First home buyers on struggle street

Melissa Jenkins
(Australian Associated Press)

Sluggish wages growth and rising living expenses will keep many Australians locked out of home ownership, even as interest rates remain low, an international ratings agency says.

In its latest Global Housing and Mortgage Outlook report, FitchRatings says it expects house prices to cool in Australia this year, tipping growth to slow to between three to five per cent, compared with 10.9 per cent as at December 2016.

But it will remain tough for would-be first home buyers to get into the property market, especially in capital cities.

“Fitch expects first home buyers to continue to struggle in 2017, as demand for housing remains strong,” the agency said.

“Low income growth, tighter underwriting and rising living costs maintain pressure on affordability, even as low rates persist.”

Growth in mortgage lending in line with home price rises has pushed Australia’s household debt to 123 per cent of GDP, trailing only Denmark.

Australia also lays claim to the fastest increase in household debt to GDP ratio, which has climbed by 11 percentage points over the last two years, Fitch said.

The Reserve Bank of Australia left the official cash rate on hold at a record low of 1.5 per cent earlier this month.

“Household debt remains high and any material rate rise will weigh on mortgage affordability and serviceability,” Fitch said.

Meanwhile, the number of houses going to auction nationally has tipped over the 2,000-a-week mark for the first time this year.

According to the latest figures from analytics firm CoreLogic, 2,280 properties were auctioned in the week to February 19, compared with 1,591 properties the previous week.

But the growth was reserved to Sydney and Melbourne, with the other capital cities holding fewer auctions.

Overall, there were 67 fewer properties auctioned last week than compared with the same week in 2016.

The auction clearance rate was 77 per cent this week, which is more than five per cent higher than the same time last year.

Sydney (83.5 per cent) and Canberra (81.5 per cent) had the highest clearance rates for the week, while 76.7 per cent of homes auctioned in Melbourne sold.

CAPITAL CITY MEDIAN HOUSING PRICES

HOUSES

Sydney – $818,000

Canberra – $600,500

Melbourne – $590,000

Darwin – $565,000

Perth – $516,000

Brisbane – $515, 000

Adelaide – $440,000

Hobart – $362,500

UNITS

Sydney – $698,525

Melbourne – $465,000

Perth – $434,250

Canberra $400,000

Brisbane – $387,000

Darwin – $372,500

Adelaide – $315,000

Hobart – $310,000

Source: Capital city private treaty sales, representing about 85 per cent of all dwelling sales across Australia. Data from CoreLogic Property Market Indicator Summary week ending February 19, 2017.

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