Yawning divide between the facts on housing affordability: Terry Ryder

Yawning divide between the facts on housing affordability: Terry Ryder
Yawning divide between the facts on housing affordability: Terry Ryder

There continues to be a yawning divide between the facts on housing affordability and media coverage claiming a crisis.

Yawning is an appropriate word, because journalistic insistence on declaring the Great Australian Dream dead in the face of all the evidence has become boring.

According the latest research on the subject, property in Australia is more affordable than it was 12 months ago – with the exception of one state (no prizes for guessing which one) .

Across Australia, affordability improved in the June Quarter from 30.9% of household income devoted to mortgage payment to 30.3%, according to a new report from the Real Estate Institute of Australia and Adelaide Bank.

The exception to a general picture of improving affordability was New South Wales, where households used 35.6% of their income to meet their mortgage repayments in the June 2015 quarter, compared to 35.3% in the June 2014 quarter.

Last month, the other major research into housing affordability – the Housing Affordability Index from the HIA – also found that affordability has been improving around Australia, with Sydney as the obvious exception.

Media generally manages to ignore that reality and run headlines like “Are foreign investors destroying the first home buyer market?” and articles like a recent one published recently by the Herald Sun which is a serious candidate for our annual Worst Article of the Year award. 

A “journalist” declared in the Herald Sun that “the Great Australian Dream of a house in the suburbs has become an unaffordable nightmare” and justified this by quoting the price of the most expensive houses in a range of suburbs – not the median price, but the dearest. 

The writer noted there was a house for sale in Doncaster asking $3.5 million and used that to support this declaration: “What hope will our kids have?” The article went downhill from there. 

That’s the reality of mainstream media in modern Australia. There are favoured story lines and publications will pursue them with little regard for the facts.

Back in the real world, the new research on affordability shows that the Northern Territory experienced the biggest gain in affordability, with the share of income needed to meet mortgage repayments falling 2.8 percentage points, from 26.6% to 24.9%. 

Western Australia improved from 26.6% to 24.4% and Tasmania from 25% to 22.9%. South Australian mortgagees had a saving of 1.6 points, from 27.1% to 25.5%, while Queensland improved from 28.1% to 27.3%, the ACT from 19.8% to 19.5% and Victoria from 32.2% to 32.1%.

Those hard statistics add to the growing pile of evidence that concerns about price booms, bubbles and out-of-control markets are overblown and wide of the mark.

It has promoted Domain Group senior economist Dr Andrew Wilson – one of the few economists in the land who has a grasp on property issues – to call on Australia’s prudential banking regulator to prove that the country's housing market really does need fixing

Wilson questioned the basis for restrictions to investor lending, saying that APRA had not provided detailed modeling to show why it believed the investor market was overheated.

“Where's the heat? I don't understand where the heat is,” he said. “We have the lowest level of mortgage defaults we've seen. Affordability is still below average levels.”

Wilson said Australian markets have a historical reputation for “orderly growth and correction phases”. He who noted that the one heated market, Sydney, was starting to cool as part of that natural process.

“This is the nature of our housing markets and we're very fortunate that we have those in-built stabilisers in our housing market. I think once we see policymakers interfere in that process, the downstream consequences are really problematic."

Terry Ryder is the founder of hotspotting.com.au. You can email him or follow him on Twitter.

Terry Ryder

Terry Ryder

Terry Ryder is the founder of hotspotting.com.au.

Housing Affordability Housing Income

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