Housing affordability enjoys temporary respite

Housing Industry Association (HIA) has announced that a slight easing in dwelling prices contributed to improvements in housing affordability in the March 2011 quarter.

The HIA-Commonwealth Bank Housing Affordability Index improved by 3.0 per cent in the March 2011 quarter although affordability was still 2.8 per cent below the level registered in the March 2010 quarter.

According to HIA, the main contributors to improved affordability were growth in average weekly earnings and a softening in dwelling prices.

"The housing market has responded to a higher interest rate environment following the series of rate hikes throughout the course of 2010, which can be seen in some softening in dwelling prices," HIA's Senior Economist, Andrew Harvey, said.

"Improved affordability is great news for home buyers, particularly first home buyers with sound financial positions who have been considering entering the market in 2011. With new home building activity moderating and some easing in pressure on trades, now is a particularly good time to consider building a new home," said Mr Harvey.

Across Australia's capital cities housing affordability in the March 2011 quarter improved in Sydney (2.5 per cent), Melbourne (1.6 per cent), Brisbane (1.6 per cent), Adelaide (1.5 per cent), Perth (6.1 per cent) and Hobart (4.1 per cent), while Canberra's affordability continued to worsen (‑0.9 per cent).

Outside of the capital cities, affordability improved in the non-metropolitan regions of Western Australia (6.6 per cent) and Tasmania (1.3 per cent), but deteriorated in New South Wales (-0.5 per cent), Victoria (-2.4 per cent), Queensland (-0.1 per cent), and South Australia (-1.2 per cent).