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A Guide to Housing & Rental Affordability

2015-05-30_16-59-09Measure of Affordability – gross incomes versus house prices & weekly rents suggest that very few urban places across Australia remain affordable.

Some Observations

  • Table 1 shows that, on average, Australian house prices are 5.8 times the average family income. Housing is more expensive relative to income in Melbourne & Perth & is an amazing 11.3 times in Sydney.
  • Table 2 outlines the proportion of income needed to afford to rent a typical house in each capital. Sydney, again, is off the charts, with 44% of the average household income needed to pay the rent each week. The average across the country is 30%.

2015-05-22_10-14-032015-05-22_10-14-03_01

End Note

Typically, a housing market is affordable (in terms of buying) if the average house price to gross family income ratio is below 4. Between 4 & 6 represents a sustainable market; over 6 is unaffordable & over 8 is just plain bonkers.

When it comes to renting, rent to household income below 30% is affordable; between 30% & 40% is tight & over 40% is very unaffordable.

Low & falling interest rates, plus increasing borrowing, is keeping the housing market afloat. Less work & lower wage growth are potential circuit breakers. Sydney – what can one say? It’s seriously on oxygen. Let’s hope nothing sparks!

 

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