As house prices continue to rise, the ability of Australians to afford a house has slid back by 5 per cent in the quarter to June 2009, according to a new Housing Industry Association affordability report.

Dramatic falls in interest rates have meant buyers are able to afford mortgage repayments more readily than they could this time a year ago, but rapidly rising house prices are starting to put a dent in affordability.

HIA chief economist Harley Dale says house price growth was very strong in the April, May and June this year thanks to low interest rates and attractive first home grants.

The HIA-Commonwealth Bank Housing Affordability Index for first home buyers fell by 5.3 per cent (8.5 points) over the June 2009 quarter as house prices rebounded.

The index remained at a level 41 per cent higher than in the June 2008 quarter to record the second highest reading in seven years.

Affordability declined in the June 2009 quarter in each city and regional area except for Melbourne. The largest falls were recorded in Hobart, South Australia, and Adelaide, three of the strongest housing markets in Australia in recent years.

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