littda01

This is correct - the CBA report that they were taking to overseas investors used two separate but different ratios between wage and property cost -

1) A UBS wage number that includes "imputed rent" (not 100% sure what that is, it doesn't seem to be a commonly-used measure).

2) A standard widely-used measure of income v property value.

They used 2) for the overseas markets (and they picked their comparisons fairly arbirtarily too) and 1) for Aus markets. This had the effect of narrowing the gap between Aus and overseas and making Aus look somewhat "normal", if expensive.

The media here reported this as "Aus bank shows johnny foreigner that he doesn't understand the Aus RE market, and all is well". But a lot of Australian and overseas economic bloggers picked up the blatant misinformation and showed it up for what it was.

http://www.unconventionaleconomist.c...g-housing.html

Steve2009

I still haven't managed to get a response from Leith Van Olsenen, but any money invested in housing in a year becomes part of GDP. So if Aussies spend AUD 250 Bn on property and GDP is AUD 1000 Bn then property represents 25% of GDP. Since these figures are about where we are right now I think it's ridiculous to compare house prices to GDP per capita since the component on the x axis makes up 25% of the component you are comparing to on the y axis.

BristolBeary

Not statistics as such but stories reported in WA news papers. And also sent to me in an email from a mortgage broker (Think he could be biased)!

Basically it looked to me like they we're taking the national average salary, which would be higher because it includes all capital cities. But then comparing it against mortgaged properties that were't from all capital cities - so therefore the salary V mortgage seems favourably.

When in reality the mortgage average should have been a lot higher because it didn't have all metro areas.

I was wondering if there was an official statistic for this thats all.

Steve2009

Post up his email if you feel comfortable. If it came from a mortgage broker then I would be confident it's a load of rubbish. It's probably the home price to GDP figure? You can get the statistics from the RBA yourself and pump them into a spreadsheet. It's all open to interpretation though there are medians and means, both have their flaws.

littda01

I personally cant remember seeing a house price : GDP or GDP/head ratio? I agree with you that would nonsense.

The CBA controversy was all about median wage : median house price.

What Bristol seems to be talking about is wages v price/mortgage, not wages v GDP? If so, I agree with what you're saying (Bristol) as it either needs to be wages v price for one area, or a general figure for the whole country, not a bit of both :-)

A better way to look at it anyways is % of take-home salary which goes to paying mortgage. A standard benchmark for that is no more than 35%, though obviously if you earn big money (say >250k) thats less valid.

BristolBeary

Email deleted already! I don't normally read these kind of emails because they serve some self interest. http://www.loanmarket.com.au/ was the source.

Yes this does sum up the point I raised. My Gramp's advice was never borrow more than 3.5 my salary and I've always stuck by this. % terms I'm at 32%. I just cant imagine how people manage with mortgage's 8-9 times they're income - thats crazy.

Steve2009

Your gramps was a wise man.
http://seekingalpha.com/article/2270...housing-bubble
Leith Van Onselen has one there, 5th chart. Not sure if he was responding to someone else who had used it previously.