The 5th annual Demographia Housing Affordability Survey ranks Sunshine Coast in Australian the most unaffordable place to live in the world. Australia has 13 of the most unaffordable cities in the top 30! Most commentators are roasting governments across Australia at state and local levels for holding onto land (to keep land prices – taxes high) and not releasing enough. Only the Victorian government is given some praise for releasing 250,000 lots in the past year.
You can download the full report here.(pdf) You can also view their website by clicking here.
Updated: I have also added a report from Macquarie University Released a few years ago. You can download this here, it tracks Australian House Prices from 1970 – 2003.
19 Comments
Robert Simeon
The classic international example of what can happen to a country when you let the lunatic’s run the governmental asylum’s.
Karl Mikkelsen
This report however only has a limited number of countires in its sample list. (Australia
Michael McNamara
Guys, guys, guys…..
Demographia come out with this stuff every year.
Each year as predictable as the last.
With heavy developer connections the conclusion is alway Australia has the most unaffordable land in the world… so lets release more land and give developers a tax break…..
Gee…. these guys wouldn’t have a barrow to push would they? – not that they are the first or the last!
Anyway… some international study!
It does not take into account many of the worlds truly unaffordable cities.
None of the asian giants… No Hong Kong, No Tokyo, No KL, No Singapore.
None of mainland europe… No Paris, no Frankfurt, no Rome, no Zurich or Stockholm, no Barcelona.
They continually compare cities like Sydney to moribund, nowhere, rust belt USA.
In the study they don’t adjust for composition or density (we have bigger lot sizes for instance)
Maybe the conclusion is right … about affordability…. but remember that a place like Sydney is more affordable than it has been for well over 5 years.
If, like Robert Shiller, you adjust for inflation and you also take into account very low interest rates around the corner and gross rental yields…. your real estate dollar takes you along way in our biggest and arguably most unaffordable capital – Sydney.
Now that I have got that off my chest I feel a whole lot better.
Cheers for now
Disclaimer: Michael works for RP Data
PaulD
I’ve been watching the Demographia survey for a couple of years now, and it seems to me ( as it did two years ago) that either the median family income has to double – or property prices have to come back. Now, it should not be too hard to decide which of those two scenarios is more likely to happen. The other thing about the survey, is that it only measures areas of population of 50,000 people and above. This leaves out quite a few seaside areas where the population of the town doesn’t get to 50,000. A classic in this regard is Byron Bay and towns similar along the east coast. They are about 11 times median family income. So there are plenty of other places in Aus that rate in the severly unaffordable category other than those that are mentioned. Notice there are none in the affordable category in Australia, well there probably are in towns such a Wheelabarraback and Argadargada and places like that with populations less than 50,000. You know, popular places that have a pub and a post office and maybe even bitumen for 100m through the town.
Peter Ricci
Possibly the point is lost – we cannot sit and hide and pretend all is rosy, just about every commentator tells us we need to release more land.
If we are ranking above New York and London, we are in trouble – don’t you think?
PaulD
Sorry about the jocularity Peter, yes, we are in trouble. The cost of construction of a house is not the issue in this case – it is the cost of the land. I heard that the S94 and S64 costs of production of land ( they are the Council costs for provision of footpaths, landscaping of streets, bus stops and anything else the Local Council thinks they can get away with) in Western Sydney are something like $150,000 per block. So the developer has to buy the land, put in the services, pay the council the fees, pay the holding costs, and legal fees, and selling costs, and make a profit. I don’t know how much land sells for in that area, but you can bet it is very expensive, and by the time a house gets built on it – housing affordability is a dream.
PaulD
According to Demographia, house prices in Tokyo have been dropping ( in real terms) for 20 years, so yes that’s probably not a good comparison. In Tokyo, the average price of detached houses was JPY35 million (US$396,000) in Q3 2008, down 4% from a year earlier, according to Real Estate Investor Network. Have a look at http://www.globalpropertyguide.com/Asia/Japan/Price-History
House prices have dropped by 31% in the last 10 years in Japan, so why are you using those statistics to bolster your argument that Demographia doesn’t include some of the world’s truly unaffordable cities. All that does is confirm what may happen here. Maybe it doesn’t appear in the study – but that doesn’t change the facts.
There is also an article in that publication about a “Looming housing slump in China”
I just want someone to give me one good reason, not some speculation, that there won’t be a housing slump here, like there is in the rest of the world.
Peter Ricci
Updated: I have also added a report from Macquarie University Released a few years ago. You can download this in article above, it tracks Australian House Prices from 1970 – 2003.
Peter Ricci
I think housing prices will be dictated by job losses. We will see an end to the reduction in housing prices when companies start hiring again. This looks like it is going to be a long process as companies will continue to shed jobs well into 2009 and perhaps 2010.
The more jobless, the more homes come onto the market, the more homes, the lower the price.
I know this sounds a little harsh, but I think it is what the whole industry needs.
Tim
Peter,
That website scares me!
Tim.
Sal Espro
And the obvious effect on agencies and agents is ?
Robert Simeon
This all depends on the unemployment barometer – the more it increases the reverse effect this has on property prices. If it hits 8 per cent it will get very ugly where some areas would see greater than 50 per cent declines in values based on 2008 median prices.
Sal Espro
Meaning the unmentionable, Robert. Something we are all loathe to speak…. The agency and agent numbers will be decimated due to lack of sales and on average, those lower sales volumes will provide less revenue per sale.
Robert Simeon
Sal, exactly where in Mosman last year it (so far) recorded 219 house sales in 2008 where in 2007 it recorded 384. So these patterns are already emerging across the country.
PaulD
Robert, 8% unemployment means that 92% of the workforce are working. I think it would need to get much worse than 8% for a price drop of that magnitude. It reached nearly 11% in 1993, and sure, there was a bit of wailing and nashing of teeth, but prices didn’t drop too much – just flattened for a couple of years. This time however there are other forces at work, and maybe we will see a bit more of a negative result.
Peter Ricci
More houses on the market, lower prices, this also means houses become a little more affordable to a few more people.
Glenn Batten
Sal,
I think the decimation of agent and agency numbers has been under way for quite awhile now. I think at the end of this “little” shakeup there is going to far fewer players than what there is now. It always happens during the tough times, but since this one might be a little tougher than most the results will probably be a lot greater.
Last time I crunched numbers in our area well over 60% of the salespeople from 12 months before had left the local market, most having left the industry. Their places were for the most part filled with non performing new people to the industry. Quite a few agents in our area have invested in new blood that is struggling to produce and is the reason why the two market share leaders have even further increased their market share leaving even less of the pie to be shared amongst the rest. When the pie itself is getting smaller, and their share of the pie is getting smaller there can be only a few outcomes.
Robert Simeon
Paul,
Interesting thoughts. When one looks at the price drops in our area based on a 4.5 per cent unemployment rate we are currently around 20 per cent down. Given that our population has increased significantly since 1993 one could assume that 11 per cent then is the equivalent of 8 per cent today. Also, of that percentage 2 -3 per cent don’t want to work anyway.
Interesting thoughts with interesting times 🙂
SSSR
Glenn,
A very interesting insight to what is happening to the agent market.
I was in the USA for Xmas with family, and over the period I met up with a family friend, who is a Denver based realtor. He indicated that 10% of the realtors in Denver do up to 90% of the business, for very similar reasons you point out.
One beneift of an economic correction is the inevitable cleanout of both companies and people that underperform leaving the strongest standing.
From my perspective, Agencies are wise to embrace the web to attain a competitive edge.