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Most affordable place to buy

With the fall in real estate values around many parts of the country, both housing and rental affordability are improving. The most affordable state or territory is the Australian Capital Territory.

According to the latest Adelaide Bank/REIA Housing Affordability Report, the proportion of family income needed to meet average home loan repayments in the ACT in the September quarter was 20 per cent – down from 20.9 per cent in the June quarter.

The proportion of family income needed to meet average home loan repayments in the Northern Territory in the September quarter was 21 per cent; in Western Australia it was 22.7 per cent; in Tasmania 25.1 per cent; in South Australia 26.7 per cent; and in Queensland 28.1 per cent.

The affordability measure is a mix of the size of the loan, interest rates, the term of the loan and family income.

Despite the big fall in Sydney house prices over the past year, New South Wales remains the least affordable state, with 36.6 per cent of family income needed to meet average loan repayments – down from 38.1 per cent in the June quarter. In Victoria the proportion was 33.8 per cent – down from 34.3 per cent in the June quarter.

Affordability improved in all states and territories, except Queensland, where it was steady. Rental affordability improved in all states and territories, except Victoria and Tasmania.

The report says improved affordability is good news for first home buyers but, due to other factors, it is not helping them much. The number of first home buyers was down 2 per cent in the September quarter, compared with the previous quarter.

Real Estate Institute of Australia president Malcolm Gunning says: “The decline in first home buyers is symptomatic of the credit squeeze that is emerging. While APRA’s restrictions were designed to curb high-risk lending practices, the current practice of reducing loan amounts and increasing approval times across the board is becoming a constraint on economic growth.”

During the quarter the average loan size fell in all states and territories, except Queensland. The average loan size to first home buyers fell 0.5 per cent to $344,133. First home buyers made up 18 per cent of the owner-occupier market in the September quarter, compared with 17 per cent in the same period last year.