Andrew Bell’s Market Update: The 5 Fundamentals, #5 Housing Affordability

MARKET WRAP: Issue 9: April 28th 2016

Recently we have looked into a series of key points mentioned during the Annual Property Report showcased at The Event, which has been 4 of the 5 fundamentals that drive the real estate market – Gross Domestic Price, Population Growth, Interest Rates and Unemployment. However, before covering the fifth fundamental, there are a couple of quick market updates.

How Is Queensland’s Unemployment?

There has been a lot of talk recently about Queensland and migration out of the state. Well, one of the things they didn’t talk about was the latest Australian Bureau of Statistics figures showing that Queensland’s unemployment rate was down from 6.2% to 5.8%. That was a really significant fall considering the previous month was 6.2%. It is in line with the national unemployment and takes us from being the worst performing state on unemployment to one of the best improving.

There will be more talk about unemployment in an upcoming report regarding the Gold Coast unemployment levels. Which you will be surprised to see that in fact the Gold Coast is one of the best unemployment rates in the entire country. This is something we are very proud of.

The 5 Fundamentals of Real Estate – Number 5, Housing Affordability

The Housing Industry Association’s Affordability Report, which has been operating for several decades, is regarded as one of the best reports. The latest figures show that housing affordability has improved – yes I repeat improved. The improvement was by 2.7% during the March quarter and was 0.4% more favourable than the same period last year.

The main reason for the improvement was that the national median dwelling price fell during the March quarter and the report noted that if it had not been for the shock increase in variable mortgage interest rates that occurred late last year by nearly all banks then the improvement in affordability would have been even better.

Will Housing Affordability Continue to Increase?

The Senior HIA Economist, Shane Garrett, said that he expects the affordability improvements to be short lived. It is logical that whilst prices continue to edge upwards, that affordability will not improve. Beyond question, when interest rates start to rise that will affect affordability in a negative sense. Certainly from the read, it is clear that it is telling us that currently it is about as good as it gets to buy a property and lock in fixed interest rates.

The largest improvements in affordability were Sydney, Perth and Darwin,  which had all seen price growth fall the most. Whilst affordability, which has been very strong in markets like Brisbane and Canberra, has actually declined as their prices are seeing the most growth.

The Affordability Index is calculated by examining house prices, mortgage rates, and wages growth to determine the proportion of home owners income being spent on mortgage payments.

Next edition we will move on beyond the 5 Fundamentals to other key components out of the Annual Property report. On a side note, I will also leave you with great news that the Gold Coast property market is continuing to strengthen month after month at present.  Hopefully, that the upcoming budget and election doesn’t put any weight on that.

That is it for this edition. See you in a fortnight’s time.

Interested in finding out what your property is worth in today’s market? Click here to get an obligation free appraisal

Kind regards,
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group