Australia's housing affordability myth busted

Font size :

Despite rising interest rates and property prices, housing affordability in Australia is not as bad as widely believed, a recent report has showed.

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.

Christopher Joye, Managing Director of Rismark International, said the fact that there has been no discernible increase in Australian house prices relative to disposable incomes since the end of the last boom in 2003 is one important explanation for the exceptionally resilient performance of Australia's housing market during the GFC.

"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."

Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker

Mortgage News and Articles

How to tell when a housing market is cooling How to tell when a housing market is cooling

You need to check clearance rates, listings, and the price gap, among other factors Read more

Growing demand for green apartments in Sydney Growing demand for green apartments in Sydney Both owner-occupiers and investors favour eco-friendly buildings for their energy-saving features and reduced environmental footprint ... Read more

Are property investors as rich as they appear? Are property investors as rich as they appear? A multi-property portfolio doesn’t guarantee easy millions ... Read more

Be proactive about getting a better mortgage deal Be proactive about getting a better mortgage deal Apathy could be costing you a considerable amount of money over the lifespan of your loan ... Read more

More mortgage news and articles

Sponsored Links

Sunday, Sep 24, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords