The housing affordability charts below display the percentage of an individual’s average full-time income required to service a 90% mortgage on a median priced house in each city. We have adopted a similar methodology to the HIA/CBA Affordability Index, except we use median prices sourced from RP Data (Apr-14 onwards) and the ABS (Jun-02 to Mar-14). See below for more information on the methodology used.
Please note improving housing affordability does not necessarily indicate it is a good time to buy. The affordability improvement may be temporary – interests rates decline then increase – or indicate a broader issue, such as increased unemployment leading to a fall in house prices.
Update 23rd April 2017
Since interest rates have 'normalised', from 1999 onwards, Sydney house prices appear to moderate/fall when mortgage servicing costs on the median house price reach 60%+ of average full-time individual incomes. This occurred in 2004, 2008, 2011 and is near this level now.
Since interest rates have 'normalised', from 1999 onwards, Melbourne house prices appear to moderate/fall when mortgage servicing costs on the median house price reach 50-55%+ of average full-time individual incomes. This occurred in 2008, 2011 and is near this level now.
Brisbane's houses appear relatively affordable, with no significant price growth of late, while incomes have increased and interest rates have fallen. See our Brisbane infographic for a more detailed analysis of Brisbane's property fundamentals.
The HIA/CBA methodology we have broadly adopted can be found here.
Note, average income to median price affordability measures have limitations as they are very broad measures. That said, the World Bank, UN, OECD and the Harvard University Joint Center on Housing recommend them as a useful tool for evaluating urban markets. A major report on housing affordability in Australia was delivered to the senate in May 2015. It can be found here.
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