The September 2010 quarter housing affordability in Sydney was 20.8 per cent lower than a year earlier, while regional NSW affordability was down by 18.7 per cent, according to the HIA-Commonwealth Bank Affordability Report released today.

Although a slight improvement in the quarterly figure, HIA NSW executive director David Bare said, "regional NSW recorded the lowest housing affordability in the entire country for the fourth quarter in a row.

Sydney is now the second least affordable capital city in Australia (after Melbourne) but this is a reflection of deteriorating affordability in Melbourne rather than any improvement having been made in Sydney."

"The low affordability levels in Sydney and regional NSW are the result of home prices increasing faster than incomes. The level of income required to service mortgage repayments on a median priced first home is now almost twice the average wage," Mr Bare said.

"The three interest rate rises in the first half of 2010 have really hit home and the rate rises we saw in November will ensure housing affordability resumes a clear downward trajectory in the December quarter."

Nationally, housing affordability improved 3.6 per cent in the September 2010 quarter due to a decline in the median dwelling price. However, housing affordability across the nation remained 18.3 per cent lower than a year ago.

"Action is required at all levels of Government to generate an adequate and consistent supply of affordable new housing, particularly for those trying to enter the market for the first time," added Mr Bare.

HIA is the leading industry association in the Australian residential building sector, supporting the businesses and interests of builders, contractors, manufacturers, suppliers, building professionals and business partners.