According to a new ANZ CoreLogic Housing Affordability Report for the period between October 2021 to March 2022, housing affordability has rapidly worsened. It has now reached 11.4 years as the median national position for borrowers to save the 20% deposit generally needed for their home. Of course it’s not essential to raise 20% as home loans are available with lower deposit amounts. This increase in years to save is up 2.2 years since the outbreak of Covid and the fastest increase on record. Sydney sits at 14.1 years. The figure is based on median household income data from the ANU Centre for Social Research and Method (and forecast at $1,665 per week for the March 2022 quarter), and assumes a household can save 15 per cent of their gross annual household income.
The main contributing elements to this decline in affordability are:-
The increased property values, assisting home owners but not first home buyers or renters, and
Reduced ability to save with a rising cost of living through inflation
As well as revealing a new record in terms of time to saving a deposit, the ANZ CoreLogic Housing Affordability Report also noted that the ratio of housing values to household income reached a new high in March 2022, rising to a record 8.5 times the median annual household income level nationally. Researchers found that the value-to-income ratio had been rising substantially since the COVID-19-induced property boom started, noting that the ratio was sitting at 6.8 in March 2020. The ratio was largest in capital cities (at 8.4 across the combined capitals), with the regional income ratio at 6.0.
However, the increase in the dwelling value-to-income ratio was largest across regional Australia, where property prices have risen substantially more than incomes. “Between March 2020 and March 2022, the value to household income ratio across combined regional Australia increased from 5.9 to 7.9, faster than the increase in the combined capital cities,” the report read.
So thinking about the above, and the increased difficulties in purchasing homes, that has come to pass through the back end of 2021 and beginning of 2022, what can you do to prepare for home ownership and what things might you consider? Here are some tips:-
What state & federal Government grants, concessions etc are available to you?
Look at your rate of savings at present and where budgets can be trimmed.
In terms of your budgeting, complete two budget scenarios. The first is your current budget with all expenses built in inclusive of rent plus your savings. The second being the ‘what if I was a home owner’ budget, replacing rent with the associated cost of home ownership, rates, insurances, replacement of appliances, repairs and maintenance.
Is there scope for increased income through current employment?
Can you gain support through family in terms of building your deposit?
Can you remove some of those smaller ancillary debts like pay day loans, credit cards, personal loans, that are impacting on your ability to comfortably meet a home loan repayment?
In this particular economic time of rising inflation & interest rates , high home prices, and current stagnant wage growth, you need to be particularly focussed on financial matters . COMPASS are experts at this and can assist in discussing and then planning for your future.
Give us a call on 02 6583 2211.