Cost of Housing rising as homeownership affordability falls

Housing affordability in Australia is falling to be among the worst in the world, a further sign that many state and local government polices are inappropriate, the Residential Development Council said.
It said today's release of the Annual Demographia survey rated every Australian city as "seriously" or "severely" unaffordable in a global study of 159 cities, with Sydney, Melbourne, Perth and Hobart among the worst 25 cities.
The Residential Development Council, the residential policy arm of the Property Council of Australia, said Australia's poor result was proof that the current policy mix was a toxic cocktail for housing affordability.
"We have four of our cities in the worst 25 when it comes to affordability – surely the message must get through?" said RDC Executive Director Ross Elliott.
The Demographia Survey, released by the US-based Wendell Cox Consultancy, attributes restrictive land release policies and excessive regulatory and zoning controls, combined with high housing taxes, for the Australian problem.
The Demographia survey rates housing "unaffordable" when the median house price passes three times median household incomes.
Housing is "seriously unaffordable" when it passes four times median household incomes and "severely unaffordable" when it passes five times median household incomes.
The least affordable Australian city is Sydney – where median prices are 8.5 times median incomes – even worse than London at 8.3 times incomes and New York at 7.2 times incomes.
"We have maintained that there are three things largely responsible for the worsening housing affordability in this country. Inappropriate land release policies, excessive housing taxes and unfair infrastructure charges, and dysfunctional systems of development assessment," Mr Elliott said.
"This report now confirms the magnitude of the problem in this country – where with abundant land, there is no excuse for our housing crisis other than bad public policy."

Source: The Herald

Homeowners cope with mortgage repayments as interest rates climb

Australian homeowners could cope with higher interest rates and a downturn in the economy, the nation's top banker forecast last night.
Reserve Bank governor Glenn Stevens blamed the housing bubble, which has burst in some states, on banks giving away mortgages too cheaply.
Three interest rate rises this year, ordered by the Reserve Bank, are expected to knock some confidence out of the market which has started to return to health. There is speculation a fourth rate rise could hit as early as February. Mr Stevens said easier and cheaper access to loans was a prime reason for the skyrocketing prices of Australia's 8 million existing dwellings.
However, he said while some households had too much debt, there would not be great damage if the economy began to decline. The prediction was based on a Reserve Bank analysis, which tipped people would trim their spending habits rather than lose their house. Economists are now punting that the Reserve Bank could order yet another rates rise in a bid to cool the economy. Slower economic growth could halt that move but the jobs market in Australia remains red-hot. Mr Stevens gave no clear direction on the future movements of interest rates.
However, there was a hint that the central bank thought Australian households could cope with higher rates -- particularly through the indication that people would reduce their spending. Mr Stevens said the higher level of debt people had built up made them vulnerable to small changes in the economy. "A very large change in the household sector's balance sheets has made households more sensitive to changes in their circumstances,'' he said.
The RBA has tipped that if there was an economic downturn, it would be businesses which would be hit the hardest. Businesses supplying into discretionary consumer markets would feel the effect quite quickly, Mr Stevens said.

Source: Herald Sun