Getting better?

Apparently, property buyers can borrow 15% more than they could 12 months ago.

Well that’s the opinion of a mortgage broker I know.

Others are saying that this uplift, assuming it is true, will be taken up by home buyers and will translate into 15% house price growth.

Meanwhile, the ratio of mortgage debt to household income has jumped to a record high of more than 140% according to the Reserve Bank. The RBA also says that total household debt to household income is now over 210%.


Below is a housing affordability table that quite a few peeps have asked me to update.

Housing affordability – Australia capitals and Australia

Capitals House price Current ratio Affordable price Difference
Sydney $866,500 6.7 $702,750 $163,750 19%
Melbourne $709,000 6.0 $637,750 $71,250 10%
Brisbane $533,250 4.9 $584,250 -$51,000 -10%
Adelaide $465,250 6.7 $378,000 $87,250 19%
Perth $458,250 4.2 $592,500 -$134,250 -29%
Darwin $461,000 5.5 $453,250 $7,750 2%
Canberra $657,000 5.4 $654,250 $2,750 0%
Hobart $484,750 7.3 $358,500 $126,250 26%
Australia $530,500 5.2 $574,000 -$43,500 -8%
Matusik, CoreLogic + ABS.  Median detached house price as at Mid-September 2019.  Affordable price set at 5.5 times median household income.  Matusik estimates.

There is much more to housing affordability than the measures outlined in this table.

For example, such results on a decade based timeline would suggest that the average Australian with a 25 year standard variable P+I mortgage has been paying, during the 2010s, in real terms, around 35% of their household income in repayments.

For those interested in such stuff, the same scenario as above, saw the following levels of real mortgage payments per decade:

  • 1960s 7%
  • 1970s 8%
  • 1980s 19%
  • 1990s 21%
  • 2000s 19%
  • 2010s 35%

Yet there is little doubt that housing affordability has improved over the last 12 months.  Declining or stagnate prices and lower interest rates will do that.

I am not advocating the Perth or Brisbane are better places to buy nor am I saying that Hobart should be avoided.  Also, I am not saying that house prices across Australia will rise, whether it is by 8% (as some may think the table above suggests) or by 15% as mentioned in the introduction.

This is just information.  Some may use it to push their own barrows.  My role in their stories is zilch.  Big disclaimer et al.

Until next time,

Michael Matusik

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