Streets Ahead : Streets Ahead Edition 11
Property prices 34% (down slightly from 35% in March 2015), followed by the difficulty of saving a deposit unchanged at 20%, continue to be perceived as the biggest barriers to purchasing a first home, indicating there has been no improvement in accessibility. In contrast, the difficulty of meeting mortgage repayments fell again in September 2015, to 4% from 5% in March 2015 and from 8% in September 2014. These figures are consistent with the latest HIA Housing Affordability Index, which fell 2.9% during the June 2015 quarter indicating an improvement in affordability. Overall, the positive impact of the second cash rate cut of the year in May 2015 was overshadowed by an increase in property prices with CoreLogic RP Data reporting the median dwelling price across all capital cities rose by 2.9% between the cash rate cuts in February and May 2015. As a result of regulatory focus on responsible lending and the level of investment lending, most Authorised Deposit Taking Institutions (ADI’s) introduced a 10% cap on the growth of residential property investment lending during 2015. In addition, ADI’s have been encouraged to use an interest rate buffer of at least two percentage points above current rates for investment mortgages. Results from the survey suggest the effectiveness of this new regulation in deterring new investor borrowers is not yet clear. Although 42% of Prospective FHBs say they would purchase an owner-occupied property instead if banks were to charge a higher interest rate for investment loans, 38% say they would still purchase an investment property because of various reasons including the benefits of negative gearing (17%), the ability to increase rent to cover additional costs (12%) and the need for rental income to assist with servicing the loan (9%). In addition 14% of Prospective FHBs would abandon plans to enter the housing market if banks were to charge a higher interest rate. Affordability vs accessibility Streets Ahead | Genworth Homebuyer Confidence Index - September 2015 10 The last edition of Streets Ahead examined the debate between accessibility (the ability to enter the property market) and affordability (the ability to meet mortgage repayments). Findings indicated that increasing property prices, with higher house prices requiring a larger deposit in terms of value, are hindering access to the property market. In this edition, we revisit this debate to see if, and how, the barriers to home ownership have changed over the last six months.
Streets Ahead Edition 12