The CoreLogic Housing Affordability August 2022 report has shown that affordability is improving due to the decrease in home values.
The report analyses housing affordability using four metrics
- The ratio between the value of a home and household income
- Years needed to save 20% of a deposit
- What portion of your income is required to service the new mortgage?
- Rent is a portion of your income.
Let’s look closer at each metric.
Dwelling Value to Household Income Ratio
Home value-to-income ratios have declined in all capital cities combined – an indication of improved affordability. The ratio fell from an all-time high of 8,4 in March 2022 to just 8.3 in June.
This ratio will improve despite rising interest rates due to the decline in home values and the gradual rise in income levels.
Years Required to Save 20%
The time needed to save a deposit on the combined capital city markets fell for the very first time in almost two years during the quarter of June, though the decrease was only marginal.
Saving a deposit on a typical house has dropped from 11,14 to 11,11 years, a drop of 11 days.
Since September 2020, the value of dwellings in more expensive capitals has decreased. In Sydney and Melbourne, the time needed to save for a deposit has been reduced by three months since June.
Canberra and Hobart have seen a more subtle reduction in the time needed to save for a deposit. The June figures show a decrease of one month.
In the three months ending July, home values fell 2% in all of Canada. Home values are expected to continue to decline.
How Much Income Is Required to Service a New Mortgage
The percentage of income needed to service a mortgage increased from 40,4% in March to 44 % in June. This is the highest since June 2011. The proportion of income required to pay for new household rents has also increased, from 30,3% in the last quarter to 30,9%.
Rents and mortgage costs are on the rise, which means that household budgets will be squeezed.
In the quarter ending June, mortgage serviceability was the lowest in areas where property values were continuing to increase. In Adelaide, where the percentage of income required to service a loan jumped from 37.4% to 42.6%, it grew to 42.6% by June. In Brisbane, the rate increased by 4.5 points to 41.8%.
The Rent Service Portion of Income
As of June, the percentage of median household income needed to pay median rent for a new lease was 30.9%. This is up from 30.3% in the previous quarter.
A combination of a high demand in the domestic market and a low supply has caused a shortage of rental properties.
Renters with low or no savings will face difficult times in the future, as property values are decreasing and rents are increasing. Renters with a high level of protection can now consider purchasing a home.
Our mortgage brokers are available to help you if you’re thinking about buying a home in a market downturn but think that making repayments will be difficult.
What We can do to help you overcome challenges and buy a home
Mortgages and rents have increased as a percentage of average income. This has made buyers more skeptical. Our mortgage brokers can assist you in finding a deal for you. Learn more by reading on!
Low Deposit Options
First-time home buyers have access to a number of government schemes and grants. First-time buyers can purchase a home for as little as 5% or 2% of the value. You can discuss with your mortgage broker if you want to take advantage of any grants or schemes.
Home Loans for Aussies Overseas”>expat, you can borrow up to 90%, and those with permanent residency (PR) can get a home loan for up to 80%. You can still get a good interest rate even if you earn in foreign currency. Our brokers have access to lenders who will consider up to 90% of your foreign income.
If you have bad credit, it doesn’t mean that you can’t enter the real estate market. If you have a steady income and enough money to pay an 8% deposit, plus stamp duty, you can get a loan of 90-95%.
Rent Increases
Rents have increased and are expected to continue rising in the future. It might be better to purchase a house in the current property market than pay high rent.
Use our Rent or Buy Calculator for clarity.
Increased Borrowing Power
Your borrowing power will be affected by the increase in the percentage of income required to service a mortgage. Your existing debts, your choice of lender, and your type of loan are all factors that can affect your borrowing power.
You can increase your borrowing capacity by canceling your credit cards that are not in use and lowering the limit of those you do have. Cut back on discretionary expenses to increase your savings. Click here to learn more about how to improve your borrowing capacity.
The CoreLogic Housing Affordability August 2022 report has shown that affordability is improving due to a decline in home prices.
The report analyzed housing affordability using four metrics.
- The ratio between the value of a home and household income
- Years needed to save 20% of a deposit
- What portion of your income is required to service the new mortgage?
- Rent is a portion of your income.
Let’s look closer at each metric.
Dwelling Value to Household Income Ratio
Home value-to-income ratios have declined in all capital cities combined – an indication of improved affordability. The ratio fell from an all-time high of 8,4 in March 2022 to just 8.3 in June.
This ratio will improve despite rising interest rates due to the decline in home values and the gradual rise in income levels.
Years Required to Save 20%
The time needed to save a deposit on the combined capital city markets fell for the very first time in almost two years during the quarter of June, though the decrease was only marginal.
Saving a deposit on a typical house has dropped from 11,14 to 11,11 years, a drop of 11 days.
Since September 2020, the value of dwellings in more expensive capitals has decreased. In Sydney and Melbourne, the time needed to save for a deposit has been reduced by three months since June.
Canberra and Hobart have seen a more subtle reduction in the time needed to save for a deposit. The June figures show a decrease of one month.
In the three months ending July, home values fell 2% in all of Canada. Home values are expected to continue to decline.
How Much Income Is Required to Service a New Mortgage
The percentage of income needed to service a mortgage increased from 40,4% in March to 44 % in June. This is the highest since June 2011. The proportion of income required to pay for new household rents has also increased, from 30,3% in the last quarter to 30,9%.
Rents and mortgage costs are on the rise, which means that household budgets will be squeezed.
In the quarter ending June, mortgage serviceability was the lowest in areas where property values were continuing to increase. In Adelaide, where the percentage of income required to service a loan jumped from 37.4% to 42.6%, it grew to 42.6% by June. In Brisbane, the rate increased by 4.5 points to 41.8%.
The Rent Service Portion of Income
As of June, the percentage of median household income needed to pay the median rental on a new lease was 30.9%. This is up from 30.3% in the previous quarter.
A combination of a high demand in the domestic market and a low supply has caused a shortage of rental properties.
Renters with low savings will face difficult times in the future, as property values are decreasing and rents are increasing. Renters with high savings can now consider purchasing a home.
Our mortgage brokers are available to help you if you’re thinking about buying a home in a market downturn, but consider that making repayments will be difficult.
What We can do to help you overcome challenges and buy a home
Mortgages and rents have increased as a percentage of average income. This has made buyers more skeptical. Our mortgage brokers can assist you in finding a deal for you. Learn more by reading on!
Low Deposit Options
a number of government schemes and grants are available to first-time home buyers. First-time buyers can purchase a home for as little as 5% or even as low as 2% of the value. You can discuss with your mortgage broker if you want to take advantage of any grants or schemes.
Home Loans for Aussies Overseas”>expat, you can borrow up to 90%, and those with permanent residency (PR) can get a home loan for up to 80%. You can still get a good interest rate even if you earn in foreign currency. Our brokers have access to lenders who will consider up to 90% of your foreign income.
If you have a bad credit history, it doesn’t mean that you can’t enter the real estate market. If you have a steady income and enough money to pay an 8% deposit, plus stamp duty, you can get a loan of 90-95%.
Rent Increases
Rents have increased and are expected to continue rising in the future. It might be better to purchase a house in the current property market than pay high rent.
Use our Rent or Buy Calculator for clarity.
Increased Borrowing Power
Your borrowing power will be affected by the increase in the percentage of income required to service a mortgage. Your existing debts, your choice of lender, and your type of loan are all factors that can affect borrowing power.
You can increase your borrowing capacity by canceling the credit cards you don’t use and reducing their limit. Cut back on discretionary expenses to increase your savings. Click here to learn more about how to improve your borrowing capacity.
Buy Now or Wait?
If you can buy now, you increase the likelihood of getting your dream house, as there is more stock in the market, but there are fewer buyers.
Interest rates are rising, but if you can cope with the rising interest rates for a few years, then purchasing is likely to benefit you in the future. Eventually, the interest rate is expected to go down.
Every person’s situation is unique and requires a unique solution. Share your situation and get to know different possibilities from our experienced mortgage brokers.
