In a recent report, Australia has been found to be one of the least affordable countries for people to buy property across the globe. The Grattan Institute study also suggested that more homes be built to start to improve the affordability issues in Australia. It will come as little surprise to many that house prices across the country have doubled over the past 20 years, and in some cases much more, particularly with Sydney and Melbourne leading the way since 2012.
To start with the basics, let’s first explore exactly what housing affordability refers to. In simple terms, when analysts and journalists refer to ‘housing affordability’, they are simply comparing household incomes to housing expenditure, whether in the form of rent or mortgage repayments. As a general rule of thumb, many households will spend approximately one-third of their income on either rent or mortgage repayments, however in some states this has increased to approximately 40% and above in some cases.
House prices across the country have grown at a faster price than average earnings in Australia, as you’ll see from the chart below. This has led to many households spending far more than one-third of their household income on housing repayments.
This week we explore just how housing affordability compares across the various cities in Australia reflecting on both median house prices and average earnings. Not only can this be a helpful metric when assessing where you might want to repatriate to if you’re currently an Australian expat, but can also be quite useful when assessing where might be a suitable investment destination for property investors.
The cities below are ranked in order of the lowest median house price to the highest for properties within 20kms of the CBD. The Average Income Multiples included reflect the 20km radius median property price.
- Hobart, Tasmania
Median Price (<10kms from the CBD) – $289,384
Median Price (<20kms from the CBD) – $256,338
Average Income – $69,477
Average Income Multiple – 3.69
- Adelaide, South Australia
Median Price (<10kms from the CBD) – $395,201
Median Price (<20kms from the CBD) – $316,528
Average Income – $73,757
Average Income Multiple – 4.29
- Perth, Western Australia
Median Price (<10kms from the CBD) – $502,988
Median Price (<20kms from the CBD) – $383,727
Average Income – $88,327
Average Income Multiple – 4.34
- Melbourne, Victoria
Median Price (<10kms from the CBD) – $869,251
Median Price (<20kms from the CBD) – $421,530
Average Income – $75,634
Average Income Multiple – 5.57
- Brisbane, Queensland
Median Price (<10kms from the CBD) – $581,972
Median Price (<20kms from the CBD) – $421,739
Average Income – $75,936
Average Income Multiple – 5.55
- Canberra, Australian Capital Territory
Median Price (<10kms from the CBD) – $632,072
Median Price (<20kms from the CBD) – $514,235
Average Income – $89,846
Average Income Multiple – 5.72
- Darwin, North Territory
Median Price (<10kms from the CBD) – $547,143
Median Price (<20kms from the CBD) – $543,432
Average Income – $81,624
Average Income Multiple – 6.65
- Sydney, New South Wales
Median Price (<10kms from the CBD) – $1,339,251
Median Price (<20kms from the CBD) – $870,237
Average Income – $80,132
Average Income Multiple – 10.86
There are a number of important takeaway lessons from the above, particularly the fact that average incomes between some of the lowest median price cities are not that far from the most expensive cities. When comparing cities from an investor’s perspective, it’s also important to compare other key variables such as population growth, employment growth and infrastructure development in the city and the region.
As always, ensure that you seek appropriate advice and work with the right team to achieve your financial goals.
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