This might be interesting:
Australian Economic Perspectives Scott Haslem...................................
Economist
George Tharenou............................
Economist
Alvin Pontoh...............................
Economist
H.ousing affordability to hit a decade high Overview
This week we look at Australian housing affordability, both from the perspective of servicing
costs (the mortgage repayment share of household disposable income), as well as the more
internationally comparable house price to income ratio.
We find that under our baseline assumption of a 7½% peak-to-trough fall in Australian house
prices and a cash rate of 2% – with household income growth strong due to lower mortgage
repayments and government cash hand-outs – that housing affordability will improve very
sharply to a decade high by year-end.
Indeed, it is the strength of these policy measures, which both reduce servicing costs and
underpin disposable income that allows affordability to improve under our ‘short & sharp’
recession outlook (involving relatively orderly deleveraging).
Sharply lower mortgage rates see servicing costs improve (fall) to their best level since the mid-
90s. For the house price to income ratio, the RBA’s measure (having peaked at 5.75) should fall
to 4. This would be the lowest ratio since the start of the decade, and sees us no longer sharply
above the top of the international range.
We also run some weaker economic scenarios, with a rise in the unemployment rate to 8% and
10% (and a 15% peak-to-trough fall in house prices), to assess how affordability would change.
The improvement proves robust, though clearly our forecast affordability-induced pick-up in
housing activity through 09/10 would be much less significant, or likely falter, in the face of such
high unemployment rates.
-
Australian Economic Perspectives Scott Haslem...................................
Economist
George Tharenou............................
Economist
Alvin Pontoh...............................
Economist
H.ousing affordability to hit a decade high Overview
This week we look at Australian housing affordability, both from the perspective of servicing
costs (the mortgage repayment share of household disposable income), as well as the more
internationally comparable house price to income ratio.
We find that under our baseline assumption of a 7½% peak-to-trough fall in Australian house
prices and a cash rate of 2% – with household income growth strong due to lower mortgage
repayments and government cash hand-outs – that housing affordability will improve very
sharply to a decade high by year-end.
Indeed, it is the strength of these policy measures, which both reduce servicing costs and
underpin disposable income that allows affordability to improve under our ‘short & sharp’
recession outlook (involving relatively orderly deleveraging).
Sharply lower mortgage rates see servicing costs improve (fall) to their best level since the mid-
90s. For the house price to income ratio, the RBA’s measure (having peaked at 5.75) should fall
to 4. This would be the lowest ratio since the start of the decade, and sees us no longer sharply
above the top of the international range.
We also run some weaker economic scenarios, with a rise in the unemployment rate to 8% and
10% (and a 15% peak-to-trough fall in house prices), to assess how affordability would change.
The improvement proves robust, though clearly our forecast affordability-induced pick-up in
housing activity through 09/10 would be much less significant, or likely falter, in the face of such
high unemployment rates.
-
