In the long running obession that Australians have for the property market, we have sourced the latest affordability charts that outline housing affordability in Australia (a key measure of price), relative to other countries property markets. The key measure used is the price of property relative to income. The higher the multiple of income, the higher the price.
The first chart shows that Australia's property market is far more attractive than Hong Kong and even New Zealand. Measured against Canada, a country that has many similarities to Australia, our market looks stretched.
To put this chart though into more perspective, let's consider what sort of levels are considered unaffordable. Here is a table showing broadly accepted definitions.
Finally the table below shows the numbers on a "State by State" basis.
"Hong Kong's Median Multiple of 17.0 was the highest recorded (least affordable) in the 11 years of the Demographia International Housing Affordability Survey. Again, Vancouver was second only to Hong Kong, with a Median Multiple of 10.6. Housing affordability in Sydney deteriorated to a Median Multiple of 9.8, which was followed by San Francisco and San Jose (each 9.2). Melbourne had a Median Multiple of 8.7 and London (Greater London Authority) 8.5. Three other markets had Median Multiples of 8.0 or above, including San Diego (8.3), Auckland (8.2) and Los Angeles (8.0)."
Jeremy Grantham, a world recognised investor with GMO remains concerned at the levels of the Australian property market and we would encourgage investors to exercise caution in assuming the run up in property prices will be a permanent feature of the Australian economy.
Note: Charts sourced from Mike Shedlock "Mish's Financial Trend Analysis"
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. We strongly suggest that no person should act specifically on the basis of the information contained herein, but should obtain appropriate professional advice based upon their own personal circumstances including personal financial advice from a licensed financial adviser and legal advice. Fortnum Private Wealth Pty Ltd ABN 54 139 889 535 AFSL 357306