Mortgage repayments for a typical first-time home buyer in Australia breached $2000 a month for the first time in the June quarter, as an index of housing affordability worsened by the largest amount in three years. It now takes 27.9 per cent of gross household income for a first-time buyer to repay a typical mortgage, just shy of the 29.2 per cent level reached at the peak of the property boom in December 2003, a HIA-Commonwealth Bank report shows. Housing affordability — which in the June quarter was affected by a rate rise and higher house prices — is now slightly worse than when interest rates were near 17 per cent in the late 1980s. HIA executive director of housing and economics Simon Tennent said the cycle was unique as rising interest rates were failing to lift affordability by reducing house prices. He said this was due to supply issues, with the level of new home building not meeting demand. "We have ended up with a housing shortage," Mr Tennent said. "It is very unusual to see in capital cities vacancy rates of less than 3 per cent." In Melbourne, vacancy rates are at an eight-year low of 1.7 per cent. In Sydney, they are at 2 per cent. Federal and state politicians weighed in, blaming each other for the affordability crisis. Treasurer Peter Costello used the launch of a book on the issue by Alan Moran from the Institute of Public Affairs to blame state and local governments for the fall in affordability, citing land supply constraints and planning delays. "Property taxes are now taking an extraordinarily high part of the price of a new home," Mr Costello said. The Bracks Government countered, saying Mr Costello was trying to take the spotlight off petrol prices. Federal shadow housing minister Kim Carr said the Howard Government had ignored the issue. "Because the Commonwealth has no urban development policies, no minister for housing, they have no contribution to make on affordability," Mr Carr said. He said it was not only first-home buyers who were affected, with renters facing rising housing costs as the lack of supply caused vacancy rates to fall sharply and rents increase. Mr Carr wants to use federal property, such as defence stock, to increase land supply as well as having the Federal Government provide basic infrastructure to lower housing costs. "There is no question this is only going to get worse," he said. According to the HIA-Commonwealth Bank index, affordability declined by 5.3 per cent across Australia in the June quarter. The situation in Melbourne was slightly better than for Australia as a whole, with affordability dropping 3.4 per cent for the quarter. It now takes the first-time buyer 28.4 per cent of gross household income to service a typical mortgage in Melbourne. But affordability in Melbourne is better than the cyclical peak in December 2003 of 32.6 per cent, or in the late 1980s when mortgage repayments soaked up 34.4 per cent of gross household income. Property groups said the decline in affordability was due to artificial constraints on the release of land and government taxes. The IPA book said rising land costs resulted from excessive planning regulations and restrictions on land releases — state and local government responsibilities. But a report released earlier this year by the Residential Development Council found that by far the biggest share of government taxes and charges on a typical new house and land package in Melbourne was through the Federal Government's GST. In his speech, Mr Costello said the GST went to the states. Source: The Age