Stop complaining: houses are cheap

The commonly held view that it is now harder to buy a house than ever before is being challenged by research from RP Data and Rismark.

Last week Rismark released research showing that housing affordability has not declined since 2003 and is nowhere near the commonly quoted seven to eight times average annual earnings.

"There is an uninformed perception that houses are much more expensive now, compared to our household incomes, than they ever have been before," said Christopher Joye, the managing director of Rismark.

"But that is not correct, affordability in the housing market is not deteriorating rapidly, average house prices are not seven to eight times household incomes as is often quoted."

Affordability is a ratio of median property prices to average annual incomes.

"Rismark's National Dwelling Price-to-Income Index implies that the true ratio across all regions and all property types is around half this estimate."

Rismark's research shows that not only are average Australian house prices only about four times average Australian household income, but also that this ratio of prices to income has gone down since 2003.

"Affordability did deteriorate slightly in 2009, from its low of 3.7 times in December 2008 to 4.1 times as at the third quarter of 2009, but we are still broadly in line with our international peers," the firm argued in material publicised at the end of last week.

The Rismark research shows houses steadily got more unaffordable between 1993 and 2003, then they levelled off and things have improved slightly for first home buyers since then.

In 1993, the average first home cost between two and three times average household incomes. Ten years later in 2003, that ratio had increased to about four times, where it has roughly stayed for the last seven years.

There are plenty of people who maintain the rage about unaffordable housing. One of them is senior economist at the Housing Industry Association, Ben Phillips.

"House prices have about doubled in recent years and incomes simply have not kept up, especially for first home buyers," said Phillips.

"Broadly speaking, we don't dispute the Rismark figures," said Phillips.

"We might have a quibble about a couple of assumptions, but generally speaking they confirm what we have been saying - affordability is getting worse."

Housing Industry Association research shows that about two thirds of first home buyers are under 35, compared to more than three quarters back in 2001.

"First home buyers need a much higher deposit and they need to be able to afford much higher repayments than in the past," said Ben Phillips.