Price-to-income ratios rising in housing

One measure of the affordability of housing shows a deterioration in this measure over 2009, though only a little greater than has applied since about 2002.

RP Data-Rismark, in their monthly review of property price trends, published an updated estimate of "price to income" ratios, drawn from their own analysis of property sales (said to cover 100 per cent of all property transactions in Australia) as well as Australian Bureau of Statistics data on household incomes.

Rismark estimated that average Australian home price across all metro and non-metro regions (and covering all property types) was 4.6 times average Australian disposable household incomes as of the December 2009 quarter. This is slightly higher than Australia's average home price-to-income ratio, since March 2003, of 4.4 times.

Rismark updated its methodology to include both an "average", or "mean" and a "median" price-to-income ratio for Australian homes across all regions and property types.

The ratio of median prices to average incomes is slightly lower at 4.3 times (and up from a ratio of 4.1 times in September).

In the December quarter, the average Australian home price was $428,000 using RP Data-Rismark data. The median home price was a little lower at $400,000.

Rismark estimates that at the height of the financial crisis in 2008 and 2009 the average home price-to-income ratio in Australia fell to a low of 3.9 as dwelling prices declined while household incomes remained generally stable.

Thus the 11 per cent growth in dwelling prices since the start of 2009 has seen the ratio of prices to incomes restored to around its recent average of 4.4 times.

The two firms make more effective attempts to control for variation in property types in working out measures of house prices on a local and national basis (compared with the ABS and with rival commercial firms).

One point that RPData-Rismark make in their monthly review is that home price growth in Australia has generally tracked disposable incomes.

One target of their analysis is the claim by Demographia (a publication of a US planning consultant, Wendell Cox) that the house price-to-income ratio in Australia is more than seven times.