The latest national housing affordability report by the Real Estate Institute of Australia (REIA) has some positive news for the Australian property market.
Despite recent media headlines about Australia has some of the most unaffordable real estate in the world, the report showed that in some areas of Australia, housing affordability is improving.
The report showed that comparing the December 2015 quarter to the December 2014 quarter housing affordability improved in Queensland, South Australia, Western Australia, Tasmania, the Northern Territory and the Australian Capital Territory.
The only areas in Australia where housing affordability declined over the past year where in New South Wales and Victoria, which was largely due to the housing booms in Sydney and Melbourne.
This growing trend of improving housing affordability in regional areas of Australia is highlighted by the fact that in the Northern Territory it takes 21.2% of an average family income to service a home loan compared to 39.4% in New South Wales.
The survey shows that the ACT is the most affordable region in Australia to buy a property requiring just 19.9% of an average family income to service a home loan.
Affordability has always been a key factor in determining the health of a property market and the fact that a large number of property markets outside the Sydney/Melbourne axis are becoming more affordable is good news for Australian property sector.
Affordability is also a signpost to future capital growth because when properties become very affordable, buyers tend to become more active in these markets pushing up prices.
The Northern Territory, for example, now has some of the most affordable housing in Australia and with a small population and huge natural resources, the prospects for future capital growth in this housing market looks very promising.
Astute property buyers and investors should also take a micro approach towards buying real estate in more affordable housing markets.
This is because the real estate market does not move in a uniform way. In Queensland, where around 27.6% of an average family income is needed to service a home loan (compared to 32.4% nationally), a number are primed for capital growth such as the Gold Coast and parts of Brisbane.
Overall, the improving affordability of real estate in many parts of Australia now creates more opportunities for astute property buyers to purchase prime real estate with the view to capitalising on capital growth moving forward.