The problem with these international property studies is that they never take into account the differences in size of properties. Melbourne's median price may be higher than London or New York's, but that is because most people in those cities are happy to live in studio apartments. It says almost zero about actual housing affordability.
Demographia 2011
- Thread starter Graemsay
- Start date
In real terms a $600k 200sqm 3 bedroom house might be cheaper per metre than a $600k 120sqm 3 bedroom apartment, but does that make it more affordable to the family that lives in it? Can you explain how that extra 80sqm makes the house more affordable?
Coz maybe you can get a 150sqm 3bed house for cheaper? Or find one with less land content? Or god forbid, buy a townhouse... *shudders*
Devo76, you'd have to be earning twice the median household income for the median house to start to look affordable. This is a chart showing income distribution in Australia.
Assuming Sydney household incomes follow a similar distribution, you'd need to be in the top 10% of earners to afford a pretty average place.
I agree about cycles, but don't think this is a great point to buy into the market.
Ruroshin, a quick Google suggests that the median mortgage in NSW is $309,200 (or $455,649 in the comments). Not sure if this is median or mean, and I'm guessing it would be higher in Sydney, but would suggest most people have $200K to $300K worth of equity in their property. That would be the deposit.
Mortgageman, new build Australian properties are something like three times the size of those in the UK. But I'd argue that building standards are higher in Britain (I'm not trying to start a flame war here), which would cost more.
It'd be interesting to compare land prices too. Historically a new build in the UK was roughly a third land, a third construction costs and a third profit for the builder, though more recently it's been 50% land, 25% construction costs, 25% profit.
I saw an Australian homes programme on TV here the other day, and an architect's house in a coastal suburb just outside Adelaide costs broke down as two thirds on construction, one third on land. (Being a self-build to live in there wasn't profit.) That would suggest that it costs more to put up a house, but less for the earth to put it on.
Assuming Sydney household incomes follow a similar distribution, you'd need to be in the top 10% of earners to afford a pretty average place.
I agree about cycles, but don't think this is a great point to buy into the market.
Ruroshin, a quick Google suggests that the median mortgage in NSW is $309,200 (or $455,649 in the comments). Not sure if this is median or mean, and I'm guessing it would be higher in Sydney, but would suggest most people have $200K to $300K worth of equity in their property. That would be the deposit.
Mortgageman, new build Australian properties are something like three times the size of those in the UK. But I'd argue that building standards are higher in Britain (I'm not trying to start a flame war here), which would cost more.
It'd be interesting to compare land prices too. Historically a new build in the UK was roughly a third land, a third construction costs and a third profit for the builder, though more recently it's been 50% land, 25% construction costs, 25% profit.
I saw an Australian homes programme on TV here the other day, and an architect's house in a coastal suburb just outside Adelaide costs broke down as two thirds on construction, one third on land. (Being a self-build to live in there wasn't profit.) That would suggest that it costs more to put up a house, but less for the earth to put it on.
Just thinking.
When the median household income is worked out. Does this include single income households. Because this would drag the median down a lot. And im sorry but single income households should not be factored into affordability when it comes to median city affordability.
If you want quality in the big smoke you need high wages. Thats a fact of where we are at the moment. This will change at some point.
As for buying now.
This depends on one thing only. Where will values be in the years to come. if values drop and you buy. Well done.
If they rise or even plateau. well you bet wrong and should have bought when it suited you or when you found the place you wanted.
When the median household income is worked out. Does this include single income households. Because this would drag the median down a lot. And im sorry but single income households should not be factored into affordability when it comes to median city affordability.
If you want quality in the big smoke you need high wages. Thats a fact of where we are at the moment. This will change at some point.
As for buying now.
This depends on one thing only. Where will values be in the years to come. if values drop and you buy. Well done.
If they rise or even plateau. well you bet wrong and should have bought when it suited you or when you found the place you wanted.
Fallacy. Large properties do not equal high prices. If they did, Texas would be more expensive than NYC. Properties in Dallas and Houston are as large as ours, yet they're two of the most affordable cities in the world (price to income ratio).
Hmmm people just need to take more responsibility. Median household income @ $80k gross, while average adult full time salary @ $66k gross.
Either way though, affordabiltiy is non-existent.
Either way though, affordabiltiy is non-existent.
It doesn't. It means that the family in the $600k 200sqm apartment could instead live in in a 120sqm 3 bedroom apartment and they would only have to pay $360k.
You're totally missing the point. I'm not saying large properties equal high prices, I'm saying comparing cities based on median price tells you absolutely nothing about actual housing values in those cities.
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have you worked in the US?
seen their wages?
their houses are probably the best price to income ratio for AUSTRALIANS - but certainly not for americans.
especially those that have been out of work for 12m or more and no longer make up official UE stats.
They could. They could also move to a $50k shack in the middle of nowhere, but this has no bearing on the affordability of the median income earners ability to buy a median priced property.
US were only 5 and 6x before crashing none the less and most of the others . That's still a hell of a lot prettier than our real story at more like 7-8-9x , it shows just how maxed we really are.
They try to blind us with fancy manipulations knowing they have to twist it , tangle it all up , make it virtually ineligibly and then we're confused enough into believing .
It's just a Telstra or so many other Australian companies , our banks, they must get the numbers looking better each yr.
That keeps sentiment, moral up , sentiment's everything but right now it's crucial. Don't forget even alone it sets off stock market crashes and that's what they're worried about .
They know damn well our prices are way, way too high and they're worried .It's been going on for 3 yrs now.
Notice too that our average wage since Costello mysteriously began including mum and dad , it use to be only one . That snuck in during the last 3 or 4 yrs of Howard so that by their end it was not only a necessity for both to be working but excepted as a must but it was only 12 -15yrs ago mums could easily stay at home.
But in reality all just an excuse because the country became so expensive over that decade that the only way a family could get along, into a house, cope with our living costs, survive became joint wages .
All just more Aussie snow jobs in other words . Just read Dennings or the like if you want the real numbers and in detail all the snow jobs.
Cheer
They try to blind us with fancy manipulations knowing they have to twist it , tangle it all up , make it virtually ineligibly and then we're confused enough into believing .
It's just a Telstra or so many other Australian companies , our banks, they must get the numbers looking better each yr.
That keeps sentiment, moral up , sentiment's everything but right now it's crucial. Don't forget even alone it sets off stock market crashes and that's what they're worried about .
They know damn well our prices are way, way too high and they're worried .It's been going on for 3 yrs now.
Notice too that our average wage since Costello mysteriously began including mum and dad , it use to be only one . That snuck in during the last 3 or 4 yrs of Howard so that by their end it was not only a necessity for both to be working but excepted as a must but it was only 12 -15yrs ago mums could easily stay at home.
But in reality all just an excuse because the country became so expensive over that decade that the only way a family could get along, into a house, cope with our living costs, survive became joint wages .
All just more Aussie snow jobs in other words . Just read Dennings or the like if you want the real numbers and in detail all the snow jobs.
Cheer
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Don't forget too that it was only 3 yrs ago that the real one person average Aussie wage was suppose to be only at 51k or there abouts depending on who was telling the story.
And where as houses had in reality risen 4 x , wages had hardly risen at all in the 10 yrs prior .
But now somehow during a world CFC , they've what - double according to some and in only 3 yrs , just more snow jobs.
And where as houses had in reality risen 4 x , wages had hardly risen at all in the 10 yrs prior .
But now somehow during a world CFC , they've what - double according to some and in only 3 yrs , just more snow jobs.
According to Demographia, Dallas-Fort Worth's price to income ratio is 2.7 and Houston's is 2.9. Both cities are consistently ranked affordable on price to income ratio surveys.
What does it matter? If a buyer has the capability of borrowing enough money to purchase a property and they can afford to maintain the repayments, then it is affordable for them.
If it was always that simple then there would be no need for banks to factor in a buffer when calculating serviceability.
If it was always that simple the government wouldn't need to resort to lining first home buyers pockets with cash incentives to buy.
If it was always that simple then there would be no need for LMI when borrowers went over an 80% LVR.
If it was always that simple we wouldn't be hearing about the increasing default and delinquency rates.
If housing was so affordable we wouldn't have seen inventories soar over the last half of 2010 as well as volumes crash.
If it is so affordable then why are prices dropping almost nation wide?
If it is so affordable then why are auction clearance rates through the floor?
If it is so affordable then why have land sales plummeted?
If only it was all that simple...
It's the technology/information age. There are more people today trying their hand at investment ie property and shares, or worse. They are doing it of their own backs with google as their ally. (no i am not that fat kid,, maybe)
With said knowledge in hand they see the value of money and see early freedom thus inspiring them to greater productivity. I think increase in double incomes resulted from this too, not just rise in living expenses. Hey hang on what came first...
Did govt and business, or should I say big business influence govt, knowing the technology age and its effects, raise expenses knowing that the general population was going to lift the bar on them and try and get ahead.
Maybe when the American system tried this they got the demographic motivation wrong and overcalled what an individual (family) is capable of in terms of making repayments. Especially if they wernt going to responsible for the debt anyway.
Conspiracy and philosophy more than finacial nouse, just putting it out there for discussion so try not to 'technically' destroy it because really no ones knows who/what is in control.
With said knowledge in hand they see the value of money and see early freedom thus inspiring them to greater productivity. I think increase in double incomes resulted from this too, not just rise in living expenses. Hey hang on what came first...
Did govt and business, or should I say big business influence govt, knowing the technology age and its effects, raise expenses knowing that the general population was going to lift the bar on them and try and get ahead.
Maybe when the American system tried this they got the demographic motivation wrong and overcalled what an individual (family) is capable of in terms of making repayments. Especially if they wernt going to responsible for the debt anyway.
Conspiracy and philosophy more than finacial nouse, just putting it out there for discussion so try not to 'technically' destroy it because really no ones knows who/what is in control.
The whole point of my post was that the median house price does not tell you anything about the actual housing value, so why would it matter if they can afford the median property or not? The median property in New York may be a studio apartment and the median property in Melbourne may be a 3 bedroom house, so how can you compare the two and actually say that it tells you anything about housing affordability between the two cities?
If the average household can't afford to buy (or struggles to afford) the average house it questions who is going to continue buying at these prices? What happens if we get to a dangerous edge in affordability and rates start rising? Perhaps we see a crash in sales volume... what happens then if inventories continue to rise?
Attachments
Except that interest rates and cost of living varies, and people have kids.
Except to win votes?
Except that some people can't manage money, and the bank wants to be able to recover it's losses should it happen that people don't make repayments. Also, people sometimes lose their jobs.
Except that default and delinquincy rates are lower now than in 2008/09
Except that we have this funny called the property cycle.
As above, the property cycle.
Again, the property cycle
Again, the property cycle
It's not that complicated
The numbers for the US are lowered by the fact that large swathes of the US did not experience a housing bubble - Texas (2nd largest state by population) and the mid-West (excluding where they build cars). This was one of the main reasons why the Fed at the time rejected the prospect of a national housing bubble, that there could be a nationally co-ordinated collapse or that this could have a serious effect on the national economy.
Bubble places in the US like Los Angeles were I think around multiples of 10 in 2007 (from Demographia too - so same methodology), which is closer to Sydney and Melbourne now. They are down to around 6 now, a large drop from their heights, but that doesn't mean they can't fall more given this is still severely unaffordable, the unemployment in California, the state fiscal situation and the strong opposition of the GOP led Congress to bailing out any of the states.
Actually looking at the 2007 Demographia now it looks like while LA was around a multiple of 11.5 back then, some of the other places which were notorious for collapsing did have much lower multiples so you are probably right on an individual market basis as well.
http://www.demographia.com/dhi2007.pdf
Miami was only 7.6
Las Vegas was only 6.5
The national average for America in the 2007 Demographia (for 3rd quarter 2006) was only 3.7. Reflecting the already high prices back then in Australia, Australia's average was 6.6. This was higher than the Irish and UK averages back in 2007 (well 3rd quarter 2006) as well.
I think one of the key differences between Australia and America is the fact that while a large portion of America did not live in areas affected by the housing bubble, most of the Australian population does. The latest demographia not only includes the capitals but also large regional centres and commuter areas (e.g. Mandurah) in the severely unaffordable areas. In fact some of the commuter areas are worse than their attached capital cities!
Pure speculation but I suspect this uniformity may be because Australia is very small population wise. The population of California alone is much larger than Australia. America's massive size may have provided a level of natural diversification in societal attitudes (e.g. attitudes to land releases, credit) which hindered the spread of the housing bubble into certain areas.
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