Perth has cemented its position as Australia's least affordable capital city after new figures released today revealed housing affordability has fallen to its lowest level yet recorded.
Nationally, the March 2007 quarter Housing Industry
Association/Commonwealth Bank Housing Affordability Index - a key industry measure of the market set up 23 years ago - fell by 0.6 per cent, 10.3 per cent lower than at the same time last year.
The average house price in Perth rose by 5.6 per cent in the March quarter, which the HIA said equated to fall in affordability of 4.5 per cent.
The new figures proved that, despite stamp duty relief announced in the State Budget, Perth continued to represent an enormous financial hurdle for first home buyers.
The situation was even worse in regional WA, where the average cost of a first home rose by 10.2 per cent, causing affordability to fall by 8.6 per cent.
Conversely, the index rated Hobart as the most affordable capital city in which to live.
Overall, the index fell to 97.8, making it the second consecutive quarter in which the index had fallen below 100, after a 1.3 per cent rise in the average price of a first home.
The 100 level is the base level for the index.
The HIA said the index was at its lowest level since the group was established in 1984, with the monthly loan repayment on a typical first home mortgage rising to $2387 from $2352.
HIA managing director Ron Silberberg said that when it came to housing affordability, all the wrong records were being set, and called for government action to alleviate the crisis.
"The housing affordability crisis shows all the signs of structural supply constraints; it is not part of some market cyclical trend that will correct itself," Mr Silberberg said.
"This continuing decline confirms previous calls by HIA for a national response to restore housing affordability."
The March quarter result was the fourth consecutive decline in affordability, with the monthly loan repayment on a typical first home mortgage rising by 1.5 per cent.
Mortgage repayments now account for 30.7 per cent of an average first home buyer's income, up 0.2 percentage points on the December 2006 quarter.
HIA said its own projections showed that if the situation was not immediately addressed, housing affordability might not be restored until 2022, even in an environment of strong wages growth and low interest rates.
"With the Australian economy in great shape and with record national surpluses, more needs to be done to alleviate housing stress and to assist those families battling to afford a roof over their heads," Mr Silberberg said.
"Only a targeted whole-of-government approach will make inroads into what is a massive economic and social challenge for Australia."
Affordability fell in all regional areas except for regional South Australia, while all capital cities except Melbourne experienced declines in affordability.