The property affordability debate is back again

The property pessimists have a field day when the annual Demographia report reminds us how expensive our houses are and how we’re likely to have a property crash.

I understand why this worries some property investors, especially as the media carries this type of report as true and factual. On the other hand I would encourage them to read some of the more sensible commentary from those in the know and who have strong arguments to the contrary.

Now I’m not arguing that our housing is not expensive, but that doesn’t necessarily make it unaffordable.

Michael Matusik recently gave his thoughts on the affordability issue here and Terry Ryder gave his opinion in Property Observer here.

Yesterday Louise Christopher from SQM Research threw his hat into the ring with some well chose words:

Yes, I agree that Steve Keen has a rather solid point that we still have too much debt in the housing market. Mortgage debt has come down from 160% of GDP to 150% but it needs to come down further before it is in a relatively safe position.

And yes,  I agree there are affordability issues at the lower end of the market for those on lower than average income levels.

However, two wrongs don’t make a right. Flawed studies on affordability such as the annual Demographia survey  do not enlighten us. And just very quickly, the survey is flawed because:
–          The world is made up of more than just six countries
–          Income levels are not consistently compared across the survey cities
–          Relative size and quality of properties does matter

In this regard property writer Terry Ryder absolutely nailed this piece last week –

I don’t regularly agree with Terry on his opinions, but in this case, I couldn’t agree with him more.  Other than I believe there are some journalists who are clued up and do have the character to avoid this rubbish.  Just not as many as we would both like.

Sadly, it seems the flawed survey has fallen on deaf ears across the Tasman, where it appears the government of the day has jumped at the shadows

Affordability in Australia is naturally an emotional point and its difficult for a reasonable person to get down to some basic facts without all the emotion and disinformation attached. I would love to write out a detailed, factual case, but there is just not enough space in this newsletter to provide a proper argument either for or against.

And my focus is on providing credible market information.

But very quickly, on the data that we monitor – particularly our rental vacancy rates, there appears to be an issue at the lower end of the market.  When one is recording vacancy rates at just 2% and in many outer city regions regions vacancy rates at just 1%, that’s a problem.

For those who like to doubt our statistics, I can only point you to rental growth rates as measured by the Australian Bureau of Statistics via their CPI data which confirms rental growth in excess of inflation for the past five years now. And the rental series we are about to release backs this up.

So fundamentally there is a problem that needs to be addressed at the lower end of the market and it is best addressed by encouraging supply of residential real estate while keeping housing speculation somewhat in check. No doubt a challenging task!

That all said there is another twist to this argument and that is what was covered over the weekend by Fairfax media – the issue of affordability verses status.

Do we have an affordability crisis all because a certain percentage of the population cannot afford to buy where they want to live?

Do we have a right to complain and blame our leaders all because only a minority of us can afford to live and buy in the most desirable and sort after locations?

Do we have a right to scream about an affordability crisis when perfectly good suburbs are rejected based on status value alone?

In my opinion, no we don’t!

For those of us on above average incomes, I am sorry but where there are perfectly reasonable choices available for you to either rent or buy, and you choose not to because it doesn’t fit with your lifestyle, this is your problem and your problem only.

Even on above average incomes, lifestyle choices are still limited and unlimited wants can not be all satisfied!

For those of us on below average incomes, your concerns of finding a home are most certainly valid and quite clearly the solution here is a combination of assistance by addressing the supply side of real estate at the affordable end as well as doing all one can to get skilled up and getting yourself into a better financial position.



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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 one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit

'The property affordability debate is back again' have 1 comment


    January 31, 2013 Troy

    ” where there are perfectly reasonable choices available for you to either rent or buy, and you choose not to because it doesn’t fit with your lifestyle, this is your problem and your problem only.”

    As my wife and I welcome the birth of our second child on one income we anticipate buying our first home later this year. In many ways we become disappointed as research often reveals what we desire is not within a reasonable range for us.

    That said it is funny how you look at what is affordable and adequate and realise pretty quickly that it is just fine for our situation. Sure it’s never going to be everything we want but as we continually educate ourselves and remain financially disciplined it is only part of a long journey.

    There is great peace that comes from being content with what you have and doing the best you can with it.


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