Housing affordability: Major dwelling dilemma hitting regional Australia

Housing affordability has deteriorated so much in pockets of regional Australia, that some locals would need to devote almost three quarters of their income to mortgage repayments just to buy.

Housing affordability has deteriorated so much in pockets of regional Australia, that some locals would need to devote almost three quarters of their income to mortgage repayments just to get onto the property ladder.

Nationally, the ratio of housing values to household incomes reached a new record high in June, according to data in the latest ANZ CoreLogic Housing Affordability Report.

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The findings reveal just how dire the dwelling dilemma is, as the number of years it takes to save a deposit, and the portion of income required to pay rent also hitting worrying highs.

The only metric that didn’t prove concerning was the portion of income required to service an existing mortgage, thanks to record low interest rates.

Source: ANZ CoreLogic Housing Affordability Report

“Affordability challenges in regional Australia have been exacerbated by Covid-19, where normalised remote work trends and appealing coastal or tree change settings became ‘pull’ factors of demand,” Eliza Owen, head of research Australia at CoreLogic explains.

“Meanwhile, high capital city property prices, and the higher incidence of strict social distancing restrictions, became ‘push’ factors, driving people away from major cities.”

Richmond Valley was highlighted as one of the most unaffordable areas.

In the year to March 2021, the escape to the country increased by 5.9 per cent, while the number of people actually leaving regional Australia for the capital cities fell by 3.5 per cent in the same period.

Ms Owen said the combination of more people arriving in regional Australia – and fewer people leaving for the cities – had created a surge in housing demand that resulted in slim pickings for buyers and renters.

Source: ANZ CoreLogic Housing Affordability Report

Rolling quarterly growth in dwelling values Source: ANZ CoreLogic Housing Affordability Report

The data showed that as of November 28, the amount of homes for sale across regional Australia remained a whopping -36.9 per cent below the five-year average, with just under 60,000 properties available to buy.

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After crunching the numbers on 130 regional sub markets, the ANZ CoreLogic Housing Affordability Report revealed a top 10 list of towns where affordability has deteriorated the most.

Richmond Valley was the most impacted with the portion of income required to service a new mortgage sitting at 55 per cent in March 2020, but up to 74.4 per cent by June 2021.

Recently sold for $2.18 million, this three-bedroom Noosa Heads home is just one of many properties on the Sunshine Coast being snapped up for top dollar in 2021.

The Noosa Head house price median moved from $1.337 million in early 2021 to $1.65 million by November.

“It is unsurprising that this market has topped the list. The Richmond Valley Coastal market, which includes Byron Bay, document the area as subject to high levels of investment for short term holiday accommodation, and attracting residents on high incomes, which can lead to longer-term residents and local service workers being priced out.

In fact many of the areas on this list, which have seen the biggest rise in metrics since Covid-19, have seen similar trends,” Ms Owen added.

Noosa, on Queensland’s Sunshine Coast north of Brisbane had the second worst affordability, with the figure jumping from 50.4 per cent up to 68.7 per cent.

Coolangatta on the NSW/Queensland border saw affordability slump from buyers needing to spend 43.4 per cent of their income on a new home loan prior to the pandemic to 60.1 per cent by mid this year.

New renters in the same regions are also spending a greater proportion of their salary on paying the rent than they would have in 2020.

Australia’s national housing value growth figure is beginning to slow down, rising 1.3 per cent higher for the month, according to CoreLogic’s November home value index.

That November result was the softest outcome since January, when values rose by just 0.9 per cent, and far below the monthly peak of 2.8 per cent in March.

This four-bedroom property recently sold for $1.305 million in the Richmond Valley suburb of Mullumbimby.

Mullumbimby has seen its median house price jump from $849,500 to $1.2675 million during 2021.

Cameron Kusher, director of economic research for realestate.com.au’s data arm, PropTrack, said even though price growth has come off the boil, affordability will continue to be a major issue heading into 2022.

“Although the pace of price growth is expected to slow, prices are still anticipated to rise over the coming year in both the regions and cities. From an affordability perspective, this will make little difference to current owners buying or selling in the same market, but it will have repercussions for first-home buyers attempting to enter the market,” he said.

“Prices have already risen and are expected to continue to rise in 2022 at a faster pace than wages, which in-turn will make it harder to enter the market.

Cameron Kusher, REA Group Director of Economic Research

Affordability and lifestyle will likely continue to be drivers for property seekers in 2022 and regional markets will continue to outperform capital cities.,” Mr Kusher added.

He said first-home buyers will still be the most impacted by the affordability imbalance, but said there are some factors that could balance the scales in their favour, if only slightly.

“Tighter credit conditions and higher prices may discourage those looking to upgrade from moving and instead reconsider renovating where they currently live.”