Residex's Dec report - median price for Melbourne & Brisbane to reach $500,000 in 08

[Kennethkohsg]

If we look at the twenty most expensive cities in the world (see link below), there is no Australian city in the top twenty. This means that people all around the world live in much more unaffordable cities than us.

http://money.cnn.com/2007/06/15/pf/most_expensive_cities/

Cheers,

Shadow.

****************************
Dear Shadow,

In its 3rd Annual International Housing Affordability Survey 2007, Demographia has actually listed Sydney (7th most un-affordable) and Perth
(as top 11th) most un-affordable cities in the world.

http://www.demographia.com/dhi-ix2005q3.pdf

Cheers,
Kenneth KOH

 

[BayView]

I'm a Generation-Y (just turned 28 a couple of months ago) and I think I bucked the trend of what all my friends were doing in Sydney, back in 2003.

I bought my own car first. Then I upgraded to a WRX. I pretty much lived from pay packet to pay packet until I was 23, when I went out of my way to just buy something. I didn't do much research, but did want to live in Brisbane, so I bought an apartment off the plan which settled 18 months later.

My wife and I moved out of our comfort zones (living with our parents) in Sydney, away from all of our families, friends and colleagues to Brisbane, where I knew a few people, but really we didn't know anyone.

Since then we've been here 3 years, and now own 3 properties in Brisbane.

Most of my friends in Sydney still rent. Oh, in a shared house situation, so they're *splitting* the rent.

-- MJ.

Excellent work MJ,

and I'll bet you look back now and think: "gee; that wasn't so hard!"

 

[Nth Brisbanite]

****************************
Dear Shadow,

In its 3rd Annual International Housing Affordability Survey 2007, Demographia has actually listed Sydney (7th most un-affordable) and Perth
(as top 11th) most un-affordable cities in the world.

http://www.demographia.com/dhi-ix2005q3.pdf

Cheers,
Kenneth KOH

Good point, Kenneth. If Residex's predictions are correct for 2008, then Sydney, Perth, Melbourne and Brisbane's unaffordability rankings are going to rank even higher in the future.

Cheers

 

[lizzie]

It's the median, not the mean. Exactly half the sales are below it and half above it, doesn't mean that the bulk is below it. Fully agree with the point that it's unrealistic for most young FHB to aim for a median home, or even above it if the characteristics (near the sea, near train, near city, large backyard, good school etc etc) that they often ask for is any indication.

you've got your "mean" and "medium" mixed up (according to collins dictionary).

mean: the mid-point between the highest and lowest number in a set.

medium: midway between two extremes averaged.

so therefore, a few very high priced sales can bump up the medium - being the prices of all properties sold averaged out and then the middle point taken of the averages.

i'd be more interested in the mean price - but don't know where i'd find it.

 

[Pete_d]

you've got your "mean" and "medium" mixed up (according to collins dictionary).

mean: the mid-point between the highest and lowest number in a set.

medium: midway between two extremes averaged.

Sorry Lizzie, but it's you who is a bit confused. Median does not take into account outliers (i.e $2M+ or <$100K properties).

Median - The mid point between an ordered set of data. i.e. Half of the values are larger than the median value, and half are smaller.

Mean - The average of a set of numbers. The sum of all data divided by the number of entries.

 

[s_t]

Your misinterpreting the definitions Lizzie. Take it from an engineer.... Those definitions are pathetic and ambigous too.

To calculate mean (average), you add all the numbers up, and then divide by the quantity of numbers you added up. eg. the mean of 3,4,5,3,12 is (3+4+5+3+12)/5 = 5.4

To calculate the median, you take the middle number. eg. 3,4,5,3,12, rearrange in order to find the middle one 3,3,4,5,12 - median = 4

As you can see in the above results, the average is easily skewed by a real high or real low number. The median is not affected like this and hence is why it is used in property figures.

 

[bailz66]

Also note that 50% of property is below or equal the median price

So that means that there should be plenty of stock below that figure for first home buyers. Our place was 100k below the median, 16k's from CBD and near schools, shopping center, and a train station. There is still plenty out there

 

[Shadow]

In its 3rd Annual International Housing Affordability Survey 2007, Demographia has actually listed Sydney (7th most un-affordable) and Perth
(as top 11th) most un-affordable cities in the world.
http://www.demographia.com/dhi-ix2005q3.pdf

Good point, Kenneth. If Residex's predictions are correct for 2008, then Sydney, Perth, Melbourne and Brisbane's unaffordability rankings are going to rank even higher in the future.

Sorry Kenneth & Nth Brisbanite, but this is simply wrong.

As I have pointed out before (in another thread) the Demographia survey does not rank Sydney the 7th most unaffordable city in the world.

It ranks Sydney 7th most unaffordable against the following countries: Canada, Ireland, NZ, UK, USA.

Now, if you compare only 6 countries in the world, and Sydney is only the 7th most unaffordable city in the 'world' out of those 6 countries surveyed, that's not really saying that Sydney is particularly unaffordable, is it?

I remember as soon as that Demographia survey came out, all the Australian media jumped on the bandwagon saying oh no Sydney is one of the most unaffordable cities in the world, it's a disaster, the sky is falling in etc. Well no, actually it's not. The survey didn't look at the whole world.

If we do look at the whole world, as per the Mercer survey, then we can see that Sydney has a long way to go before it becomes as unaffordable as...

1. Moscow
2. London
3. Seoul
4. Tokyo
5. Hong Kong
6. Copenhagen
7. Geneva
8. Osaka
9. Zurich
10. Oslo
11. Milan
12. St. Petersburg (Russia)
13. Paris
14. Singapore
15. New York City
16. Dublin
17. Tel Aviv
18. Rome
19. Vienna
20. Beijing

http://money.cnn.com/2007/06/15/pf/most_expensive_cities/

Funny how the Demographia survey ignored most of these countries.

Cheers,

Shadow.

 

[Nth Brisbanite]

Your misinterpreting the definitions Lizzie. Take it from an engineer.... That definition for average is pathetic and ambigous too.

To calculate average, you add all the numbers up, and then divide by the quantity of numbers you added up. eg. the average of 3,4,5,3,12 is (3+4+5+3+12)/5 = 5.4

To calculate the median, you take the middle number. eg. 3,4,5,3,12, rearrange in order to find the middle one 3,3,4,5,12 - median = 4

As you can see in the above results, the average is easily skewed by a real high or real low number. The median is not affected like this and hence is why it is used in property figures.

Lizzie, take it from an ex statistics teacher that the above information is dead right. Most property experts regard the median as the best statistical measure of the "typical" price that would be paid for property in a particular area. I know that it doesn't tell the whole story but when you are trying to summarise or give one-liners about a specific product, it's the best figure to use.

Amazing isn't it, we use terms every day but don't always understand what they mean.

 

[Nth Brisbanite]

Sorry Kenneth & Nth Brisbanite, but this is simply wrong.

As I have pointed out before (in another thread) the Demographia survey does not rank Sydney the 7th most unaffordable city in the world.

It ranks Sydney 7th most unaffordable against the following countries: Canada, Ireland, NZ, UK, USA.

Now, if you compare only 6 countries in the world, and Sydney is only the 7th most unaffordable city in the 'world' out of those 6 countries surveyed, that's not really saying that Sydney is particularly unaffordable, is it?

I remember as soon as that Demographia survey came out, all the Australian media jumped on the bandwagon saying oh no Sydney is one of the most unaffordable cities in the world, it's a disaster, the sky is falling in etc. Well no, actually it's not. The survey didn't look at the whole world.

If we do look at the whole world, as per the Mercer survey, then we can see that Sydney has a long way to go before it becomes as unaffordable as...

1. Moscow
2. London
3. Seoul
4. Tokyo
5. Hong Kong
6. Copenhagen
7. Geneva
8. Osaka
9. Zurich
10. Oslo
11. Milan
12. St. Petersburg (Russia)
13. Paris
14. Singapore
15. New York City
16. Dublin
17. Tel Aviv
18. Rome
19. Vienna
20. Beijing

http://money.cnn.com/2007/06/15/pf/most_expensive_cities/

Funny how the Demographia survey ignored most of these countries.

Cheers,

Shadow.

Thanks for enlightening me. Just shows you that if we don't understand statistics, that we can come to the wrong conclusions and even worse, end up making wrong decisions.

 

[Kennethkohsg]

Sorry Kenneth & Nth Brisbanite, but this is simply wrong.

As I have pointed out before (in another thread) the Demographia survey does not rank Sydney the 7th most unaffordable city in the world.

It ranks Sydney 7th most unaffordable against the following countries: Canada, Ireland, NZ, UK, USA.

Now, if you compare only 6 countries in the world, and Sydney is only the 7th most unaffordable city in the 'world' out of those 6 countries surveyed, that's not really saying that Sydney is particularly unaffordable, is it?

I remember as soon as that Demographia survey came out, all the Australian media jumped on the bandwagon saying oh no Sydney is one of the most unaffordable cities in the world, it's a disaster, the sky is falling in etc. Well no, actually it's not. The survey didn't look at the whole world.

If we do look at the whole world, as per the Mercer survey, then we can see that Sydney has a long way to go before it becomes as unaffordable as...

1. Moscow
2. London
3. Seoul
4. Tokyo
5. Hong Kong
6. Copenhagen
7. Geneva
8. Osaka
9. Zurich
10. Oslo
11. Milan
12. St. Petersburg (Russia)
13. Paris
14. Singapore
15. New York City
16. Dublin
17. Tel Aviv
18. Rome
19. Vienna
20. Beijing

http://money.cnn.com/2007/06/15/pf/most_expensive_cities/

Funny how the Demographia survey ignored most of these countries.

Cheers,

Shadow.

************************
Dear Shadow,

1. Your CNN article actually refer to the cost of living in a particular country ;- not the cost of purchasing a house/unit in that city or its housing affordability levels.

2. The Demographia Survey is self-explanatory.

3. They are actually referring 2 different things: cost of living vs housing costs/affordability;- even though the same term, "most expensive cities" are used in the reference materials.

4. It is not true that Demographia only compares Australian cities to other countries at the macro levels only. It does actually compare the Australian cities to other capital cities and urban areas in the 6 other Western-speaking countries with a local resident population of 1 million or more, if you have read the full Demographia Survey Report yourself.

5. The Demographia Survey provides its readers regarding its basic definitions of housing affordability, components of the housing costs used etc. This is much unlike the CNN article which fails to explain its costs of living index and measures used.

6. Short of another comphrensive report available in comparing the actual housing costs and its housing affrdability levels for the entire world, as a property investor in the Australian residential real estate, I will prefer to use the Demographia Survey as a guide for my investing in the various Australian Capital Cities regarding its present housing affrdability levels.

7. However, if I am planning to relocate to work overseas, then I will then consider using the Mercer Survey Cost of Living Index as my guide for my family relocation cost planning purposes.

8. Hopefully, this will clarify how the variious reports can be used and properly interpretated accordingly.

9. For your further comments/discussion where neccessary, please.

Cheers,
Kenneth KOH

 

[willfong]

Still, you can hardly call Sydney 7th most expensive city and Perth 11th most expensive city in the world for housing when the study does not include many other cities that might have ranked higher than them (eg. Tokyo, Hong Kong, Moscow, Singapore, etc etc).

 

[Kingbrown]

Hi Kenneth.

The demographia survey does not rank any other cities outside of the 6 countries its lists.

Therefore, it does NOT rank Perth or Sydney as the 11th or 7th most unaffordable housing cities in the WORLD, it ranks them only within the 6 countries listed.

 

[willfong]

The other thing to consider is are they comparing apple to apple? Sure they are comparing median houses in those cities against Australian cities. But the median houses there might be vastly different from here, for median house price here is most Australian capital cities you can still get decent land content in mid ring suburbs, whereas in some other big cities in other countries their median properties might be a tiny terrace or even a flat or apartment.

 

[alexlee]

I forgot whether it was the Demographia survey but I read that some surveys use, for example, a 2 bedroom, 80sqm unit, 45 minutes from the CBD or something like that as the base dwelling type. Now, depending on the city, this may or may not make sense. A 45 minute commute would be considered slightly long in Hong Kong. In London it would be considered short. In Tokyo, even a 'big' 2 bedroom unit would be much smaller than a 2 bed unit in Sydney.

In many cases you simply can't compare apples to apples because of different building types, city size, etc.
Alex

 

[Kennethkohsg]

The other thing to consider is are they comparing apple to apple? Sure they are comparing median houses in those cities against Australian cities. But the median houses there might be vastly different from here, for median house price here is most Australian capital cities you can still get decent land content in mid ring suburbs, whereas in some other big cities in other countries their median properties might be a tiny terrace or even a flat or apartment.

*******************************
Dear Willfong,

1. Alexlee has clairfied regarding the very limitations in doing a comparative housing cost studies in his a/m post.

2. I come from Singapore where land is truly scarce resource such that the majority of Singaporeans have to live in the "airspace" via high-rise density living built on 99-leasehold land owned by the Singapore Govt.

3. Likewise, in Thailand, foreigners are only allowed to own "the rights to build on the land" and not the actual land rights ownership. This is much unlike the present freehold land ownership in Australia.

4. Even across the different Australian cities like Cairns, I was told by some of the local residents in Cairns that unless one lives in the Cairns CBD area ( which is less than 5 KM in size) to be considered "near the city" , living 5-10 km outside Cairns CBD area is actually considered as "living far away from the city" as far as some of the local residents in Cairns are concerned.

5. So, how do we "objectively", go about doing this "apple-for-apple" comparison in such comparative housing studies?

Cheers,
Kenneth KOH

 

[Kennethkohsg]

Sorry Kenneth & Nth Brisbanite, but this is simply wrong.

As I have pointed out before (in another thread) the Demographia survey does not rank Sydney the 7th most unaffordable city in the world.

It ranks Sydney 7th most unaffordable against the following countries: Canada, Ireland, NZ, UK, USA.

Now, if you compare only 6 countries in the world, and Sydney is only the 7th most unaffordable city in the 'world' out of those 6 countries surveyed, that's not really saying that Sydney is particularly unaffordable, is it?

Shadow.

&&&&&&&&&&&&&&&&&&&&
Dear Shadow, Kingdown and Willfong

I fully agree with you.

I will need to remove the phrase, "in the world" from my earlier post, on the basis of the Demographia Survey studies.

Cheers,
Kenneth KOH

 

[willfong]

Kenneth, I see where you are coming at and it's impossible to compare apple with apple. By the same reason I find the study as flawed and it is absurd to use median house price relative to income here then look at the same thing in say London and then claim our housing is more unaffordable than them, as they are looking at different properties. Their median house is probably much smaller or further out than ours, if most of us are willing to downgrade our expectation to their median house rather than our median house.. I am sure our houses are much more affordable here than there. We do not have affordability problem in Australia, just aspiration problem. Alex has raised this point many times before and it's something I fully agree with.

 

[trendsta]

Why just 500,000?

I reckon the median in Bris and Melb should be a million at least.
No reason it shouldnt be...

Perth should move to 1.2 million within couple of years.
Syd really would look cheap then, maybe 1.5 million for syd in that case.

 

[lizzie]

Lizzie, take it from an ex statistics teacher that the above information is dead right.

i stand corrected - my collins dictionary must have very confusing meanings then ... doesn't alter that housing is affordable if fhb are prepared to make the sacrifices that their parents and grandparents had to make (and often lessor sacrifices).