More debate over housing affordability

You’d have to be living under a rock not to know that our property markets have stalled and house prices have fallen a little in many suburbs.

However while would-be home owners are enjoying a slightly cheaper property market, some commentators suggest applying the word “affordable” to the local property sector is still a bit of a stretch. And it will be a long time before houses become “affordable.”

But is it really as bad as they would have us believe?

According to an AMP NATSEM Income and Wealth Report outlined in a Sydney Morning Herald report, home buyers on an average wage still continue to struggle to break into the local market.

This is in part because, despite slight falls in median prices, the Sydney and Melbourne housing markets have been relatively resilient.

The report suggests that affordability is still a bug bear for Melbourne home buyers, in spite of the overall drop in home prices of 2.1% since mid 2010. And…“It will take at least another 10 years of flat house prices coupled with income growth for houses to regain an affordable status,” the report said.

Now that’s a scary thought, but there are still affordable properties available in Melbourne – you just have to go further out.

You see… while inner city Melbourne boasts Australia’s least affordable real estate, with a median house price of $625,000 or 10.2 times the average income, Victoria’s Latrobe Valley in the regional area of Gippsland is home to Australia’s most affordable real estate with a median house price of $162,000 (4.3 times the average income).

Sure inner city properties have become unaffordable to many first home buyers, but it’s the same in most mature cities around the world.

The report reveals that national median house prices rose 147 per cent to $417,000 in the decade to 2011, compared to a rise in median after-tax incomes of only 50 per cent to $57,000 for the same period.

With house prices outpacing wages significantly over the past ten years, the data collated by AMP NATSEM shows that 18 per cent of Melbourne homeowners and 28 per cent of Sydney-siders are considered to be in a state of mortgage stress, which kicks in when a household pays more than 30 per cent of total income on housing expenses.

Lead author of the NATSEM report Ben Phillips, said 31 per cent of all people buying a home in Australia were currently experiencing mortgage stress.

“Nearly one in 10 buyer households spend at least half their after-tax income on housing, which pushes them into the severely housing stressed category,” said Phillips.

The report listed Sydney as the least affordable capital city, with median house prices 8.4 times the median income, however Melbourne was not too far behind with a ratio of 7.9 times the median income.

“Buying a home and paying off the mortgage is putting Australians under considerable stress,” said AMP Financial Services Managing Director Craig Meller.

“It can be a struggle to get into the market and when people do, many have little funds left over for essentials, let alone a family holiday.”

But is the issue really about affordability or a lack thereof?

Sure, the median prices look pretty scary for the average wage earner, but as I explained there is still affordable real estate to be found across Melbourne, and in other states. And you don’t have to go to the ends of the earth to find it.

I have seen many first home buyers make the leap onto the property ladder, simply by reducing their expectations and working hard to save a healthy deposit. Let’s face it, although housing affordability is certainly problematic in our major cities, if you ask your parents they would tell you the same story. Properties were expensive and seemed unaffordable when they bought their first home.

But who wouldn’t like to buy their parents home at the price they paid for it?


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit

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