HOUSING AFFORDABILITY FOR HOME BUYERS

The home ownership aspiration of Australians has widely been referred to as 'the great Australian dream'. For higher income households, purchase affordability is an issue of choice rather than access. For those with more modest means, affordability is a more significant issue. For this indicator of home purchase affordability, a home is considered affordable if a household would have to spend no more than 30 per cent of its gross income on mortgage repayments.

The proportion of homes sold that were affordable to moderate income households declined from 36% in 2003-04 to 27% in 2007-08.

The number of homes sold that were affordable by moderate income households declined from 24 homes per 1,000 moderate income households in 2003-04 to 17 homes per 1,000 households in 2007-08. The proportion of homes sold that were affordable to low income households declined from 15% in 2003-04 to 7% in 2007-08.

The affordability of homes for home buyers is influenced by many factors including interest rates, the price of homes, and the level of household income. From July 2003 to June 2008 the standard variable interest rate for housing loans increased from 6.55% to 9.45%. From 2003-04 to 2005-06 the price of homes increased at a generally commensurate pace with income growth. However, between 2005-06 and 2007-08 prices rose more strongly, contributing to the decline in purchase affordability from 2005-06 to 2007-08.