Housing affordability in the ACT has improved for the 11th consecutive quarter amid federal fiscal tightening and a waning construction boom, a new report says.
The latest Housing Industry Association-Commonwealth Bank Affordability report shows the ACT's housing affordability index improved by 6.3 per cent to reach 84.1 during the September quarter – the second highest increase in the country.
It comes as a separate new report shows property values fell by 1.4 per cent over the past quarter, amid concern over public sector job cuts.
Affordability is now 18.1 per cent higher than at the same time last year.
The index measures the extent to which average weekly earnings can repay a mortgage for a median-priced dwelling.
The report says national housing is at its most affordable in a decade after interest rate reductions and subdued home price growth.
Affordability was 15 per cent higher than a year ago and 43 per cent higher than the low point in mid-2010.
HIA senior economist Shane Garrett said the single biggest factor driving affordability nationwide and in the ACT was low interest rates.
“As well as that housing developments in the ACT have been a bit weaker in the past quarter,” he said.
Mr Garrett said slow house price growth, wage increases and interest rate reductions had all contributed to making it more affordable to buy a house in Canberra.
The report said the economic backdrop nationally remained subdued and this had resulted in the official cash rate and mortgage interest rates declining.
“Meanwhile the ACT economy has its own unique weaknesses – its exposure to federal fiscal tightening is coinciding with a waning construction boom,” the report said.
“These factors are prominent in the backdrop to the subdued dwelling price developments experienced in the territory which has consequently aided housing affordability.”
Canberra recorded the second strongest improvement for the quarter (6.3 per cent) behind Hobart, which had an increase of 10.1 per cent.
Perth improved by 3.2 per cent, Melbourne by 2.6 per cent, Adelaide by 2.4 per cent, Brisbane 1.5 per cent and Sydney 0.5 per cent.
New data in the just issued RP Data Quarterly Review shows that while Canberra home values had increased by 3.5 per cent over the past year, signs of market weakness were starting to emerge.
“Over the past three months home values have fallen as have sales volumes and properties have begun to take longer to sell,” the report said.
“With public sector job reductions likely to occur this is probably weighing heavily on market sentiment.”
According to the report, Canberra home values decreased by 1.4 per cent over the past quarter and annual sales volumes to August had decreased by 4.2 per cent compared to the year before.
Capital city home values increased by 3.4 per cent over the quarter. This is the fastest rate of growth in three years.
Mr Garrett said that while he expected the ACT to continue to become more affordable in the next year or so, it would not be by a significant margin.
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