According to the latest Housing Affordability Report from the Real Estate Institute of Australia, Victoria remains the second-most expensive state in Australia in which to own a home.
Due to increasing house prices and interest rates, the proportion of the average family income required to pay the average loan increased from 30 per cent a year ago to 36.1 per cent in the December quarter.
The main reason for this is that incomes have increased at a slower rate than loan repayments have.
This will not surprise anyone with a mortgage as they have seen the bank standard variable rate increase from 6.65 per cent to 7.4 per cent over this time. That has translated to an average of $470 per month to service an average loan compared to an increase in median family income of $191 over the same time.
The average home loan was $313,808 compared to $287,331 a year ago, so not only have interest rates increased but so, too, has the size of loans. This is because over the same time house prices have also increased strongly.
The impact of the reduced affordability can be easily seen in the substantial reductions in the number of home loans that were taken out recently and in overall market activity.
There will be little surprise, then, that the biggest issue for home buyers and owners in 2011 will be housing affordability and while it remains low we expect buyers to be more cautious and interested in trying to drive a better bargain when buying.