Oz Real Estate News

Housing Affordability. How Does Australia Rate?

noreply@blogger.com (Oz Real Estate News) — Tue, 26 Feb 2008 12:20:00 +0000

So just how does Australia rate in terms of housing affordability compared to the rest of the developed world? Well, according to the 4th Annual Demographia International Housing Affordability Survey 2008, not well at all.

Australia has a "Median Multiple" of 6.3, giving it a rating of Severely Unaffordable. Given that a rating of Severely Unaffordable is given to a city or country with a Median Multiple of 5.1 and over, Australia is well and truly Severely Unaffordable.

The Median Multiple is the median house price divided by median household income. This allows for a standardised comparison to be made of housing affordability between international housing markets, as it rates housing affordability in a locality according to the locality's median income. The Median Multiple ratings are as follows:

Severely Unaffordable - 5.1 & Over
Seriously Unaffordable - 4.1 to 5.0
Moderately Unaffordable - 3.1 to 4.0
Affordable - 3.0 or Less

Some notable results from the list of 50 Least Affordable Housing Markets:

Los Angelas, CA, US, tops the list with a Median Multiple of 11.5.
Mandurah, WA, Australia, is the highest non-US market on the list, sitting in sixth spot with a Median Multiple of 9.5.
Sunshine Coast, QLD, is the only other Australian market in the top 10, sitting equal seventh with a Median Multiple of 9.3 along with San Jose, CA, US.
Sydney, NSW, is the highest listed Australian capital city, sitting 11th with a Median Multiple of 8.6, followed by Perth, WA, 19th with 7.6, Melbourne, VIC, 22nd with 7.3, Adelaide, SA, 35th with 6.5, Brisbane, QLD, 36th with 6.4 and Hobart, TAS, 40th with 6.3.

Australia has no markets rated as Affordable. In fact, Australia also has no markets rated as Moderately Unaffordable. Only three markets in Australia are rated as Seriously Unaffordable, with the majority, 25, rated as Severely Unaffordable.

New Zealand is on par with Australia, with all seven of it's rated markets falling under the Severely Unaffordable umbrella. New Zealand's Median Multiple is 6.3, the same as Australia's. The most affordable country surveyed was Canada, with a Median Multiple of 3.1. The United States has a Median Multiple of 3.6.

Housing Affordability Trend: Australia
MARKETS: 1981-2007

The above graph demonstrates that housing affordability in Australia has drastically reduced over the past decade. As an example, in Perth, WA, 35 percent of the median household income was required to pay the median mortgage in 2000. In 2007, 70 percent was required.

The survey report stresses the importance of home ownership, stating:

Home ownership rates have risen strongly since World War II. This has been made possible by suburbanization, the development of housing on inexpensive urban fringe land. Suburbanization has been a principal driver in the democratization of prosperity that has lifted middle-class living standards to previously unimaginable heights. However, in recent years and in some markets, the historic house price to household income ratio that was so important to rising prosperity has been broken, as housing costs have inflated beyond precedent.

These higher costs have serious social implications. In the markets where extraordinary price inflation has occurred, living standards are not likely to be sustainable. Further, many ethnic minority households, with their generally lower incomes are likely to find the dream of home ownership put out of reach.

So why is housing affordability dramatically decreasing? The survey report strongly criticises government policy, stating:

There is a general consensus among economists that the principal cause of the housing affordability loss has been prescriptive planning, the strategies of “urban consolidation” or “smart growth” that ration land and impose excessive fees on development. This is denied by many in the urban planning community.

It goes on to say that high population growth and increased demand do not necessarily have to result in the loss of housing affordability. With the availability of inexpensive urban fringe land and without excessive government fees on development, housing in Australia does not need to be so Severely Unaffordable.

If you have an interest in this subject and some time to spare, I would recommend reading the survey. It can be found here: http://www.demographia.com/dhi.pdf

A Base in Australia?

noreply@blogger.com (Oz Real Estate News) — Tue, 19 Feb 2008 12:42:00 +0000

Heard of Google Base? If not, you might soon be.

Google Base is a type of online classifieds service from the good folk at Google. Its affect, which of course is probably still a while off, could potentially cause major shake-ups to how the online real estate sector functions in Australia.

"If you're a real estate professional, making your listings searchable on Google is simple and completely free. We don't charge for photos or offer "featured listings." We believe that buyers just want to see the home that fits them best and that providers shouldn't have to pay to show it to them. We don't sell houses, deal with agents' compensation, or charge for leads. Our business is helping people find the information they're looking for—when you have it, we send them directly to you."

- The Official Google Blog

Google Base is still in its BETA phase and even though, technically, it doesn't yet cater to Australia, real estate listings from Australia are already being added to Google Base by real estate agents, real estate listing providers (such as OzCastles, our partner site) and single users.

Currently, realestate.com.au (REA) is way ahead as the number one real estate website in Australia. In effect, it has a monopoly over online real estate listings in Australia and is where most users begin searching for properties. REA, of course, does not have all the properties available on sale in Australia. This is not only due to the fact that not all real estate agents in Australia pay to list there, but also due to the fact that many sellers choose to sell privately and REA does not accept listings from private sellers.

If Google Base does take off, what it could create is a central hub for searching online property listings. This is, essentially, what has been missing in Australia. Imagine simply going to Google, searching for "Perth real estate" and receiving property listings in Perth from multiple sites, including REA and Domain and the multitude of other, albeit smaller, real estate listing providers.

This would be one powerful and easy-to-use tool in the hands of all property buyers!

To see what property listings already exist on Google Base, search here.

Welcome to Oz Real Estate News

noreply@blogger.com (Oz Real Estate News) — Wed, 13 Feb 2008 16:11:00 +0000

Hello and welcome to Oz Real Estate News!

As this is our first post, we'll simply make it a brief introduction.

The intended purpose of Oz Real Estate News is to post and discuss the happenings of the Australian real estate market. Real estate is big business anywhere in the world and no doubt you'll find information from a multitude of places - online and offline. Here at Oz Real Estate News, however, we'll strive to be a bit different. We see ourselves as not trying to compete or replace your newspaper or magazine reading, but simply to add to it. To add a new dimension, from a unique angle, to your intake of real estate information.

So that's it from us in our first post. We look forward to providing you with insightful and interesting posts surrounding real estate in Australia. And, of course, we hope you continue to visit Oz Real Estate News and contribute with your comments and feedback.