Rate rises make homes less affordable

The Housing Industry Association-Commonwealth Bank housing affordability index fell 1.8 per cent in the December 2010 quarter to 53.5 from 54.5 in the September 2010 quarter. The gauge is 10 per cent lower than a year ago, HIA said. “Housing affordability suffered a big hit over the course of 2010, with a clear driver being the interest rate increases in March, April, May and November,” said HIA chief economist, Dr Harley Dale.

The Reserve Bank lifted to 4.75 per cent last year, with banks, such as Commonwealth Bank, nearly doubling the cost on a residential mortgage. By city, affordability dropped 5.5 per cent in Sydney in the December quarter, more than double the 2.6 per cent fall in Melbourne. However, affordability improved slightly by 0.5 per cent in Brisbane in the quarter and 0.1 per cent in Perth, where house prices growth weakened towards the end of last year.

Source: Sydney Morning Herald