Although it’s easy to blame mortgage costs for the decline in housing affordability last years, the Housing Industry Association said that the main problem facing first-homebuyers is actually securing a loan.

The HIA Housing Affordability Index reported declines in Sydney (Melbourne), Hobart, Canberra, and Hobart during the first three months 2019. Despite the slight decline in affordability, HIA stated that the relationship between income and mortgage repayments has been positive over the past two decades.

According to Tim Reardon (chief economist at the HIA), this means that homeownership isn’t as restricted by servicing a mortgage.

“The sticking point facing the current generation of aspiring home buyers is obtaining a mortgage in the first place — this relates to the lengthening of the time it takes to save a deposit — and then meeting the increasingly stringent requirements of lenders,” he said.

The last ten years of tightening the regulatory environment have seem to have worked against first home buyers. It has also reduced flexibility in the mortgage market.

In addition, banks have been required to increase the assets they own when lending money to first-home buyers as part of reforms in financial services. Reardon said that it was becoming more difficult to lend to first home buyers because of this.

“Even if a first-home buyer has sufficient income to meet loan serviceability requirements, they typically borrow a high proportion of the property value — and borrow closer to their capacity — which means they are considered a higher risk,” Reardon said.

Due to stricter questions about household budgets and restrictions on interest-only loans first-home buyers will be required by the system for a deposit of more than 10%.

Industry data indicates that 20% of the new loans issued in 2009 went to first-homebuyers with less than 10% deposit. Reardon claimed that this ratio fell to 7% in 2009.

“Reducing the risk of lending to first home buyers comes with a price, and that cost is the decline in homeownership. “Homeownership must be a realistic goal for all Australian households,” said he.

CoreLogic’s September study found that Australians are already used to the constant affordability crisis.

According to the study, the recent property boom has led to higher affordability ratios. The current dwelling value-to household income ratio is 6.5 to 1, which means that an average Australian household would spend 6.5 times their annual gross income to purchase a median-priced home at $524,000.

It was 4.5 times less than 20 years ago. That is one privilege. A 20% deposit requires an average of 8.7 years. It’s a long time, and an eighth to a tenth lifetime,” CoreLogic International CEO Lisa Claes stated.

ME Bank recently conducted a survey that showed that Australians remain positive about their goal to own a home, despite rising house prices.

According to the ME Bank study, more than half of first home buyers plan to purchase property within the next 12 months. Andrew Bartolo (general manager at ME) said that this increase in homebuyer intent could be explained by the low interest rate environment and fear-of-missing out trend.

“Rising property prices have the potential to drive first-homebuyers out of the market. But, they also signal a stronger market that offers a worthwhile long term investment,” he stated.