Whatever the case, traditionally the Australian housing market has been seen as relatively unaffordable compared with other countries, and particularly for first home buyers.
It turns out, according to Rismark International, that in fact Australian housing is not as expensive as we think. It's the first time such a study has been done and it throws up some interesting new insights.
Their new housing affordability index compares Australian home prices with the Reserve Bank of Australia's definition of national “disposable household incomes” over time. It's called the Rismark National Dwelling Price-to-Income Index – which is a bit of a mouthful.
It reveals that Australian house prices have not risen relative to disposable household incomes since late 2003.
Rismark also claims that this is another reason why Australian housing values held up during the recent Global Financial Crisis. Because our housing market was relatively affordable, there were relatively few mortgage defaults and therefore the market did not collapse.
The Rismark Report says, “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. It also correlates with the Reserve Bank's analysis highlighting Australia's internationally low mortgage default and mortgage stress rates.
How do these findings measure up with home prices in your area?