Owning Victorian housing has become less affordable over past few years

The affordability of housing for Victorian owner-occupiers has barely changed in the past year, according to the most recent REIA Deposit Power Housing Affordability Report.

The report shows that, in Victoria, the proportion of family income needed to meet average loan repayments in the September quarter last year was 35.7% compared with 35.6% in the September quarter this year.

There is no doubt that housing has become less affordable over the last few years; Victorians have generally required more than a third of an average income to pay the average loan for the last seven years (with the exception of the year of the GFC).

Between 1999 and 2004, Victorians generally required a quarter of an average income to pay the average loan.

The significant reduction in affordability was a direct result of the state’s rate of population growth doubling between 2005 and 2010 not being matched by an increase in housing construction. This suggests that the solution to affordability concerns is primarily through ensuring adequate housing supply.

When compared with the other states, Victoria is the second least affordable; only in NSW is a greater proportion of income needed at 37.1%.

Renters, however, are in a better position when compared with other states. In Victoria they required 22.7% (same as a year ago) of an average family income to meet the average rent. This was more affordable than in New South Wales, Queensland, South Australia, Tasmania and the Northern Territory.

Enzo Raimondo is the CEO of the Real Estate Institute of Victoria.