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PPG_Blog_April_image 2_housing affordability

The Real Estate Institute of Victoria (REIV) released some interesting data this week relating to Victoria’s housing affordability. According to these latest figures housing affordability has improved by 20% since the prices peaked in late 2010. This is one of the reasons why more buyers are currently active in the residential market.

The REIV research also shows that an average Victorian household would have had to dedicate 26.1% of its income to meet loan repayments when prices last peaked in the December quarter of 2010. This calculation is based on the average income of all households with an average mortgage according to the Australian Bureau of Statistics. By the December quarter of last year the average household would have had to dedicate 21.4% of its income to meet average repayments.

According to the national Census the average household income of mortgagees in Victoria was estimated at $1,950 per week in 2011. This is 60% higher than the average total household income of $1,216 per week and clearly demonstrates that those paying back a mortgage have a higher income than those who are renting. First home buyers face a different scenario as they both lack the equity that second and third home buyers bring to the purchase and often have lower incomes.

The REIV offers three reasons as to why we are experiencing improved affordability at this time – interest rates are very low; incomes have risen and overall prices have fallen. Over the past five years the only time affordability was better was in the June quarter of 2009 when the market was substantially affected by the global financial crisis.

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