Australian Property News
How do Australian house prices compare to incomes?
Posted on Wednesday, December 02 2009 at 5:30 PM
Australian house prices aren't as expensive compared to average incomes as many people believe, Rismark International managing director Christopher Joye says.
Numerous commentators have cited Australia's high house price to income ratio as unsustainable and even Reserve Bank of Australia (RBA) economists have said the ratio is "quite high" by international standards.
It's often said that house prices are six to eight times higher than average disposable household incomes. However, Joye says the truth is median house prices are only four times average incomes.
"According to our analysis of all home sales in Australia, which we have privately shared with the RBA, the median Australian home value is only four times average disposable household incomes," Joye says.
"This is inconsistent with claims that Australian dwelling prices are six to eight times household incomes."
Joye says the discrepancy arises because "people forget that 40 per cent of the housing stock is not located in the capital cities".
"This data implies that Australian housing is not expensive by overseas standards and also helps explain our internationally high rates of home ownership combined with very low mortgage default rates."
An examination of international price changes from 1997 to 2008 provides "no evidence of unusually high growth in housing costs" in Australia, Joye says.
Based on International Monetary Fund data, he says growth in Australia's house price to income ratio was lower than in the United Kingdom, France, Sweden, Spain, the Netherlands and Ireland.
On the other hand, it was higher than the United States, Canada, Italy, New Zealand and Norway.
In other words, "changes in Australian housing costs over time have been demonstrably 'middle-of-the-road'," he suggests.
Follow us on Twitter.
Was this article helpful? Place a link to it from your website, or share it using the button below.
Recent articles:
Retirement villages offer gains
Price growth predictions for spring
Queensland Government protects homeowners from dodgy building
Housing correction unlikely
Electric pumps instead of wood heaters could see rents rise by $20
Homeowners to suffer as reforms are ditched
