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Australia's housing affordability myth busted ?

Australia's housing affordability myth busted ?

Old Jan 29th 2010, 6:44 am
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Default Australia's housing affordability myth busted ?

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http://www.yourmortgage.com.au/artic...0/default.aspx

"According to Rismark National Dwelling Price-to-Income Index, housing affordability has not deteriorated; in fact, it has improved slightly over the past six years.

Rismark found that over the past six years, home prices have held between 3.7 times disposable incomes and 4.3 times incomes over the past six years. Household disposable income rose 44% since the end of 2003 while the median home price has lifted 41%, from $270,000 to $380,000. This means in December 2003, Australian dwelling prices were 4.2x disposable incomes, which is effectively where they remain today according to Rismark."

"In contrast to claims that Australian house prices are 7-8x incomes, Rismark's National Dwelling Price-to-Income Index implies that the true ratio across all regions and all property types is around half this estimate. This suggests that Australian housing is not as expensive as is commonly believed," said Joye.

Craig James, chief economist with CommSec noted that over a much longer span of time, housing affordability has weakened. For example, from 1993 to 2001, housing affordability held between 2.5-3.1 times disposable incomes.

"Home prices accelerated between 2001-2003 while incomes didn't keep pace, but over the past six years, housing affordability has been little changed," he said.
"The result doesn't mean that housing affordability may not have weakened in some cities and for various occupation and demographic groups, but in a broad macro sense, it is clear that the myth that Australian home prices have become dramatically less affordable in recent years has been busted."
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Old Jan 29th 2010, 6:49 am
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Default Re: Australia's housing affordability myth busted ?

Originally Posted by DownUnderPaddy View Post
Comments, opinions ?
http://www.yourmortgage.com.au/artic...0/default.aspx

"According to Rismark National Dwelling Price-to-Income Index, housing affordability has not deteriorated; in fact, it has improved slightly over the past six years.

Rismark found that over the past six years, home prices have held between 3.7 times disposable incomes and 4.3 times incomes over the past six years. Household disposable income rose 44% since the end of 2003 while the median home price has lifted 41%, from $270,000 to $380,000. This means in December 2003, Australian dwelling prices were 4.2x disposable incomes, which is effectively where they remain today according to Rismark."

"In contrast to claims that Australian house prices are 7-8x incomes, Rismark's National Dwelling Price-to-Income Index implies that the true ratio across all regions and all property types is around half this estimate. This suggests that Australian housing is not as expensive as is commonly believed," said Joye.

Craig James, chief economist with CommSec noted that over a much longer span of time, housing affordability has weakened. For example, from 1993 to 2001, housing affordability held between 2.5-3.1 times disposable incomes.

"Home prices accelerated between 2001-2003 while incomes didn't keep pace, but over the past six years, housing affordability has been little changed," he said.
"The result doesn't mean that housing affordability may not have weakened in some cities and for various occupation and demographic groups, but in a broad macro sense, it is clear that the myth that Australian home prices have become dramatically less affordable in recent years has been busted."
All the property 'experts' will be along in a minute to get stuck in.
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Old Jan 29th 2010, 6:56 am
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Default Re: Australia's housing affordability myth busted ?

Problem is, the "Index" is a ratio of a median (house prices) to an average (household disposable income).

Not the soundest of methodologies...
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Old Jan 29th 2010, 8:25 am
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Default Re: Australia's housing affordability myth busted ?

It is flawed.

Simply because the people who earn the average or above income mostly work in the CBD region or closeby. If you want to earn $65,000 you pretty much are going to have to work for a big corporation or get a good Govt job.

If you want to commute within one hour of your place of work you will not find for the most part an average priced house. It will be a much higher cost base.

Sure if you earn $65,000 and live in Hobart you are doing very well. But, if you live in Sydney you are not doing quite as well.
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Old Jan 29th 2010, 9:33 am
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Default Re: Australia's housing affordability myth busted ?

Originally Posted by Mr Grumpy View Post
If you want to commute within one hour of your place of work you will not find for the most part an average priced house. It will be a much higher cost base.
Established house prices within 1 hour of Sydney CBD can be nearer $300-$350k for a 3 bed 1 bathroom house.

However, to confuse the price issue, see these values:

Sydney Median House Prices (quarterly)
Mar-05 $536,000
Mar-06 $516,000
Mar-07 n/a
Mar-08 $553,902
Mar-09 $527,677
Jun-09 $547,193
Sep-09 $569,061
Dec-09 $595,745

Sydney Median house Prices (annual)
2008 $457,800
2009 $510,000

Sydney Median Established House Prices
Mar-05 $486,000
Mar-06 $471,000
Mar-07 $482,000
Mar-08 $499,000
Mar-09 $447,000
 
Old Jan 29th 2010, 9:47 am
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Default Re: Australia's housing affordability myth busted ?

Originally Posted by ABCDiamond View Post
Established house prices within 1 hour of Sydney CBD can be nearer $300-$350k for a 3 bed 1 bathroom house.
Where? somewhere like Liverpool?
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Old Jan 29th 2010, 10:05 am
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Default Re: Australia's housing affordability myth busted ?

Originally Posted by viviennef View Post
Where? somewhere like Liverpool?
Median Price of Liverpool is $349,000 for detached houses and $250,000 for units and townhouses.
Distance: 40.1km Time: 36min (approx non peak)

Median means half of all sales are less than that, and half are more.

There are better areas, I was going to say Erskine Park as one;
Distance: 43.7km Time: 43min (approx non peak) (1 hr by train)
But the prices appear to have gone up 11% this year, and are now:
Median Price of Erskine Park is $381,000 for detached houses and $300,000 for units and townhouses.
 
Old Jan 30th 2010, 1:04 am
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Default Re: Australia's housing affordability myth busted ?

We're not considering buying for a while yet but I'd like to be able to keep an eye on the situation in the areas we're interested in. I'd like to investigate specific areas, rather than the general position for the country or for the state, as I know how much variation there is between rural, suburban and city properties.

I'd be interested to read more of these stats - can someone provide links?
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Old Jan 30th 2010, 1:36 am
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Default Re: Australia's housing affordability myth busted ?

A standard 3 bed house in my area, sold for $315,000 on 16th Dec 2009.

The median price in my area is $460,000 which gets you:

This 4 bed, 2 bath, with $40,000 change (ie: sold for $419k)



or this New House for $459,000

 

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