Aussie News -- Sydney for settling down?

Sydney the city of broken dreams as mortgage stress mounts

SYDNEY is still the toughest town in which to buy a house after a jump of more than 25 per cent in home loan repayments, the latest housing affordability survey found.

The pressure came from higher prices, a rise in interest rates and the winding down of the Government's first homebuyers' grants.

And it is unlikely to get easier as demand is tipped to overtake supply for the next four decades and interest rates rise over the rest of the year.

The Housing Industry Association calculated NSW would have to build more than 40,000 houses a year if the state's population was to reach its forecast population level of 10.5 million by 2050.

The HIA reported yesterday that mortgage repayments in Sydney rose by $627 in the three months of the December quarter. This related to the cost to average income earners of making a typical first home purchase.

It found that repayments went from $2413 a month in the September quarter to $3040 a month in the December quarter.

And Sydney was easily the lowest rating on the HIA's affordability index, falling from 127.4 points in September to 99 points in December. By comparison, Melbourne's affordability index was 115.6, Brisbane's 107.3, Perth 110.5, Adelaide 134.2 and Hobart 134.

Canberra had the closest affordability rating to Sydney's - 104.6 points - and an average repayment level of $2875 a month.

HIA's NSW executive director Graham Wolfe said slow construction, which was not keeping up with demand, meant "house prices and rents are expected to continue pushing upwards through 2010".

"Prior to the December quarter, first home buyers had a small window of favourable affordability conditions to enter the market," Mr Wolfe said.

"This window is now closing, with affordability retreating to early 2008 levels when interest rates were significantly higher."

Opposition parliamentary secretary for housing Gary Humphries said Prime Minister Kevin Rudd and his Government must explain why 2010 had become the year of housing unaffordability.

"When Kevin Rudd described the issue of housing affordability in 2007 as the 'ultimate barbecue stopper' Mr Rudd was clearly angling for political capital," he said. "When he got into Government, we have witnessed the number of homeless rise, private rental costs rise, interest rates go up and now housing affordability plummet."

Labor backbencher Kelvin Thomson said population growth was to blame for the spike in housing prices.

"Runaway population growth is damaging our young people's chances of buying a home," Mr Thomson said.

Critique: The raising demand for housing estates in Sydney but limited to scarce resources have lead to shortage and the rising price of houses. This problem has not only occurred in Sydney, but also in other cities like Hong Kong, Singapore, Japan and New York. The common characteristic of these cities is having a very concentrated population. Thus, what can be done to ease this situation? Government can provide subsidies for the housing estate agents to lower the price of houses. Besides, more jobs should be introduced to reduce the rate of unemployment and hence increase the people's affordability to buy a house.
p/s: Sorry that the critique might sound a bit ECON as there are full of economics terms and it's an business news too. However, i'll be glad if you can reply in a more econ way. =D