Houses are still cheap

28/01/2010

Last week Rismark released research showing that housing affordability has not declined since 2003 and is nowhere near the commonly quoted seven to eight times average annual earnings.

“There is an uninformed perception that houses are much more expensive now, compared to our household incomes, than they ever have been before,” said Christopher Joye, the managing director of Rismark. “But that is not correct, affordability in the housing market is not deteriorating rapidly, average house prices are not seven to eight times household incomes as is often quoted.”

Affordability is a ratio of median property prices to average annual 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.”

Rismark’s research shows that not only are average Australian house prices only about four times average Australian household income, but also that this ratio of prices to income has gone down since 2003. In 1993, the average first home cost between two and three times average household incomes. Ten years later in 2003, that ratio had increased to about four times, where it has roughly stayed for the last seven years.

Banking Day