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Home Loan Affordability Lowest in Over A Decade

Home loan affordability has dropped to levels not seen in over 10 years, according to Bluestone’s Consultant Economist Dr Andrew Wilson. 


During the April quarter, the Bluestone Home Loan affordability index rose to its highest point since November 2011 – showing that home loans are taking a higher proportion of borrowers’ incomes than they were before. Not surprisingly, this is most severe in NSW, with VIC with TAS following closely behind. 


The current annual decline in affordability of 16.9% is due to a combination of rising interest rates, stagnant wages growth and the recent increase in house prices. There is some good news though – it’s likely this will ease through 2022 as lower price growth stabilises the market. 


Property market set for a slowdown

According to Dr Wilson, the property market will quieten down over the next few months. And while we’ve heard a lot about interest rates lately, a few other factors are likely to contribute to a decline in activity, including the natural reduction in affordability we’ve seen as house prices have risen over the last year. We’re also entering a slower selling season, which will work to reduce market activity further.


It’s not all bad news

On the plus side, housing demand is likely to remain strong, due to the return of mass migration, international students returning and a number of new policies that the government is putting in place to help first-home buyers. The continuing record low rental vacancy rates, rising rents and tight rental conditions are encouraging investors to get into the market. 


Read the full report here

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