23/01/2008 - 22:00

Affordability battle over Mandurah

23/01/2008 - 22:00

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The author of an international housing survey has defended its findings, notably the surprise inclusion of Mandurah among the world’s least affordable cities in terms of housing prices when compared to income.

Affordability battle over Mandurah

The author of an international housing survey has defended its findings, notably the surprise inclusion of Mandurah among the world’s least affordable cities in terms of housing prices when compared to income.

Wendell Cox, principal of US-based public policy consulting firm Demographia and co-author of the Demographia International Housing Affordability Survey said no matter how you split the figures, Mandurah was way above the generally accepted measure of affordability.

Mr Cox’s study found not only that Mandurah was the sixth least affordable city in the world, but also that no Australian cities were affordable when compared with their peers in the US, UK and Canada.

Affordability has been one of the key political issues of the past year, notably in Perth, which has rocketed from being one of the cheapest to one of the most expensive cities in Australia in the past five years.

The Real Estate Institute of Western Australia questioned the methodology behind the survey, citing differences in the median house price and also highlighting the mix of Mandurah’s residences, which was skewed towards retirees and holiday homes.

REIWA said the median house price used by Demographia was $455,000, about $31,000 above its own number.

Mr Cox pointed to REIWA’s September figure of $449,000, but added that these numbers only made a marginal difference to the outcome. Mandurah still recorded a median multiple (the median house price divided by the median household income) above nine, around three times the generally accepted limit of affordability, a multiple of three, according to Mr Cox.

“Indeed, at either price, Mandurah is the least affordable market under 200,000 population in the entire survey. Mandurah would be unaffordable at half the price,” he told WA Business News.

In Mandurah’s case, the median house price is more than nine times median annual household income. In the case of Perth it was 7.6, or 21st in the world.

“Mandurah’s high median multiple does not mean it is unaffordable for people who bought their homes, say a decade ago, before the huge increase in housing prices occurred,” Mr Cox said.

“It does, however, indicate that those who bought then could probably not afford to do so today.”

Mr Cox toured Australia last year as a guest of the Australian Property Institute.

API WA councillor Ross Hughes said the institute believed affordability was a big issue.

“You can nit-pick the numbers all day long; I reckon it’s very well researched, he is on the money,” Mr Hughes said.

Mr Huges points to the sub-prime drama in the US, which is cascading across international markets.

He said high debt was the problem but affordability the culprit.

Property Council of Australia policy and communications manager, Lino Iacomella, said Mandurah’s affordability was consistent with the extraordinary rise in property prices driven by seachangers, proximity to the metropolitan Perth and, initially, affordability.

“It hit all the hot buttons,” Mr Iacomella said

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