Housing Affordability Report

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Joint Quarterly Survey No. 94. March Quarter 2008

The title of the Deposit Power/Real Estate Institute of Australia Home Loan Affordability Report has been changed to the Housing Affordability Report, effective from March 2008. The report now includes data and commentary on rental affordability as well as home loan affordability, to take account of the changing levels of affordability in the rental property market.

As interest rate increases begin to bite hard into household income, March quarter 2008 data show a shift in the pattern of housing affordability across Australia.

Queensland has replaced New South Wales as the least affordable state for new home loans. Queenslanders now require 40.5% of median weekly family income to service the average new home loan.

Every state and territory recorded a decline in affordability in the year to March 2008, with an overall national decline of 8.7%. New South Wales and the Northern Territory were the only locations to record an improvement in home loan affordability during the March quarter 2008.

The Australian Capital Territory experienced the largest quarterly decline in loan affordability, deteriorating by 5.5%, with an annual decline of 14.0%. Over the year to March 2008, South Australia’s deterioration in affordability was the greatest at 15.3%.

The highest proportion of income required for rentals was recorded in Tasmania where 29.5% of median weekly family income was spent on rent. Western Australia is the only location where the proportion of income spent on rent fell during the March quarter.

The proportion of median weekly family income required to meet median weekly rent has risen by 8.3% across Australia in the year to March 2008, with increases recorded in every state and territory. This was most notable in the Northern Territory, where there has been a 37.1% increase in the proportion of income required for rent.

There is likely to be a further negative impact on home loan affordability in the June quarter 2008 resulting from the recent Reserve Bank increases in interest rates, as well as the additional interest rate increases imposed by lenders during

Proportion of family income required to meet loan repayments, March 2008

ACT Proportion of

family income required to pay loan Median Weekly Family Income

Repayments based on data for new borrowers.

$1260 39.3%

$2205

22.4%

$1284 37.1%

$1207 40.5%

$1058 36.8%

$1745 23.0%

$1488 34.0%

$1000 35.3%

Australia wide

$1256 38.0%

Rental affordability is also expected to deteriorate further around the country, as rents increase in response to extremely tight vacancy rates.

FAST FACTS

Proportion of family income required to meet:

Home loan repayments 38.0%

Rent payments 24.7%

Proportion of Family Income Required to Meet Loan Repayments

Chart 1 shows the movement in the proportion of family income required to meet average home loan repayments

Interest rate increases bite hard

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CHART 1

Proportion of family income required to meet average loan repayments – Australia

10 15 20 25 30 35 40

Mar 08

Mar 06

Mar 04

Mar 02

Mar 00

Mar 98

Mar 96

Mar 94

Mar 92

Mar 90

Mar 88

Mar 86

%

Table 1: Proportion of income needed to meet loan repayments

Mar qtr 2008

Dec qtr 2007

Mar qtr 2007

NSW 39.3% 39.8% 35.9%

VIC 37.1% 36.2% 33.5%

QLD 40.5% 38.7% 36.0%

SA 36.8% 35.7% 31.1%

WA 34.0% 33.5% 33.7%

TAS 35.3% 33.5% 32.1%

NT 23.0% 23.3% 22.8%

ACT 22.4% 21.1% 19.2%

AUS 38.0% 37.4% 34.5%

Rental Affordability

With home loan affordability deteriorating significantly, many potential home buyers are remaining in the rental market. REIA vacancy rate data shows that demand for rental property remains extremely high in every state and territory. There is little prospect that this will improve in the short-term, particularly noting the downward trend in investor finance in response to recent interest rate rises.

Table 2 shows rental affordability expressed as the proportion of median weekly family income required to meet weekly rent for a three bedroom house. The Australian weighted median rent for three bedroom houses is calculated using Census data, and median rents published in the Mortgage Choice/REIA publication, Real Estate Market Facts. In March 2008, the Australian weighted median rent for three bedroom houses was $310.20 per week, an increase of 4.7% over the quarter.

Chart 2 shows that there was some volatility in rental affordability in the nine years to 2005, although there was a general downward trend in the proportion of income required for rents from mid- 2002. However, since mid-2005, rents as a proportion of median weekly family income have moved strongly upwards with no sign that the upward movement will abate in the near future.

Rents increased, not only in nominal terms, but also in relation to income, during the year to March 2008. Overall in Australia,

Renters in Tasmania continue to be in the worst position, requiring 29.5% of family income to meet rent payments in the March quarter 2008. This is because the Tasmanian median income is the lowest in Australia, yet rents are relatively high at

$295 per week for the March quarter.

Renting in Darwin is more expensive than buying. The proportion of family income required to meet rent payments is 28.1%, compared with 23.0% required for home loan repayments.

Darwin rents are the highest in Australia.

Table 2: Proportion of income needed to meet rent payments

Mar qtr 2008

Dec qtr 2007

Mar qtr 2007

NSW 25.4% 24.8% 23.2%

VIC 21.8% 20.6% 20.5%

QLD 26.5% 25.1% 24.1%

SA 25.5% 24.5% 24.1%

WA 22.5% 23.3% 21.7%

TAS 29.5% 28.4% 28.4%

NT 28.1% 26.1% 20.5%

ACT 17.5% 16.6% 15.9%

AUS 24.7% 23.9% 22.8%

CHART 2

Proportion of Median Weekly Family Income Spent on Rent

19

20 21 22 23 24 25

Mar

%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

First Home Buyers

First home buyer participation in the market deteriorated markedly during the March quarter 2008, with first home buyers representing a 16.4% share of total housing finance commitments, a fall of 2% over the quarter. This compares with an average of 20.0% over the 26 year period since July 1991.

Excluding refinanced loans, first home buyers represented 25.4%

of new borrowers in March 2008.

There were 30,205 first home buyers in Australia in the March quarter 2008, a fall of 17.5% from the December quarter 2007, when there were 36,618 first home buyers. However, the March quarter 2008 figures were similar to those of the March quarter 2007, when there were 30,986 first home buyers.

In the March quarter 2008, the average loan to first home buyers fell slightly to $230,000. The average loan size across all owner occupiers, excluding those who refinanced, was $246,647.

First homebuyers’ share of all dwellings financed and the average size of their loans from the March quarter 2006 to the March

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REIA President’s message

From the minutes of the May 2008 meeting of the Board of the Reserve Bank, it is clear that the Bank is concerned there will be further inflationary growth, necessitating another round of interest rate rises.

Data in this report demonstrate the impact of the 2008 interest rate rises, including both the official and the additional rises imposed by lenders. Home buyers have experienced a blow-

out in their mortgage repayments with new home loans now requiring 38% of family income to meet loan repayments.

The average new loan, excluding refinancing, in the March quarter was $246,647. Allowing for a 20% deposit, a loan of this size would enable a borrower to purchase a home valued at less than $310,000. This is significantly lower than the median price in most cities, suggesting that borrowers purchasing a modest home require a significant proportion of income to meet their loan repayments.

It is not much better to be a renter in the current property market. Australian Bureau of Statistics data show a significant decline in building approvals, following the recent interest rate rises. Without the additional housing stock urgently needed to address Australia’s housing shortage, not only will home loan affordability suffer, but we can expect to see rental affordability reach new lows.

Housing is a key driver in inflationary growth. The conundrum is that higher interest rates to address inflation will also push up the cost of housing, thus increasing the inflationary problem.

It is hoped that an outcome of the 2008 Budget will be downward pressure on inflation to complement Government initiatives to address housing affordability such as the First Home Savers Account and the National Rental Affordability Scheme.

Lenders also have to play their part with more rigorous lending practices, to ensure that those borrowing have the capacity to repay their loans, and are not creating negative equity in homes used as collateral for other household borrowings.

Consumers must also carefully factor in potential rate rises and shifting house prices in their financial planning for home purchases and investments.

Noel Dyett President, REIA

Deposit Power

Following the fourth official interest rate rise in seven months, we have seen mortgage default rates reach record levels in many Australian regions.

‘Mortgage stress’ is also at all- time highs, with many property owners forced to make changes to their household finances to absorb any of the further predicted rises in interest rates, food costs and petrol prices.

Unfortunately, the hardest hit by these increases will be those who have over-committed financially on their mortgage and are now in negative equity due to falling house prices.

Some suburbs in Western Sydney are facing mortgage defaults that are at crisis levels.

We have previously questioned whether competitive pressures from the mortgage industry could be a reason that seemingly high income earners have found themselves with debts they’re not capable of repaying.

But it’s not all doom and gloom.

Potential home buyers are now more educated and aware of how much they can afford to borrow to ensure they will be able to meet repayments, even if faced with possible interest

Changes in strategy which have resulted from the US mortgage crisis could also mean better home loan deals as lenders create customised packages in an effort to retain customers.

We are still seeing record income and employment levels throughout much of the country.

With the rental squeeze and rising demand for rental properties, investment property is looking like an attractive option – especially as cashed-up investors are looking to exit the stock market and invest elsewhere.

It is difficult to predict how property values will fluctuate in the short term, but over time property has proven to be a sound long term investment.

Property owners should not panic and should try to hold on to their asset which is likely to appreciate in value.

To find out how Deposit Power can assist when purchasing residential property, please contact our Helpline 1800 678979 or visit www.depositpower.com.au

Keith Levy

National Manager, Deposit Power

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CHART 3

200 205 210 215 220 225 230 235 240 245 250

14 15 16 17 18 19 20 Average loan size $'000 Percentage of all

dwellings financed %

Mar 08

Jan 08

Nov 07

Sep 07

Jul 07

May 07

Mar 07

Jan 07

Nov 06

Sep 06

Jul 06

May 06

Mar 06

First Home Buyers’ Share of All Dwellings Financed

$’000 %

Source: ABS Catalogue No. 5609.0

Factors Influencing Home Loan Affordability

A range of factors influences home loan affordability, including the following:

• The amount to be borrowed reflects the price of the property being purchased and the borrower’s equity situation.

• The size of loan, interest rates and the period of the loan determine the average loan repayment.

• The ability to repay the mortgage depends upon the family income.

Chart 4 shows the relationship between the Australian weighted average median house price, median weekly family income and average loan size.

CHART 4

100 150 200 250 300 350 400 450 500

0 200 400 600 800 1000 1200 1400

Ave Loan Size Med Weekly Family Income

Med Wtd Ave Price

MarDecSepJunMarDecSepJunMarDecSepJunMarDecSepJunMarDecSepJunMar

2003 2004 2005 2006 2007 2008

House Prices and Income

$‘000 $

Median House Prices

Although house prices increased across Australia in the year to March 2008, and by significant amounts in many locations, interest rate increases have already made their mark on the market, with price falls recorded in several cities, notably Melbourne and Canberra, during the March quarter. Only two capital cities have a median of more than $450,000 as opposed to four capital cities in the last quarter.

Detailed data on median prices for houses and other dwellings is available in the Mortgage Choice/ REIA Real Estate Market Facts report.

Median Family Income

The national median weekly family income increased by 1.5%

over the March quarter, to reach $1,256 (or $5,442 per month).

Over the year to March 2008, the median weekly family income rose 5.5%. The average monthly home loan repayment rose by 16.2% over the year to reach $2,070, thus again outstripping income growth and contributing to declining affordability.

The proportion of family income needed to pay the mortgage increased nationally from 37.4% in the December quarter 2007 to 38.0% in March 2008. This is the highest proportion recorded since the REIA started to calculate affordability data.

Average Loan (All Borrowers)

The national average new home loan (excluding refinancing) of

$246,647 in the March 2008 quarter was 2.4% lower than the average loan in the December 2007 quarter, and 4.9% higher than in the March 2007 quarter.

The national average loan repayment in March 2008 increased by 3.1% to $2,070.

The total number of loans issued nationally over the quarter decreased by 15.0% to 118,722 loans. Over the year to March 2008, the total number of home loans issued decreased by 5.5%.

Interest Rates

The Reserve Bank announced a 25 basis point increase in the cash rate in both February and March 2008, bringing the cash rate to 7.25%.

Standard variable lending rates increased accordingly, as lenders responded to the RBA’s increased cash rate. A number of lenders also announced additional increases.

Fixed interest rates also increased amongst all lenders, reflecting market sentiment that the Reserve Bank might raise interest rates again, in response to inflationary pressures in the economy.

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The average variable interest rates were:

Banks – 9.19%, a 0.78% increase from the December quarter 2007.

Permanent Building Societies – 9.01%, a 0.6%

increase from the December quarter 2007.

Other Lenders – 8.76%, a 0.57% increase from the December quarter 2007.

The average fixed (3 year) interest rates were:

Banks – 8.89%, a 0.57% increase from the December quarter 2007.

Permanent Building Societies – 8.92%, a 0.62%

increase from the December quarter 2007.

Other Lenders – 8.87%, a 0.6% increase from the December quarter 2007.

Chart 5 shows the relationships and the movements of the RBA cash rate, the average standard variable rate and the average three-year fixed rate by quarters over the last five years.

CHART 5

Quarterly Interest Rates

%

3 4 5 6 7 8 9

RBA Cash Rate Av 3yr Fixed rate

Av. Var Rate

Mar 08

Sep 07

Mar 07

Sep 06

Mar 06

Sep 05

Mar 05

Sep 04

Mar 04

Sep 03

Mar 03

Home Loan Affordability Indicator

The Home Loan Affordability Indicator (HLAI) is the ratio of median family income to average loan repayments. An increasing value reflects improving affordability of housing loans.

Table 3 shows the HLAIs for Australia and each of the States and Territories for the March quarter 2008, compared with the preceding quarter and the March quarter 2007. Percentage changes are shown in Table 4.

A long-term series of the quarterly movements in the Home Loan Affordability Indicator from December 1987 is shown in Chart 6.

Table 3: Home Loan Affordability Indicators Mar qtr

2008

Dec qtr 2007

Mar qtr 2007

NSW 25.4 25.1 27.9

VIC 27.0 27.6 29.9

QLD 24.7 25.8 27.8

SA 27.2 28.0 32.1

WA 29.4 29.8 29.6

TAS 28.4 29.9 31.1

NT 43.5 42.9 43.8

ACT 44.7 47.3 52.0

AUS 26.3 26.7 28.8

Table 4: Percentage Change in HLAI

%Change:

Dec '07 - Mar ’08

%Change:

Mar '07 – Mar '08

NSW 1.2 -9.0

VIC -2.2 -9.7

QLD -4.3 -11.2

SA -2.9 -15.3

WA -1.3 -0.7

TAS -5.0 -8.7

NT 1.4 -0.7

ACT -5.5 -14.0

AUS -1.5 -8.7

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CHART 6

Home loan affordability indicator over time

HLAI

Quarter

20 25 30 35 40 45 50 55

Mar 08Mar 07Mar 06Mar 05Mar 04Mar 03Mar 02Mar 01Mar 00Mar 99Mar 98Mar 97Mar 96Mar 95Mar 94Mar 93Mar 92Mar 91Mar 90Mar 89Mar 88

Table 5: AUSTRALIA

Mar 2008

Dec 2007

Mar 2007 Home Loan Affordability Indicator (HLAI) 26.3 26.7 28.8

Average HLAI since March quarter 1980 39.8 39.9 40.3

Proportion of family income devoted to meeting

average loan repayments 38.0% 37.4% 34.5%

Proportion of family income devoted to meeting

median rents 24.7% 23.9% 22.8%

Median weekly family income $1,256 $1,238 $1,190

Average monthly loan repayment $2,070 $2,008 $1,781

Average loan $246,647 $252,705 $235,211

Total number of loans (excl. refinancing) 118,722 139,696 125,578

Number of first home buyers 30,205 36,618 30,986

Average first home buyer loan $230,200 $234,000 $229,200 Banks

Average loan $251,541 $256,342 $236,246

Standard variable interest rate 9.19% 8.41% 7.91%

Fixed interest rate 8.89% 8.32% 7.31%

Building Societies

Average loan $210,661 $226,793 $221,206

Other Lenders

Average loan $214,226 $231,895 $232,169

Percentage Change HLAI CPI

Since previous quarter -1.6 1.3

Since corresponding quarter last year -9.2 4.2

CHART 7

0 50 100 150 200 250 300 350

0 20 40 60 80 100 120 140 160 180 200

Weighted Median Rent CPI

2008

2007

2006

2005

2004

2003

2002

20012000

1999

1998

1997

1996

1995

1994

Australian Rent and CPI from March 1994

Rent $ CPI

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Table 6: NEW SOUTH WALES

Mar 2008

Dec 2007

Mar 2007 Home Loan Affordability Indicator (HLAI) 25.4 25.1 27.9 Average HLAI since March quarter 1980 34.6 34.7 35.0 Proportion of family income devoted to

meeting average loan repayments 39.3% 39.8% 35.9%

Proportion of family income devoted to

meeting median rents 25.4% 24.8% 23.2%

Median weekly family income $1,260 $1,249 $1,206 Average monthly loan repayment $2,146 $2,155 $1,876

Average loan $255,686 $271,232 $247,753

Total number of loans (excl. refinancing) 35,070 42,074 36,049 Number of first home buyers 8,675 10,783 9,053 Average first home buyer loan $248,900 $264,700 $239,500 Banks

Average loan $260,315 $275,960 $247,389

Average loan $206,244 $226,466 $207,578

Other Lenders

Average loan $231,052 $248,644 $258,363

Percentage Change HLAI CPI Syd

Since previous quarter 1.2 1.4

New South Wales

New South Wales was only one of two states and territories that recorded an improvement in home loan affordability for the March quarter.

Affordability improved by 1.2% over the quarter driven by substantial decreases in the size of new home loans. However it decreased by 9.0% over the year.

Median weekly family income increased slightly by 0.9%, while average monthly loan repayments decreased by 0.4%. The proportion of family income required to meet average loan repayments in NSW decreased slightly to 39.3%.

NSW has been overtaken by Queensland as Australia’s least affordable location for home buyers. There are signs in the March quarter that consecutive interest rate rises are beginning to have a stabilising affect on the cost of housing.

The cost of rent in NSW continues to grow and the proportion of income needed to meet rent payments increased by 0.6% to 25.4% in the March quarter.

HLAI

0 5 10 15 20 25 30 35 40

Mar 08

Dec 07

Sep 07

Jun 07

Mar 07

Dec 06

Sep 06

Jun 06

Mar 06

Dec 05

Sep 05

Jun 05

Mar 05

Quarter

Long term average Quarterly value

CHART 8: New South Wales HLAI

100 150 200 250 300 350 400

120 125 130 135 140 145 150 155 160 165

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

Rent and CPI for Sydney from March 1998

Rent $ per week Consumer Price Index

CHART 9: New South Wales Rents

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Table 7: VICTORIA

Mar 2008

Dec 2007

Average loan $245,937 $249,489 $234,064

Average loan $250,582 $253,551 $237,404

Average loan $250,646 $251,817 n/a

Other Lenders

Average loan $200,903 $215,474 n/a

Percentage Change HLAI CPI Melb

Victoria

Loan repayments increased more than income in Victoria during the March quarter 2008, causing a deterioration in home loan affordability of 2.2%. Overall, the Victorian HLAI decreased by 9.7% over the year.

Victorian median weekly family income increased by 1.6% and average monthly home loan repayments rose by 4.1%, causing the proportion of family income required to meet the average loan repayment to increase from 36.2% to 37.1%.

Significantly, the total number of home loans issued in Victoria decreased by 15.4% over the quarter, while the average size of a new loan decreased by 1.4%.

The proportion of income needed to meet rent payments increased from 20.6% in December to 21.8% in March.

HLAI

0 5 10 15 20 25 30 35 40 45 50

Mar 08

Dec 07

Sep 07

Jun 07

Mar 07

Dec 06

Sep 06

Jun 06

Mar 06

Dec 05

Sep 05

Jun 05

Mar 05

Quarter

CHART 10: Victoria HLAI

180 200 220 240 260 280 300

125 130 135 140 145 150 155 160 165 Rent and CPI for Melbourne from March 1998

CHART 11: Victoria Rents

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Table 8: QUEENSLAND

Mar 2008

Dec 2007

Average loan $252,566 $252,828 $239,367

Average loan $256,531 $255,338 $239,084

Average loan $209,276 $217,108 $209,840

Other Lenders

Average loan $221,521 $241,155 $248,197

Percentage Change HLAI CPI Bris

Queensland

The proportion of family income required to meet average loan repayments in Queensland increased to 40.5% in the March quarter, making it the least affordable state or territory in Australia. Home loan affordability fell by 4.3%

over the quarter and by 11.2% over the year.

The median weekly family income increased by 0.8% while average monthly loan repayments, exacerbated by consecutive rate rises, increased 5.5%.

The number of home loans issued during the March quarter decreased significantly by 15.6%, and their average value decreased by 0.1%, suggesting a steadying of the market.

Rental affordability in Queensland shows no sign of improving as the proportion of income needed for rent increased from 25.1% in the December quarter to 26.5% in the March quarter.

CHART 12: Queensland HLAI

HLAI

0 10 20 30 40 50

Mar 08

Dec 07

Sep 07

Jun 07

Mar 07

Dec 06

Sep 06

Jun 06

Mar 06

Dec 05

Sep 05

Jun 05

Mar 05

Quarter

CHART 13: Queensland Rents

140 160 180 200 220 240 260 280 300 320

120 125 130 135 140 145 150 155 160 165 170

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

Rent and CPI for Brisbane from March 1998

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Table 9: SOUTH AUSTRALIA

Mar 2008

Dec 2007

Average loan $200,744 $206,565 $184,788

Average loan $203,181 $206,300 $183,985

Average loan $270,417 n/a $149,447

Other Lenders

Average loan $190,453 n/a $188,148

Percentage Change HLAI CPI Adel

South Australia

South Australia has seen the largest deterioration of home loan affordability anywhere in Australia with the HLAI falling 15.3% over the year. The fall over the quarter moderated slightly with a decrease of 2.9%.

South Australia was one of only two state and territories to record a decrease in median weekly family income for the March quarter, if only a small decrease of 0.2%.

The number of loans issued in South Australia during the March quarter decreased by 13.1%

from the previous quarter, and the size of the loan also decreased by 1.5%.

Despite a decrease in the size of the loan, loan repayments in South Australia increased by 2.7% because of consecutive interest rate rises and a decrease in median family income.

This led to an increase in the proportion of family income needed to meet average loan repayments from 35.7% in the December quarter to 36.8% in the March quarter.

The proportion of median weekly family income required for rent increased over the quarter from 24.5% in December 2007 to 25.5% in March 2008.

HLAI

0 10 20 30 40 50

Mar 08

Dec 07

Sep 07

Jun 07

Mar 07

Dec 06

Sep 06

Jun 06

Mar 06

Dec 05

Sep 05

Jun 05

Mar 05

Quarter

CHART 14: South Australia HLAI

130 150 170 190 210 230 250 270 290

125 130 135 140 145 150 155 160 165 170 Rent and CPI for Adelaide from March 1998

Consumer Price Index

Rent $ per week

CHART 15: South Australia Rents

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Table 10: WESTERN AUSTRALIA

Mar 2008

Dec 2007

Average loan $261,524 $259,161 $248,716

Average loan $264,646 $258,419 $247,782

Average loan n/a n/a n/a

Other Lenders

Percentage Change HLAI CPI Perth

Western Australia

Home loan affordability in Western Australia worsened slightly over the March quarter, due mainly to larger loans and higher interest rates.

The number of new home loans decreased by 11.5% during the March quarter, while the average size of a new home loan increased by 0.9%.

Median weekly family income increased by 5.1%, compared with a 6.6% increase in the average monthly loan repayments. The proportion of income needed for loan repayments increased by 0.5 percentage points over the quarter to 34.0%.

The overall effect was that the HLAI worsened by 1.3% over the quarter, and by 0.7% over the year. This small annual change was similar to that recorded for Northern Territory, and is the lowest level of deterioration across Australia.

Renters were fortunate this quarter with a 0.8%

decrease in the proportion of income needed to meet rent payments. Renters require 22.5% of family income to meet rent payments.

HLAI

0 10 20 30 40 50

Mar 08

Dec 07

Sep 07

Jun 07

Mar 07

Dec 06

Sep 06

Jun 06

Mar 06

Dec 05

Sep 05

Jun 05

Mar 05

Quarter

CHART 16: Western Australia HLAI

120 170 220 270 320

115 120 125 130 135 140 145 150 155 160 165

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

Rent and CPI for Perth from March 1998

CHART 17: Western Australia Rents

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Table 11: TASMANIA

Mar 2008

Dec 2007

Median weekly family income $1,000 $986 $949

Average monthly loan repayment $1,528 $1,430 $1,321

Average loan $182,072 $179,993 $174,486

Number of first home buyers 585 616 474

Average loan $191,259 $183,578 $180,044

Other Lenders

Percentage Change HLAI CPI Hob

Tasmania

Tasmanian home loan affordability decreased yet again in the March quarter as small increases in median income failed to match the increase in average loan repayments. Median weekly family income increased in Tasmania by 1.4% while the average monthly loan repayment increased by 6.9%. The proportion of family income needed to meet the average mortgage repayment increased by 1.8 percentage points.

The average size of home loans in Tasmania increased by 1.2% over the quarter, and the number of loans issued decreased by 3.8%.

Tasmania experienced the highest decline in housing affordability over the quarter with the HLAI decreasing by 5.0%, and by 8.7% over the year.

Renters in Tasmania are the worst off in Australia, with 29.5% of their income needed to pay the median rent in Hobart. This is up 1.1 percentage points from the December quarter.

HLAI

0 10 20 30 40 50 60

Mar 08

Dec 07

Sep 07

Jun 07

Mar 07

Dec 06

Sep 06

Jun 06

Mar 06

Dec 05

Sep 05

Jun 05

Mar 05

Quarter

CHART 18: Tasmania HLAI

120 140 160 180 200 220 240 260 280 300

125 130 135 140 145 150 155 160 165

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

Rent and CPI for Hobart from March 1998

CHART 19: Tasmania Rents

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HLAI

0 10 20 30 40 50 60 70

Mar 08

Dec 07

Sep 07

Jun 07

Mar 07

Dec 06

Sep 06

Jun 06

Mar 06

Dec 05

Sep 05

Jun 05

Mar 05

Quarter

CHART 20: Northern Territory HLAI

Table 12: NORTHERN TERRITORY

Mar 2008

Dec 2007

Average loan $207,198 $218,705 $217,018

Total number of loans (excl. refinancing) 925 1,226 1,113

Average loan $214,851 $229,021 $228,362

Other Lenders

Percentage Change HLAI CPI Dar

Since previous quarter 1.4 0.9

Northern Territory

Along with NSW, NT was the only State or Territory to record an improvement in affordability during the March quarter of 1.4%.

Over the year, there was only a small decline in affordability of 0.7%, similar to that recorded in Western Australia, another location which has benefited from increased incomes as a result of the commodities boom.

There was a significant decrease in the number and size of new loans in the March quarter. The total number of new loans issued in the March quarter decreased a staggering 24.6% and the average loan size decreased by 5.3%.

Median weekly family income rose by 1.4%

in the March quarter. Coupled with the 0.1%

increase in average monthly loan repayments, the proportion of family income required to meet the average loan repayment decreased by 0.3%.

The Northern Territory remains the second most affordable location for home loans in Australia.

However, it is more expensive to rent than to buy in Darwin. Rental affordability decreased even further in the March quarter, with the proportion of income required for rent payments rising to 28.1%.

150 200 250 300 350 400 450 500

120 125 130 135 140 145 150 155 160

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

Rent and CPI for Darwin from March 1998

CHART 21: Northern Territory Rents

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CHART 22: Australian Capital Territory HLAI

Table 13:

AUSTRALIAN CAPITAL TERRITORY

Mar 2008

Dec 2007

Average loan $255,014 $256,752 $236,650

Average loan $252,290 $251,392 $237,236

Other Lenders

Percentage Change HLAI CPI Can

Australian Capital Territory

The ACT continues to enjoy the best home loan affordability in the country, due largely to higher than average incomes. Despite this, the ACT experienced the highest quarterly decrease in home loan affordability across Australia, declining by 5.5% in the March quarter. Affordability decreased 14.0% over the year.

The decrease in affordability is due mainly to a reduction in the median weekly family income of 1.0%. The proportion of family income required to meet the average loan repayment increased to 22.4%.

The number of new loans decreased by 15.6%

over the March quarter, and the size of new loans decreased by 0.7%.

The proportion of income spent on rent in the ACT increased 0.9% from the December quarter to 17.5%, placing the ACT as the most affordable location for renters despite having the second highest rents in the country.

HLAI

0 10 20 30 40 50 60 70

Mar 08

Dec 07

Sep 07

Jun 07

Mar 07

Dec 06

Sep 06

Jun 06

Mar 06

Dec 05

Sep 05

Jun 05

Mar 05

Quarter

CHART 23: Australian Capital Territory Rents

150 200 250 300 350 400

125 130 135 140 145 150 155 160 Rent and CPI for Canberra from March 1998 165

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The Deposit Power/Real Estate Institute of Australia Housing Affordability Report is based on data from all major lending institutions. It is a comprehensive and accurate assessment of the ability of Australians to meet the cost of home purchase.

Any differences between information contained in this and previous editions of the Home Loan Affordability Report are due to revisions in the database that may be necessary from time to time.

Home Loan Affordability Indicator: A ratio of family income to average loan payments. (An increase denotes easier affordability). The HLAI divided by a (constant) factor of 10 is the number of times by which median family income exceeds average home loan repayments in a full year. The reciprocal value of the HLAI is the proportion of family income that is required to repay the average home loan in a full year.

Loans: Average size and total number for first home buyers and all borrowers (excluding refinancing) are average data over the quarter, based on all lender data from the ABS.

Average Monthly Loan Repayment: Loan repayment figures are calculated from data provided by the ABS, Cannex Pollfax, and financial institutions across Australia.

Median Weekly Family Income: A family is defined as a married couple with or without dependant children. The major part of family income is adult wages and salaries. Income data are sourced from ABS records, and updated on the basis of movements in average weekly earnings.

Quarterly Median House Prices/Quarterly Median Vacancy Rates: House price and vacancy data are taken from the REIA/

Mortgage Choice quarterly Real Estate Market Facts.

Proportion of Family Income to Meet Rent Payments: The percentage of Median Weekly Family Income required to meet the median rent for a three bedroom house. Rents are obtained from the REIA/ Mortgage Choice quarterly Real Estate Market Facts.

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16 Thesiger Court, Deakin, ACT PO Box 234, Deakin West, ACT 2600 Phone: (02)6282 4277 Fax: (02)6285 2444 Website: www.reia.com.au

Email: [email protected]

Deposit Power

Deposit Power established the deposit guarantee market in Australia in 1989, and has maintained market leadership through innovative solutions and commitment to industry partners. With 17 years experience, Deposit Power is a firmly established and respected brand in Australia’s finance, property development and real estate industries. Deposit Power is issued by Vero Insurance Limited ABN 48 005 209 807.

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