Housing affordability measures improved in the June quarter, as capital city house prices fell, but rising mortgage costs and rents offset the gains.

According to ANZ and CoreLogic’s September quarter Housing Affordability Report, the 2 per cent fall in the CoreLogic home value index since the peak in April is equivalent to a A$15,000 fall in the median dwelling value.

This has led to some improvement in affordability metrics. The time needed to save a 20 per cent deposit in capital city markets fell in the June quarter – down from 11.14 years in March to 11.11 years in June.

The ratio of dwelling value to average income also fell in capital city markets, falling from 8.4 times in March to 8.3 times in June.

The report points out that these changes are occurring at a time when income levels are starting to rise, which should lead to further improvements in affordability metrics.

However, the changes have been most notable in Sydney and Melbourne. Affordability measures in some cities and regional areas have not improved, although home value declines are expected to become larger and more widespread.

The gains in the big cities are being offset by rising mortgage costs and higher rents. CoreLogic estimates that the proportion of median gross annual household income required to service a new mortgage rose from 40.4 per cent in March to 44 per cent in June.

The serviceability measure has increased from 33.1 per cent in September 2020.

New rental payments represent 30.9 per cent of median household income – up from 30.3 per cent in March. This change has been driven by a shortage of available rentals, which is due to a combination of higher demand and a slowdown in rental supply.