Homeowners may get a reprieve in terms of the proportion of their monthly income spent on loan repayments as house prices cool.
Housing affordability improved in all capital cities during the March quarter thanks to a fall in house prices, although it was not enough to offset an annual decline everywhere except Perth.
Early signs have emerged that housing costs may have peaked with affordability conditions beginning to improve over the three months to March 31, a Moody's Investors Service report says.
"Housing prices fell during the three months to March 31, 2016, suggesting that repayment costs may have peaked," Moody's analyst Natsumi Matsuda said on Thursday.
Sydney remains the most unaffordable city for homebuyers, followed by Melbourne.
But a decline in house prices in the March quarter, particularly in those two cities, may augur well for affordability going forward.
"We expect that affordability in these two cities will improve over 2016, reflecting the pullback in the housing market," Ms Matsuda said.
This week's 25 basis point cut in the cash rate, which has been passed on in full by three of the four major banks, should also be positive for affordability.
The extent of this impact will ultimately depend on whether there are any flow-on effects to the housing market, where lower rates can put upward pressure on prices, Ms Matsuda said.
Sales volumes are trending lower, CoreLogic RP Data says.
"Affordability constraints, particularly in Sydney and Melbourne, following consistent value growth in recent years, is likely leading to a decline in sales," CoreLogic research analyst Cameron Kusher said on Thursday.
"With fewer transactions in the market and tighter mortgage lending conditions, we're expecting to see less upward pressure on home values as we progress through 2016," he added.
Sales of new homes, however, bounced back in March with an 8.9 per cent rise following a sharp decline in February, according to the Housing Industry Association.
"The current level and trajectory of new home sales and approvals provides a strong signal that new home building activity in 2016 will remain strong," HIA economist Diwa Hopkins said.
"Tuesday's cut to the official cash rate will also provide additional support to the residential construction sector."
Nationally, housing affordability deteriorated in the year to March, meaning homeowners have to spend a larger proportion of their income on mortgage repayments.
Australian households spent an average of 27.6 per cent of their monthly income on mortgage repayments, up from 27 per cent in the year to March 2015, Moody's said.
Perth bucked the national trend on the back of a decline in housing prices.
THE STATE OF AUSTRALIA'S HOUSING MARKET
* Households with two income earners spend average 27.6 pct of monthly income on mortgage repayments
* In Sydney it's 35.6 pct, Melbourne 30 pct, Adelaide 23.2 pct, Brisbane 24.3 pct
* Affordability improved in Perth, to 21.5 pct
* 339,026 houses and 132,081 units sold nationally in year to April
* House sales down 3.7 pct, unit sales by 9.7 pct
* New home sales up 8.9 pct in March, after 5.3 pct fall in February
* New detached house sales up 7.0 pct, multi-unit sales up 16.3 pct
Source: Moody's Investors Service, CoreLogic RP Data, Housing Industry Association.
Share
