The much needed recovery in housing affordability has fallen into a black hole.

The combination of a second interest rate rise in August and robust house prices has sent housing affordability back down to a three year low and not far from the bad old days of the late 1990s when mortgage interest rates reached 17 percent.

Figures released from the HIA/Commonwealth Bank Affordability Report show that affordability deteriorated for the third consecutive quarter in September, falling by 4 percent to be 4.6 percent lower than in the September quarter last year.

The HIA said the lack of action to address the obvious supply squeeze brought about by dwindling land stocks and an escalation in government charges on development, has now come home to roost.

HIA’s Executive Director of Housing and Economics, Mr Simon Tennent, said that the unstoppable force of housing demand has met the immovable object, namely an industry constrained from getting affordable housing, apartments or land onto the market. “The unacceptably low levels of housing affordability in Australia are restricting home ownership, constraining residential construction, and exacerbating already very tight rental markets,” Mr Tennent said.

“Since the national housing cycle hit its peak it has been readily apparent that the triple whammy of spiralling land costs, excessive fees and charges, and planning red tape was making a tangible recovery in housing affordability virtually impossible.”

“Moreover, a distinct lack of progress in addressing these three factors means that in the higher interest rate climate of 2006 we find ourselves back in the same affordability hole,” Mr Tennent added.

“First-home buyers entering the market would have to commit 29 per cent of their income towards mortgage payments, the highest ratio in nearly three years and a ratio knocking on the door of the ‘no-go zone.’

“Home ownership is becoming more of a dream and less of a reality for an increasing number of households in Australia. With or without higher rates, this quite simply should not be the case by now. The need for urgent action rather than re-announcements has never been more compelling,” Mr Tennent concluded