2014 saw good returns for diversified investors as the global economy continued to grow and monetary conditions remained easy, but a combination of uneven global growth, worries about deflation, plunging commodity prices, soft growth in Australia and geopolitical concerns meant returns were uneven across asset classes.
The past year has seen the world oil price fall by more than 50%. Late last year as the fall accelerated this started to act as a drag on share markets and this has resumed at the start of this year as the oil price has continued to slide. But what’s driving the oil price plunge and isn’t a fall in oil prices meant to be good news?
2014 has had its share of worries with a range of geopolitical threats, uneven global growth, the end of quantitative easing in the US, plunging oil and iron ore prices and a debilitating debate about budget cuts in Australia. Yet again, events have conspired to indicate deflation as opposed to inflation is more of a risk.
The national study by the Real Estate Institute of Australia and Adelaide Bank found less income was needed to meet mortgage repayments during the September quarter.
First-home buyers are also flocking to the market to take advantage of lower interest rates. Adelaide Bank general manager Damian Percy says this was occurring in parts of Australia where it is cheaper to buy than rent.
“Around a fifth of all home buyers are first-home owners who have decided to come down on the buy side of the equation”, he said.
In the three months to September 30, the proportion of income required to meet home loan repayments fell by 0.1 percentage points to 31.8 per cent, marking the fifth consecutive quarter of affordability improvement. Homes are more affordable than the corresponding period in 2011, when it took 34.4 per cent of take-home pay to service a mortgage.
Better affordability has led to more first home buyers taking up a mortgage, with their ranks swelling to 19 per cent of the market in the September quarter, from 17.9 per cent during the previous quarter.
The ACT continues to be Australia’s most affordable housing market, with just 18.9 per cent of income needed to pay off a loan. In NSW, 36.5 per cent of pay was needed to meet mortgage repayments, and this state posted the biggest quarterly improvement in affordability.
Queensland and the Northern Territory also became more affordable during the September quarter. The national improvement in housing affordability occurred as average home loans grew by one per cent to $320,542, taking average monthly loan repayments to $2176 or $544 a week.
During the same period, the Reserve Bank of Australia (RBA) left interest rates on hold at 3.5 per cent.
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