Housing market definitely unaffordable, say experts

Australian real estate is both “inflated and unaffordable” for those trying to get into it, housing market experts say. 

Despite the peak-to-trough fall in housing prices over recent years, coupled with an easing of lending rates, Australian house prices remain out of reach for many would-be buyers, says market analyst Catherine Cashmore.

“Residential property prices in Australia still remain far too high for a large proportion of first-home buyers – the majority of whom don’t stand a chance unless they benefit from a deposit cash injection gifted by family or friends,” she writes in an opinion piece published by Property Observer.

And, she says, first-home buyers are not showing any great enthusiasm to buy into the Aussie dream, outside of the “carrot and stick” approach of grants and incentives.

“If you took a national survey the majority would tell you in no uncertain terms…Australian real estate is both inflated and unaffordable,” she said.

In support of this, the most recent Demographia International Housing Affordability Survey 2013 has once again highlighted what it claims is the “severely unaffordable” nature of our housing.

“All major markets in Australia continued to be severely unaffordable, reflecting vastly over-priced housing,” the report said.

Demographia measures affordability by dividing the median house price with the median household gross annual income before tax.

Yet, there has been some activity in the housing market of late. Australian Bureau of Statistics (ABS) data reveals that a total of 546,577 home loans were settled in the 12 months to January this year, 95,435 taken up by first home buyers.

APM senior economist Andrew Wilson has argued that because there are buyers “buying” property, housing can’t be all that unaffordable.

“We need to look very carefully at the concept of what is unaffordable,” he said. “Does unaffordable mean inability to buy, because in Sydney buyers are up and about?”

Yet for those who do take the step onto the property ladder, many are taking on high levels of debt to do so. Household debt to disposable income in Australia stands a little below 150 percent – high by historical standards and certainly not healthy, says Cashmore.

“We’ve borrowed more in order to pay more,” she said.

Research from RateCity suggests the average first home buyer home loan size almost doubled in the past 10 years, and first-time buyers are taking on almost three times more debt than they were 15 years ago.

It’s also taking longer to save for a down payment. RateCity estimates it takes an average single income wage earner on $70,000 per annum five years to save a deposit – and more than half of buyers in their 20s receive help from family and friends. Other analysis based on ABS borrowing figures places a single-income first-home buyer’s budget around the $300,000 mark.

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