COMMON perceptions of the housing market have been challenged by a new report that says Australian houses are not overly expensive, with the median price at $371,000.
The report, co-authored by RP Data and Rismark International, contends that Australia’s dwelling price-to-income ratio, a standard measure used to compare the cost of housing, is currently 4.1, a significantly smaller figure than ratios of seven to eight which are frequently reported.
It also argues that the imminent review of the tax system by Treasury boss Ken Henry should address state-based supply-side taxes as a means to reducing rigidity in the market, rather than the oft-advocated revisions to capital gains tax.
The report’s authors account for features of the Australian housing market not typically considered by other commentators: that one in four homes are not free-standing houses but generally cheaper apartments and terraces; and that 40 per cent of Australia’s total housing stock is not located in more expensive regions of capital cities, but in outer-metro and regional areas.
The inclusion of these characteristics leads RP Data-Rismark to conclude that a suitable median figure for Australian house prices is $371,000, far less than the $500,000-plus figures often reported.
The report also maintains that implicit in Australia’s internationally high rates of home ownership, its low mortgage default rates and the fact that house prices are continuing to rise, is that housing affordability cannot be as bad as is commonly reported.
In fact, based on the RBA’s preferred measure, affordability is no worse than it has been during the past 28 years, and that even at the peak of prices in the early to mid 2000s, affordability was better than it was in the bear years of the late 1980s and early 1990s.
