Tax cuts and pay rises make homes more affordable in Oct
3:00PM Friday Nov 21, 2008

Tax cuts, strong wage growth and lower interest rates have combined to improve housing affordability to its best level since May 2006, says new research.

The Wizard Home Loans Affordability report for October has been affected by the national median after tax income rising almost $20 a week in October, thanks to tax cuts and higher wages, while a significant drop in interest rates cut the expected mortgage payment by almost $10 a week.

These combined to reduce the proportion of an after tax media income needed to service the mortgage on a median priced home to 68.2 per cent in October from 71.2 per cent in September.

This was the second biggest monthly improvement on record in the Wizard Home Loans Affordability report and takes this measure to its best level since May 2006. The biggest improvement on record was in August this year when this ratio improved by 3.2 per cent.

Housing affordability has improved from its record worst level of 83.2 per cent in November last year when house prices hit their peak. However, affordability remains considerably worse than the 45 per cent seen in 2003 before the housing boom.