Housing affordability has further deteriorated in Australia, with a recent report from Australian Property Monitors (APM) highlighting the rising rental costs throughout the country. Sydney has been worst hit, with median house rents rising 14% in the city over the year, reaching an all-time high of A$400. Other key cities also saw a sharp rise in rents; Perth saw a 23% rise in median house rents over the year to September 2007, while rents in Canberra increased by 12%.
The situation is equally bleak for buyers. The global credit crunch has hurt mortgage lenders, in particular non-bank lenders, which have more exposure to short-term debt. As a result, several non-bank lenders have announced mortgage rate rises. RAMS and Bluestone were among the first to increase the rates on a number of products. More recently, additional non-bank lenders have been forced to increase their rates. RESI Mortgage Corp increased the rate of its non-conforming loans by as much as 0.52%, while Collins Home Loans and AMO Group increased the rate on low-documentation products.
The current housing affordability crisis is due to an unfortunate combination of factors. High property prices combined with a tight global credit market, and exacerbated by recent interest rate rises, have led to record high levels of housing stress. House price growth has largely been driven by insufficient supply.
One part of the problem is unavoidable, in that popular areas such as Sydney's inner city will continue to attract high property prices. Another, more serious, part of the problem is that not enough new houses are being constructed. This is likely to continue to be an important political issue and an area of contention, and the housing affordability crisis may continue to make conditions difficult for both buyers and renters for some time.