- For the first time in a long time, housing affordability in Australia is starting to improve.
- However, housing is still highly unaffordable in many capital city markets.
- Many parts of Sydney and Melbourne have median home price to median household income ratios in excess of 9 times — and that’s based on gross income before tax.
While they may still sit at unaffordable levels for many families, especially in Sydney and Melbourne, housing affordability has improved in Australia in 2018.
Thanks to falling values in many markets, as well as a modest improvement in household income levels, affordability has improved on a variety of metrics, including the Australia’s median house price to household income ratio.
According to analysis from CoreLogic, the ratio fell to 6.81 in the June quarter, down from 6.84 in early 2018, the highest level on record.
That simply means it takes 6.81 times the median national gross household income to buy the median-valued Australian home at present.
However, as we all know, Australia is not simply one housing market, and household income levels across the country are not all the same, meaning the national affordability measure is not indicative of what many families see in their day to day lives.
This map from CoreLogic underlines that point.
It shows the ratio by SA2 region, using colour shading to reflect affordability across the nation based on this metric.
There’s 2,310 SA2 regions across Australia, with each generally having a population between 3,000 to 25,000, according to the ABS.
Clearly, it doesn’t take 6.81 times gross household income to buy the median-valued home in each of these regions. Outside of the big cities, the ratio is generally significantly lower, particularly in inland areas.
And within Australia’s capitals, similar trends are also apparent, as seen in the next chart below.
The deep red shading indicates the ratio is in excess of 9 times gross median household income — extremely unaffordable in other words.
Unsurprisingly, red dominates most Sydney and Melbourne regions, indicating that while home prices in these cities are high, household income levels are not, at least compared to those in the rest of the country.
There are also pockets of red located in the other capital cities, although not to the same level seen in Australia’s largest and most expensive cities.
Housing affordability may be improving but it’s still clearly unaffordable in many capital city markets, especially for those who have yet to enter the market at a time when lending restrictions are being tightened.
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