Roundup: Housing affordability in Australia has deteriorated as prices surge: report

A new report into housing affordability in Australia found the current housing prices are forcing Australians to spend increasing amounts on mortgage repayments, with delinquencies and defaults at risk of soaring.

Alena Chen, vice president at Moody's Investors Services and author of the report, told Xinhua on Wednesday that the current housing situation in Australia has led to her organization giving Australian residential mortgage backed securities (RMBS) a credit negative rating.

"Rising housing prices outstripped the positive effects of lower interest rates and moderate income growth," Chen said.

"In the near term, we expect housing affordability to continue to deteriorate because of ongoing housing price increases."

In the report, Sydney was listed as the city with the worst affordability, and most sensitive to any changes to pricing, personal income levels and interest rates and with the Reserve Bank not shifting in its hold on interest rate hikes, Chen said the banks are stepping in with increases of their own.

"We have seen banks recently increase their rates, this is in response to regulators coming out with measures trying to limit the origination of interest only loans," Chen said.

"Banks in response to limiting growth in that area, have already started to raise rates. Independent of the Reserve Bank raising rates, we are already seeing rates go up."

In Sydney, 37.5 percent of household income is needed to cover the mortgage payments, with that figure dropping to 30.3 percent in Melbourne, 23.9 percent in Brisbane, and 19.9 percent in Perth, bringing the Australian average to 27.9 percent for this year.

According to Chen, despite the new measures that have been introduced to inhibit interest-only loans, the upward pressure on housing prices is pegged to continue moving forward, at least in the short term, as interest rates remain at historically low levels.

Currently in Australia, a number of different solutions have been offered up by politicians, and experts alike, as to the best way to deal with the growing housing affordability crisis.

Australian Federal Opposition Leader Bill Shorten called for an end to the practice of negative gearing earlier in April, a scheme which allows investors to claim deductions against their losses on maintaining the property and the mortgage against their earnings.

"The government should stop re-announcing old news, and start dealing with the real issue in front of it, which is reforming negative gearing," Shorten said.

"We think first home buyers on a Saturday face unfair competition from investors purchasing their tenth house, and these investors are getting a taxpayer funded concession, when they bid against a family or a couple trying to get their first home."

However, not all experts agree, and the Property Council of Australia (PCA) said on Wednesday that negative gearing and the capital gains discount are "essential components" of the rental market, and tax policy, and according to Ken Morrison, chief executive of the PCA, poor planning and costly regulations are more to blame for the affordability crisis.

"Australia is benefiting from population growth, record low-interest rates and relative economic prosperity, but getting so many other policy settings wrong has made affordability worse," Morrison said.

The annual Australian Federal Budget, said to contain the government's plan to tackle the current housing affordability crisis in Australia's major centres, is set to be delivered on May 9, 2017. Endit