Affordability actually improving in terms of mortgage payments: Terry Ryder

Affordability actually improving in terms of mortgage payments: Terry Ryder
Affordability actually improving in terms of mortgage payments: Terry Ryder

Affordability nationwide improved in the five years between 2011 and 2016 – that’s one of the more interesting facts to emerge from the 2016 Census data. 

An analysis by population analysts profile.id finds that the median mortgage payment in 2011 was $1,800 per month, but in 2016 it was $1,755. Over the same period the median household income increased from $5,330 to $6,205 per month. 

Of course, these are national average figures and they conceal myriad differences among the various states and cities. The biggest improvements in affordability, in terms of the reduction in mortgage payments, occurred in Queensland and the ACT. 

But there was even a small improvement in New South Wales, notwithstanding the big price rises in Sydney. 

Unsurprisingly, the biggest single factor in the reduction in mortgage payments was the decrease in interest rates. In 2011, the official cash rate was 4.5 percent and by 2016 it was 1.5 percent. Glenn “the Census expert” at profile.id says: “While the banks have passed on less and less of these cuts, it’s certainly the case that mortgage interest rates being paid by home owners in the past five years have reduced.” 

Perhaps the most startling fact is that the median mortgage payment for the Greater Sydney area was the same in 2016 as it was in 2011. And in Melbourne the median mortgage payment reduced slightly. 

The analysis examined mortgage payments for people aged between 18 and 34 who have a mortgage and don’t live at home with their parents – i.e. looking at the profile most likely to include first-time buyers. This is where the improvement in affordability was actually the highest, in terms of the reduction in median mortgage payments between 2011 and 2016. 

In the ACT, for example, median monthly payments dropped from $2,460 to $2,140, while in Queensland they fell from $2,165 to $1,958. Even in NSW, the median mortgage payment for this demographic dropped from $2,182 to $2,129. 

As Glenn points out: “There are very large falls in mortgages in the ACT ($320/month) and Queensland ($207/month). But even in Sydney and Melbourne, which have seen rapid escalation of housing prices, there have been modest declines in what 18-34 year olds are actually paying on their mortgages when they have them. 

“So in fact, a larger part of the decline (in mortgage payments) is in this key group. Probably because they have the larger mortgages and are more affected by changes in interest rates. So, while we have seen that children are delaying leaving home longer (though not much longer), once they do leave home they are actually paying less to buy a house.” 

These figures put another perspective on the general issue of housing affordability. 

But here’s the thing: every day the Hotspotting team scours media sources for information on residential real estate and, to date, we haven’t found any coverage of this very thorough and professional analysis of the affordability situation. 

No newspaper or other media outlet has run this story. Why not? Because it doesn’t suit the pre-conceived storyline, the much-beloved theme of everyone being priced out of the market. 

Another reflection of media bias on this subject came earlier in the year when one of the major affordability indexes published the latest findings. There were two scenarios: in annual terms, affordability had improved in most states and territories, but comparing the latest quarter to the previous quarter, affordability had declined in most states and territories. 

Every media outlet which ran an article in this report focused on the quarter-to-quarter deterioration and totally ignored the annual improvement. 

Media has created a “crisis” by selectively using data to support the favoured theme which says no one can afford to buy any more. It’s obviously rubbish but that’s what they keep telling us – and so when someone runs a survey on the issue, a majority of citizens say they believe young people are priced out of the market everywhere. 

It’s sad how dishonest our media is and also sad how easily people are deluded by it. 

Terry Ryder is the founder of hotspotting.com.au. You can email him or follow him on Twitter.

 

Terry Ryder

Terry Ryder

Terry Ryder is the founder of hotspotting.com.au.

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Housing Affordability Terry Ryder

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