News Service from House Harris

Homes most affordable in five years - report

SYDNEY, Feb 16 AAP - The Australian dream of owning a home is more affordable now than it has been for five years following lower interest rates and greater government subsidies, a report says.

The Housing Industry Association (HIA) and Commonwealth Bank First Home Buyer Affordability index improved by 39.2 per cent to 153.6 points in the December quarter, from 110.3 index points for the September quarter.

First home buyers last had housing this affordable in the March quarter of 2003, the index showed.

HIA chief executive Chris Lamont said lower mortgage rates and the boost to the first home owners scheme made buying a house easier.

"For would-be first home buyers conditions have improved significantly, and clearly many Australians are taking up the opportunity to get into home ownership," Mr Lamont said in a statement.

"Cuts with interest rates and the first home owners' grant have made a large impact."

Households would need an annual income of around $70,000 to buy a modest home, the affordability index said.

"Previously, a household would have to be earning in the order of $85,000 to afford a modestly priced home without going into severe mortgage stress," Mr Lamont said.

"The improvement in housing affordability means those on a more modest income can now contemplate a home of their own."

Buying a home was more affordable in all capital cities and regional areas during the December quarter, the report said, with the largest improvement occurring in Brisbane, Perth and regional Western Australia.

Since September, the Reserve Bank of Australia (RBA) has cut the cash rate by four percentage points to a 45-year low of 3.25 per cent as it tries to cushion the economy from a possible recession.

Commercial banks have lowered standard variable mortgage rates by an average of 3.75 percent points in response, since September last year.

Repayments on an average home loan fell by 26 per cent to $2,056 a month by the end of the December, from $2,796 the previous quarter.

In mid-October, the federal government doubled the first home owners grant to $14,000 for established dwellings and tripled it to $21,000 for newly built homes until June 30.

Home loan approvals for owner-occupiers rose by 6.4 per cent in December, official data showed last week.

First home buyers comprised 25.4 per cent of new mortgages in December, the highest market share since December 2001.