Interpac Business and Migration Solutions Melbourne Australia

(July.29)

Home prices in Melbourne have fallen over the past year but unless house prices stay flat for a decade home ownership will stay out of reach for people on average wages, says a new report.

While Melbourne's median house price fell 2.1 per cent in the year to June, prices for the last three months of that period held firm, according to new data from Fairfax-owned Australian Property Monitors (APM).

That's a solid result, said APM economist Andrew Wilson, with national home prices falling 0.6 per cent in the quarter.

"Australia's two largest capital city housing markets are exhibiting resilience and, with the exception of Darwin, the Sydney and Melbourne housing markets have proved to be the best performers over the year," said APM senior economist Andrew Wilson.

But the drop in home prices since mid 2010 has not boosted affordability, according to the AMP NATSEM Income and Wealth Report, released today.

"It will take at least another 10 years of flat house prices coupled with income growth for houses to regain an affordable status," the report said.

It showed that Victoria had the most and least affordable communities of anywhere in Australia, with the median price of an inner-ring Melbourne house reaching $625,000, or 10.2 times a median income in 2011. Latrobe Valley was at the other end, with a median house price of $162,000, or 4.3 times median income in 2011.

The AMP NATSEM report found that national median house prices rose 147 per cent to $417,000 in the decade to 2011, while median after-tax incomes rose only 50 per cent to $57,000 in the same time.

The data showed that 18 per cent of Melbourne homeowners were classified as being in housing stress, which kicks in when a household pays more than 30 per cent of total income on housing expenses. About 5.3 per cent of Melburnians were paying more than 50 per cent.

But a greater number of Sydneysiders were feeling the pinch, with 28 per cent of people spending over 30 per cent of their income on housing, and 9.4 per cent spending more than half their income.

Ben Phillips, the lead author of the NATSEM report, said housing stress was being felt by 31 per cent of all people buying a home in Australia.

"Nearly one in 10 buyer households spend at least half their after-tax income on housing, which pushes them into the severely housing stressed category,” said Mr Phillips.

Falling auction clearance rates, economic uncertainty and persistent worries about interest rate rises were behind the falls in home prices during 2011, with the outlook for house price growth in Melbourne among the most pessimistic.

Strong inflation data released yesterday has rekindled fears the Reserve Bank will lift interest rates again, which could further dissuade new buyers from entering the market.

In encouraging news for Melburnians, Sydney was listed as the least affordable capital city with median house prices 8.4 times the median income. Melbourne's ratio was 7.9 times the median income.

“Buying a home and paying off the mortgage is putting Australians under considerable stress," said AMP Financial Services Managing Director Craig Meller.

"It can be a struggle to get into the market and when people do, many have little funds left over for essentials, let alone a family holiday.”

The AMP NATSEM report, using RP Data house price statistics, calculated that the Australian home prices have moved from an affordable price to income ratio of 4.7 in 2001 to a severely unaffordable 7.3 today.

Source from Theage.com.au