Thursday, December 11th, 2014 - Which Real Estate Agent

A recent analysis of housing affordability in Australia may shed some light on why the HIA/CBA Affordability Index hasn’t been updated since their March 2014 report, which reported affordability at the "most favourable level since the March 2002 quarter". 

Which Real Estate Agent recently updated the index to 30 November 2014, referring to the published HIA/CBA methodology and substituting internal CBA median price data for ABS and more recently RP Data median price data.

 The updated study shows:

  • Housing affordability in Sydney is the worst it has been since Aug 2008, when interest rates were 8.95%. 
  • Mortgage servicing costs on the median Sydney house price now represents 62.8% of an average full-time individual’s income. 
  • Sydney median house prices fell when servicing costs went past 60% of income in 2003, 2008, 2010 and there are early indicators that the Sydney market may already be slowing.
  • Sydney housing is as unaffordable as it was in Dec 2010 when servicing costs where 62.7% of income, after which the median price fell from $620,000 (Dec 2010) to $533,000 (Dec 2011).  This is at odds to the latest (Mar 2014) HIA/CBA Affordability Report, which said “Sydney, affordability has improved 31 per cent since late 2010”.
  • Since interest rates 'normalised', from 1999 onwards, Melbourne house prices have fallen when mortgage servicing costs reach 50-55%+ of income. This occurred in 2008, 2011 and appears to be already occurring, with Melbourne house prices falling over the last month and affordability improving slightly to 44.45% income, at 30 November 2014.
  • Brisbane's houses appear relatively affordable, with no significant price growth of late, while incomes have increased and interest rates have fallen.

Which Real Estate Agent’s Managing Director Thomas Roberts says “This study highlights the dangers of relying on publications from industry participants, with strong vested interests.

The amount of money at stake is staggering. Since the ‘best in a decade’ March 2014 affordability report from the CBA/HIA, the big four banks, according to APRA, have increased their residential property loan books to households by $42.8 billion and wrote 115,100 additional loans to September 2014. This is more than twice as many loans written between the 6 month period of Mar 2011 to Sep 2011 and more than $14 billion in additional loans, when price growth was more subdued.”

About Which Real Estate Agent

Which Real Estate Agent is an analytical firm that helps Australians make smart real estate decisions.  In 2014 the company assisted over 2,000 clients across Australia evaluate their local real estate agents.

Contact:  Thomas Roberts, 1300 66 555 7
Website: http://whichrealestateagent.com.au
Which Real Estate Agent Affordability Tracker - http://whichrealestateagent.com.au/australian-housing-affordability-live-tracker/

Sources
APRA Quarterly ADI Property Exposures - http://www.apra.gov.au/adi/Publications/Pages/Quarterly-ADI-Property-Exposures-statistics.aspx
HIA/CBA Affordability Report and Methodology - http://goo.gl/pFh5Ue & http://goo.gl/KBsX4F

Contact Profile

Which Real Estate Agent


Which Real Estate Agent is an analytical firm that helps Australians make smart real estate decisions.  In 2014 the company assisted over 2,000 clients across Australia evaluate their local real estate agents.

Visit http://whichrealestateagent.com.au to find out more.


Thomas Roberts
P: 1300665557
M: 0438483011
W: whichrealestateagent.com.au

Keywords

Australia Housing Affordability, Sydney Property Market Unaffordable, Which Real Estate Agent Affordability Study

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