PROPERTY PRICES A POOR INDICATOR OF HOUSING AFFORDABILITY

Housing prices are on another tear, increasing in the vast majority of Australia’s markets. But does this mean property has become less affordable?

The reality is changes in housing prices can be a poor guide to how affordability has changed over time. Accounting for the increase in the prices of all goods, as well as reduced interest rates, shows real repayments have only increased by about 22% since 2003 despite housing prices more than doubling.

The analysis shows the level of housing repayment costs are actually at the same level as in 2007.

The fact that housing repayment costs are significantly below the levels of 2010 suggests the growth in housing prices is not yet at an end.

The selling prices of homes have more than doubled

Housing prices have increased dramatically across Australia over the past two decades.

Housing price indices produced by the Australian Bureau of Statistics, which track average price changes, show prices in each capital have more than doubled since September 2003. In aggregate, prices in the eight capital cities are up 116%.

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