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Real Estate Still Unaffordable According To Ratings Agency

11 Jan 2013 4:33 PM -
Only a few weeks into the New Year and we’ve got our first report declaring Australian housing the least affordable in the world.
 
This time the source is credit ratings agency Fitch.
 
They’ve said housing affordability has improved in Australia (translation: prices have been falling), but our market still remains the least affordable in the world.
 
These reports will flow throughout the year from various companies and economic media sources.
 
Expect them to all be international because the Australian companies, groups and individuals who dominate our media with their predictions never acknowledged house prices could fall.
 
Often they had a real estate connection and were talking their own book – again, everyone needs unbiased advice.
 
Not only have housing prices fallen, they’ve fallen as interest rates have been lowered.
 
According to RP Data, Australian capital real estate prices peaked in October 2010 and have since fallen 5.7%.
 
Sydney has fared the best with a 3.2% fall dwelling values, while Hobart has lost a substantial 13.7%.
 
Pity the Tasmanian first home buyer from 2010/11 who may have little equity in left in their home.
 
In Brisbane values are off 11.2%, Melbourne is down 8.4% and Perth 5.8%.
 
Sales volumes across the country have also fallen; household finance is flat, while listings have consistently remained near levels of the GFC.
 
In some locations, notably Hobart, Canberra and Melbourne, listings have exceeded the levels of the GFC.   
 
Given the declines and continuing tough conditions for sellers, our housing market probably was (and still is) overvalued – it’s worth remembering our household debt to income ratio remains near 150%.
 
Finally, I’ll use the example of Tasmania in a crude measure of affordability.
 
According to the ABS, Tasmanian fulltime weekly income increased 55% between 2002 and 2012.
 
Across the same period, the average mortgage increased 165% for first home buyers and 141% for non-first home buyers.
 
With mortgage increases like that, in hindsight it’s not surprising to see Tasmanian real estate coming back to earth.

It’s never too early to invest in your future