21/01/2008 - 13:16

REIWA questions Mandurah's latest "unaffordable" status

21/01/2008 - 13:16

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The Real Estate Institute of Western Australia has questioned the methodology behind an international survey which claims Mandurah is the most unaffordable city in Australia.

REIWA questions Mandurah's latest "unaffordable" status

The Real Estate Institute of Western Australia has questioned the methodology behind an international survey which claims Mandurah is the most unaffordable city in Australia.

The 4th Annual Demographia International Housing Affordability Survey released today, has Mandurah ranked 6th on the list of the world's 50 least affordable housing markets.

Mandurah's new status was derived using a 'median multiple' survey method, where affordability is measured by dividing the median price of homes in an area by the median income in that area.

Mandurah was found to have a median multiple of 9.5, slighty higher than Queensland's Sunshine Coast with 9.3 (ranked 7th), and the Gold Coast and Sydney with 8.6 (equally ranked 11th).

For the record, Los Angeles in California took the title of the least affordable housing market in the world, with a median multiple of 11.5.

REIWA President Rob Druitt said the methodology was highly likely to produce skewed and misleading results in an area where there was a high proportion of low and fixed income retirees and holiday homes.

"The reality is that most retirees own their home and live comfortably on a modest, mortgage-free income. It does not mean that Mandurah is unaffordable," Mr Druitt said.

Mr Druitt also said the median price for Mandurah used by the survey firm was wrong and did not match REIWA data.

"Despite the survey company saying it used REIWA data, they are wrong to say the median price in Mandurah is $455,000.

"In fact, REIWA data for the September quarter shows Mandurah's median to be $424,000. This is a disparity of more than $30,000 and raises further questions about the survey's accuracy," he said.

Mr Druitt said that while Mandurah prices had grown significantly over the last five years, prices declined for three quarters in a row last year as it underwent a local market correction.

"Mandurah slipped backwards quite a bit last year, however anecdotal evidence suggests that the opening of the new train line is causing the housing market in this regional city to pick up again," he said.

Mandurah mayor Paddi Creevey said the report had to be read carefully given Mandurah's median house price had been skewed somewhat in recent times by high individual sales of properties located on the canals, estuary and coastline.

Despite increasing affluence in Mandurah and its emergence as a 'fly-in, fly-out' hub, Ms Creevey said the city still had a high level of unemployment and the issue of housing affordability had been on council's radar for some time.

Ms Creevey said the state government's Housing Affordability Taskforce had met with the city to discuss the issue, and the resulting Peel Region affordability plan was with housing minister Michelle Roberts for consideration.

"We think there are a number of housing issues which need to be addressed in Mandurah and we've lobbied the state government hard to come up with a sustainable housing strategy," Ms Creevey said.

"Achieving a level of sustainability will require people to think differently and look at pockets of density with different types of housing options as well as mixed-use development."

According to REIWA data, Mandurah has averaged 24 per cent growth each year for the last five years, leading up to the September quarter 2007.

 

Below is a release from the Property Council of Australia:

Australian and New Zealand homes are the least affordable in the world, according to a survey of 227 cities published in the 2008 Demographia study of international housing affordability.
"The survey tells us there are plenty of affordable cities in the world, it's just that none of them are in Australia", said Peter Verwer, Chief Executive of the Property Council of Australia.
Demographia rates a city's housing market "affordable" when the cost of an average home is three (or less) times average household income - the typical multiple for the past few decades. A four year multiple is "seriously unaffordable" and a five year multiple "seriously unaffordable".
"Australia's dismal performance highlights the need to reverse the policies that created today's artificially inflated house prices", said Verwer.
"According to Demographia's survey, Australia scored 18 cities in the top 50 list of severely unaffordable markets."
"No Australian cities are included in the top 50 most affordable markets", Verwer said.
"On average, Australian families are forced to spend 6.1 times their entire household income to buy a typical home compared with 3.1 times in Canada and 3.6 times in the US, and that's before interest charges."
In Sydney the multiple is 8.6 and Melbourne 7.3.
"Some of Australia's fastest growing cities, such as Mandurah (9.5 multiple), Sunshine Coast (9.3) and the Gold Coast (8.6), are suffering an affordability crisis", Verwer said.
"The housing affordability squeeze is not just a big city issue, which is why we urgently need all governments to work together tackle the obvious causes of the problem", Verwer said.
"The survey backs the Property Councils view that the affordability crisis is caused by land rationing, excessive development charges and dysfunctional development assessment", Verwer said.
The Property Council acknowledges that several state governments have now committed to release more land, to cut back on developer taxes and reduce red tape.
"The response of some state governments shows the message is getting through, however the survey results show more urgent action is required."
"The new Rudd Government has demonstrated much needed leadership in committing to five major programs aimed at improving housing affordability."
"The latest Demographia survey results show there is no time for delay", Verwer said.

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