The latest Bluestone Home Loans Home Loan Affordability Index confirmed that 2021 was the worst year on record for home loan affordability, with an annual decline of 14.5%.
The index, which measures the proportion of average income needed to make an average home loan repayment, fell from a reading of 82 in December 2020 to 92.6 in December 2021 against the long-term average of 87, higher scores indicating lower accessibility.
“Strong growth in house prices in 2021 has prompted buyers to borrow more to keep pace with markets and, with moderate income growth and fixed interest rates, this has resulted in a higher proportion of buyers’ income needed to repay the loans,” said consultant economist Dr Andrew Wilson. for Bluestone home loans.
The index registered a quarterly increase of 1.4% in December and has remained above the long-term average for seven consecutive quarters.
“Although mortgage lending activity rose sharply again in December after peaking in November, the end-of-year rally reflects a catch-up from the restrictive impact on housing markets of severe lockdowns. coronavirus outbreaks – particularly in Sydney, Melbourne and Canberra,” he said.
Australians spent $688.7 billion buying more than 834,000 properties in 2021, according to PEXA Insights, which also found the number of home loans taken out during the year soared 32.5% to 617,338.
“Lending activity to homeowners and first-time homebuyers is likely to be lower in 2022 than the record levels seen in 2021, but we expect investor activity – which remains below average – on its part total long-term residential loan market – continues to grow,” said Dr. Wilson.
House prices across Australia rose 22.1% in 2021, according to CoreLogic, and growth also continued in the first month of this year with a modest increase of 1.1%.
However, ANZ, Westpac and NAB have all recently revised their forecasts for the property market, with price increases expected to be as little as 2% in store for this year.
“Last year’s meteoric rise in prices is already easing as tighter lending conditions from financial institutions cap borrowing capacity. This has the effect of pushing buyers away, leading to lower demand and lower price growth over the coming year,” Dr. Wilson said.
“But although the housing lending boom has come to an end, we believe the outlook for housing markets in 2022 remains generally positive, supported by the recovery of local economies, the continued easing of COVID constraints and concerns, the resumption of high levels of migration, an underlying housing shortage and still low interest rates.