Tackling the housing affordability question

The-housing-industry-has-come-up-with-some-affordability-solutions_157_6006624_0_14102175_300There has been a lot of discussion about the future of the property market over the past few months. While New South Wales continues to prove itself as a serious property player, there are still some challenges on the horizon. Affordability and first home buyers have been the hot topic recently, particularly as the Australian Bureau of Statistics (ABS) released its housing finance figures for January.

The figures show that lending in the housing market could be easing, which bring up some interesting questions. The data revealed that the number of loans for owner occupied housing only rose 0.8 per cent in trend terms from December last year – and dropped 0.1 per cent in seasonally adjustment measurements.

The Housing Industry Association (HIA) echoed these figures, pointing to a much weaker lending market in January than the previous year. Finance for both building and purchasing new homes also dropped off slightly in January. According to HIA Economist Geordan Murray, this number fell 5.3 percent. While the number of loans for buying established homes fell even further – it eased back 7.9 per cent over the month and 7.3 per cent from the same period in 2014.

Fuelling the first home buyer fire

It’s not all doom and gloom, however. The lending market may have eased, but the figures have ignited discussion about how to get it back on track. While lending may have eased, building approvals have soared and house prices in Sydney in particular have continued to rise. Investors also continued to support property across the country in January.

The value of lending for investors rose 1.6 per cent over the month but declined for construction loans, according to the HIA – and while this might seem like a disappointing result, the value loans for this market is still much higher than it was a year previously.

This shows that there is still potential for the lending market to pick up – it could be a matter of finding the right mix of solutions. The challenge is to keep a bit of balance. The Real Estate Institute of Australia indicated that the proportion of first home buyer loans dropped in February, falling to 14.2 per cent of the owner-occupied sector – and it has ignited calls to make sure they are not shut out of the market.

Master Builders Australia Chief Economist Peter Jones said affordability is the key issue – and construction could be the answer. Increasing the supply of new homes could offset affordability pressures.

“The latest housing finance highlights the urgent need for a national housing affordability agenda to increase the housing supply and ensure first home buyers are not locked out of the market,” he said in a March 11 release.

Super news 

In response to declining affordability, Treasurer Joe Hockey has suggested that first home buyers be able to dip into their superannuation fund to finance a home. This could have some interesting implications for the housing market. It could allow more young people to get a foot on the property ladder, but it might also increase the competition between buyers and investors.

The HIA has shown support for the idea. In a March 10 statement, HIA Chief Executive Industry Policy and Media Relations Graham Wolfe said there are any number of benefits for first home buyers if they can access their super – for one, it could reduce the amount they pay on a deposit and even reduce the time households spend paying off their loan.

“Accessing a portion of superannuation savings may be the difference between young families securing their future by starting the journey of home ownership, versus staying on the rental treadmill,” he said.

Lending may have dropped off a bit in January, but there could be plenty of room for improvement. Buyers and investors alike should keep their fingers close to the pulse, but a local agent or property manager can also help you decipher what’s happening.

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