First National Real Estate chief executive Ray Ellis says claims of a looming ‘housing market bloodbath’ in the Parliamentary submission of two economists are overly technical and fail to appreciate the realities of Australian Real Estate, where the bulk of our population wants to live in a fraction of available space, and where home ownership is deeply embedded in the national psyche.
‘The submission suggests that house prices must fall to once again reflect economic fundamentals. However, it depends entirely on what fundamentals you consider and with all the talk of affordability issues in the media, it’s easy for consumers to be blinded to the truths that underpin Australian real estate’ said Mr Ellis.
Economists generally measure affordability using a comparison of middle-market house prices against average incomes, as measured by the Australian Bureau of Statistics (ABS). Based on average household incomes of $75,000 to $85,000, that makes a house in Sydney about 9.7 times average income; a house in Melbourne about 7.3 times income, and a house in Brisbane about 6 times average income.
‘The problem with the ABS income figures is that they disguise the real picture. They include a range of people not actually in the housing market and research from Barclays argues average household incomes are actually significantly higher in Australia – in the region of $122,000’ said Mr Ellis.
‘This explains why many Australians can afford homes in the region of $650,000 to $800,000 on loan to value ratios of 70 per cent. Also, 10 to 15 years ago, ABS statistics indicated only 250,000 households earned over $156,000 per annum. That figure has now increased to more than a million Australian households and the number of households earning in excess of $260,000 has tripled.’
By contrast, housing stocks in fashionable capital city areas have not increased by anywhere near that magnitude and, when people don’t want to consider suburbs where homes are cheaper, the impression is created that housing is unaffordable. Yet, throughout Australia’s suburbs and regions there are many affordable alternatives available.
‘Our local and Federal Governments need to maintain focus on much needed public transport infrastructure that facilitates easy access to employment centres, release more land for , and consider incentives that help people relocate to regional centres where businesses are struggling to find talented employees’ said Mr Ellis.