The June quarter of 2015 showed an improvement in housing affordability nationally, according to the Adelaide Bank and Real Estate Institute of Australia Housing Affordability Report, with the proportion of income required to meet loan repayments decreasing by 0.5 percentage points to 30.3%.
Compared to the June quarter of 2014, the proportion of income needed to meet loan repayments has decreased even further, by 0.6 percentage points.
All states and territories saw an improvement in housing affordability across the quarter, except for the heated New South Wales housing market, where the proportion of income required to meet mortgage repayments increased by 0.6 percentage points.
As such, New South Wales has once again remained the least affordable state for homebuyers with the proportion of income required to meet loan repayments 5.3 percentage points above the national average.
South Australia, on the other hand, showed the greatest improvement with income proportion dropping 2.9 percentage points, to 25.5%. However, the Australian Capital Territory is still the most affordable state or territory in which to buy a home with the figure sitting at 19.5%.
According to the report, housing affordability was boosted after the Reserve Bank of Australia cut the official interest rate to its historic low of 2% in May. The quarterly average standard variable interest rate is now 0.2 percentage points lower than the March quarter and down 0.5 percentage points when compared to the corresponding quarter last year.
The quarterly average three year fixed rate has fallen 0.1 percentage points during the quarter and 0.6 percentage points when compared to a year earlier.
Thanks to improved housing affordability, the number of first home buyers also increased 8.1% to 24,869 over the June quarter. However, first home buyer activity is still 3.8% lower compared to twelve months ago. First home buyers now make up 15.7% of the owner-occupier market. The figure is well below the long-run average of 19.8%.
All states and territories recorded increases in the number of loans to first home buyers, except Tasmania and the Northern Territory. The largest rise was seen in the Australian Capital Territory, where the figure increased by 20.9%.
Declining interest rates and rising income have boosted housing affordability across the nation, except for one sizzling state, a new report reveals.