First homebuyer affordability best on record but likely to be ‘short-lived’

First homebuyers have incentives left, right and centre to buy a home, but even though prices are affordable it may not last for long.

Affordability of first homes has improved to the best on record, according to the latest national first homebuyer affordability index.

All states reported falls over the September 2020 quarter, although New South Wales unsurprisingly remains the least affordable of all the states, a reflection of the high-priced Sydney housing market.

Victoria led the housing price drop, down 6.5 per cent, followed closely by South Australia which dropped 6.2 per cent and Tasmania which fell by 5.8 per cent.

The Northern Territory is the most affordable for first homebuyers – 20.6 per cent below the national level.

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Affordability of first homes has improved nationwide but it may be “short-lived”. Picture: iStock

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The index revealed the income proportion of home loan repayments had fallen to just 72.57 which is the lowest recorded by the series since its base in 2007.

The index fell sharply from the 77.06 recorded over June and is also well below the 78.12 reported over September 2019.

“The improvement in first homebuyer loan affordability over the September quarter is reflected in the recent surge in first homebuyer activity,” Archistar chief economist Dr Andrew Wilson commented.

“The ABS reports that national loans for this group increased by 34 per cent over the first 10 months of this year compared to the same period last year.”

NSW is still the least affordable across the nation due to Sydney’s prices. Picture: iStock

Lower interest rates and grants for first homebuyers are helping to stimulate the uptake.

“Lower prices, lower interest rates and higher incomes have all acted to improve affordability to record levels for Australian first home buyers over the September quarter,” he said.

“Numerous state and federal government incentives are also activating first homebuyers.”

However, the recent sharp improvements in affordability are likely to be “short-lived”.

“With rates set to remain steady for years together with ongoing weak incomes growth and higher house prices, the recent sharp improvements in affordability are likely to be short-lived,” he commented.

Lower interest rates are making it more affordable to buy. Picture: iStock

MOST AFFORDABLE SUBURBS

The most affordable suburbs to buy a house in Sydney are Bradbury, Campbelltown, Minto, South Windsor and Gregory Hills.

In Melbourne, house affordability is at its best in Melton, Frankston North, Kurunjang, Melton South and Meadow Heights.

In Brisbane, it’s Leichhardt, Lowood, Laidley, Blackbutt and East Ipswich while Adelaide’s cheapest suburbs to buy are Elizabeth Downs, Davoren Park, Salisbury North, Munno Para West and Burton.

In Perth, it’s cheapest to buy a house in Orelia, Medina, Armadale, Greenfields and Gosnells.

Originally published as First homebuyer affordability best on record but likely to be ‘short-lived’