with over 220,000 new homes beginning construction, an 11% rise on 2014 with which the previous record for new home activity.
‘It is impossible to overstate the importance of new home building in supporting economic activity over the past few years. The mining slump left a big hole in economic growth, which residential building has partly alleviated, providing much needed employment in construction. Australia’s housing stock has been augmented significantly by the high levels of new home building. This will benefit our economic capacity and living standards for decades to come,’ said HIA’s Garrett.
But he warned that new home building is likely to have peaked last year and he predicts that there will be fewer new homes started in 2016. ‘Under current policy settings, new home building is then projected to fall below the levels required to provide for Australia’s long term housing needs,’ he pointed out.
‘We must avoid this outcome by immediately tackling the heavy taxation burden on new home building, speeding up the planning process and doing more to deliver shovel-ready residential land. In the absence of serious housing policy reform, there is a real risk that we will fall behind in the race for better living standards,’ he added.
A breakdown of the figures shows that in 2015 the largest increase in new home starts was in New South Wales with growth of 19.1%, by 18.8% in Tasmania, by 18.7% in Queensland, by 17.3% in Victoria and by 6% in ACT.
But they fell by 22.4% in the Northern Territory, by 12% in Western Australia and by 9.4% in South Australia during 2015.