Australian house prices are surging on tight supply, a lack of construction, pent up demand and increased interest from self-managed super funds.
But amidst the discussion of a possible housing bubble and a lack of affordability, comes a series of charts from ANZ which provides some perspective on the debate.
- Australian house prices are not that elevated relative to borrowing capacity
- Australian house prices are not that expensive on an international comparison
- The house price to household income ratio is as low as it has been in a decade
- The population keeps growing but we aren’t building enough houses
It all adds up to a continued rise in house prices, and while fears of a bubble will persist, ANZ just doesn’t believe there is one.
Maybe Australian housing is moving to a permanently higher plateau – or is this Australia’s Irving Fisher moment for housing?
But it's far from the recent peaks in 2003 and 2010. The RBA won’t be concerned because income is still rising faster than prices.
In fact, if purchasing power is taken into account, there’s a 97% correlation!
This has created a supply and demand imbalance.
This is the result of the underinvestment in housing.
There's plenty of room for improvement - look at Singapore.
Making servicing mortgage costs as a percentage of income in Australia kind of expensive.