Sorry, average HOUSEHOLD income is $80k (two incomes). Average full time wage is $45k. House Price/Income ratio is actually closer to 11, but is usually reported as household income (6.25), not individual income.
Please don't repeat lies told in the media. And please don't insult the nearly 1 million people in this city who are working full time and making nowhere near 70k, because you risk coming off as a complete twat, and I haven't formed that opinion of you at this juncture.
Wrong. Same for Themoops, whose article citing average wages is dated frigging November 15, 2007!!! And whose house price figure is detached houses only. You are some researcher moops aren't you!.
So No lies from me - I am just stating the actual, up to date, correct, verifiable facts:
LATEST ABS wage data: Average Australia full time wage; $69k ($1 330.20 / week - not even including bonuses and overtime) ( (http://www.abs.gov.au/ausstats/abs@.nsf/mf/6302.0). In fact if you look at the state data NSW is slightly higher than that again. I am sure Sydney is a bit higher that NSW average even as well.
There are 2M plus people working in Sydney, so if the average full time wage is $70k , then sure 1M might earn less than that - but another million earn more, many significantly more. That's why it's called an AVERAGE figure. Form any opinion of me you like, but understand that I am well informed in these topics and work unemotionally on the facts and data.
There are 2M plus people working in Sydney, so if the average full time wage is $70k , then sure 1M might earn less than that - but another million earn more, many significantly more. That's why it's called an AVERAGE figure. Form any opinion of me you like, but understand that I am well informed in these topics and work unemotionally on the facts and data.
Isn't that called a MEDIAN figure? Far different than AVERAGE as that can be skewed by people are very large salaries at the top end.
Interesting that you use an article from 2007 to give us todays average income. I knew the Australian was prescient, but...
To judge affordability, you need to take into account (a) interest rates because interest is the major component of mortgage repayments in the early part of the loan when people are most stressed, and (b) the increase in household income vs. average income due to the rising participation rate. Back in the 1960s, households had approximately one income on average. These days it is more like 1.5.
Interestingly, since 1986 at least, the rise in housing prices can be explained amost entirely by the rise in household disposable income and the decline in interest rates. I guess I should not find that too surprising since the ratio of home ownership has been relatively constant which would say people probably value the utility of owning their own home about as much as they did in 1984 and hence are going to endure about the same amount of pain.
As it works out, affordability (as defined by percentage of household disposable income devoted to housing) oscillates around its long-term mean. Sometimes for a while it gets cheap and sometimes for a while it gets expensive, but there is no long-term trend.
Note that the forecast is for affordability to better than the long-term average in 2012. The forecast is based on an expectatiuon of lower prices in 2012, but if interest rates fall by the 75 bp people seem to be predicting by Melbourne Cup day, the improvement in affordability could be quicker, deeper and shorter-lived than you might expect. (Since lowering interest rates will give a boost to affordability that will soon get taken away by rising housing prices and then be given a double whammy by interest rate rises, as we experienced in 2008.
Interesting that the graph shows housing was relatively affordable in 1986. It certainly didn' *seem* affordable to me at the time. Possibly because I was a fresh newgrad with an attitude at the time. Also I suspect if you go back a few years to the beginning of the 80s it will be worse because of the rampant inflation f the 1970s and astronomical interest rates of the late 70s/early 80s which did drop for a few years at the beginning of Hawke/Keating.
PS. Another thing you can infer from these graphs is that, barring a massive drop in average household disposable income, a crash in property prices is pretty unlikely from here.
So No lies from me - I am just stating the actual, up to date, correct, verifiable facts:
No. You're counting units in there as well, the median house price is about $600k in Sydney, so that's about 8.57 times the average wage.
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
You're using extremely biased data from propertyobserver.com, it has no credibility.
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
No. You're counting units in there as well, the median house price is about $600k in Sydney, so that's about 8.57 times the average wage.
About one third of the Sydney housing stock are units, townhouses, semi's etc, so excluding them is silly IMO, but even if you do, the ratio you have NOW come up with is far less than what you originally claimed. You also claimed that this ratio "used to be" 3-5 times, as if this was "the norm" in the past, which is simply not true. Sydney has not had a price/wage ratio of less than 4.5 in 50 years as far as I can see, and has only managed to get it just below 5 on a number of very discrete occasions when we have been in full blown recession etc. Most of the time it has been 5-7 times, all when credit was far tighter than today and when interest rates were far higher. I'll prove it:
Here is some ABS wage data from 1991: http://www.ausstats.abs.gov.au/ausstats/free.nsf/0/AA260570027FB88ACA2574FA00185E83/$File/63020_MAY1991.pdf. As you can see average full time wage then was $591.70/week = $30.7k pa (so correcting my original $25k assertion here when working just from memory). I also have in front of me a scanned copy of a 90s newspaper article stating the Sydney median house (detached) price as $185k in 1991. That gives a ratio of 6, and this was at a time when the country was in deep recession, and mortgage rates were 12-13% still, and credit was very tight and rationed. In 1983 the same article places the Sydney median house price at $83.5k. ABS gives average wage for that year as $336/week = $17.5k. That's a price/income ratio for Sydney of 4.8. So I've picked two periods there where Australia was recovering from deep recession and interest rates were sky high, and it only just dips down below 5
My parents bought land and built a house in Sydney in the mid 60s in an area that today has house prices around the median, but back then as the area was new and undeveloped, it was probably below average in price. The house and land cost $13.5k. The oldest wage data I can find is for 1965 from ABS here: http://www.ausstats.abs.gov.au/ausstats/free.nsf/0/C6775153C9AB20E8CA2575160011B5AA/$File/63020_JUN1967.pdf, which gives average full-time earnings INCLUDING overtime etc (which is usually about 5% higher than the OTE figure that we normally use) as $57/week = just under $3k. Drop that by 5% to get an OTE figure and we have $2.8k. So that give a price/income ratio of 4.8. This was 50 years ago! And for a modest 11sq brick veneer new build in an undeveloped area 25kms from the CBD. And we won't even go into the different economic environment then and how hard it was to borrow money from banks etc if you were an ordinary person.
Sydney has ALWAYS had very expensive property relative to wages and the rest of Australia, and IMO it always will. A change in the price/income ratio from 6 to 7.5 or 8.5 since 1991 is hardly an indication of any great bubble, especially given that over this 20 year period average interest rates have halved, the economy emerged from a long recession and has boomed essentially since, wages + household incomes have grown in real terms by a significant amount, and average wealth has also grown dramatically. As always of course you can do your own research.
About one third of the Sydney housing stock are units, townhouses, semi's etc, so excluding them is silly IMO, but even if you do, the ratio you have NOW come up with is far less than what you originally claimed. You also claimed that this ratio "used to be" 3-5 times, as if this was "the norm" in the past, which is simply not true. Sydney has not had a price/wage ratio of less than 4.5 in 50 years as far as I can see, and has only managed to get it just below 5 on a number of very discrete occasions when we have been in full blown recession etc. Most of the time it has been 5-7 times, all when credit was far tighter than today and when interest rates were far higher. I'll prove it:
Here is some ABS wage data from 1991: http://www.ausstats.abs.gov.au/ausstats/free.nsf/0/AA260570027FB88ACA2574FA00185E83/$File/63020_MAY1991.pdf. As you can see average full time wage then was $591.70/week = $30.7k pa (so correcting my original $25k assertion here when working just from memory). I also have in front of me a scanned copy of a 90s newspaper article stating the Sydney median house (detached) price as $185k in 1991. That gives a ratio of 6, and this was at a time when the country was in deep recession, and mortgage rates were 12-13% still, and credit was very tight and rationed. In 1983 the same article places the Sydney median house price at $83.5k. ABS gives average wage for that year as $336/week = $17.5k. That's a price/income ratio for Sydney of 4.8. So I've pickled two periods there where Australia was recovering from deep recession and interest rates were sky high, and it only just dips down below 5
My parents bought land and built a house in Sydney in the mid 60s in an area that today has house prices around the median, but back then as the area was new and undeveloped, it was probably below average in price. The house and land cost $13.5k. The oldest wage data I can find is for 1965 from ABS here: http://www.ausstats.abs.gov.au/ausstats/free.nsf/0/C6775153C9AB20E8CA2575160011B5AA/$File/63020_JUN1967.pdf, which gives average full-time earnings INCLUDING overtime etc (which is usually about 5% higher than the OTE figure that we normally use) as $57/week = just under $3k. Drop that by 5% to get an OTE figure and we have $2.8k. So that give a price/income ratio of 4.8. This was 50 years ago! And for a modest 11sq brick veneer new build in an undeveloped area 25kms from the CBD. And we won't even go into the different economic environment then and how hard it was to borrow money from banks etc if you were an ordinary person.
Sydney has ALWAYS had very expensive property relative to wages and the rest of Australia, and IMO it always will. A change in the price/income ratio from 6 to 7.5 or 8.5 since 1991 is hardly an indication of any great bubble, especially given that over this 20 year period average interest rates have halved, the economy emerged from a long recession and has boomed essentially since, wages + household incomes have grown in real terms by a significant amount, and average wealth has also grown dramatically. As always of course you can do your own research.
I know for a fact house prices were much cheaper in the 70s. My parents bought for around $12k, mum was on about $3k as a secretary. It's "worth" around $800-$900k now.
Ok so it was around 6 times in the early 90s, and about 8.5 times now. So that makes Sydney house prices 30% overpriced.
I don't think it's silly excluding units and townhouses, most Australians have enough self respect to not bring up battery kids.
The ratio is NOT far less than what I originally claimed. I said Sydney has been traditionally 3-5 times the average wage, now I will agree that it was 6, in 1991-1993, before that, it was far less. Ie, Far less for boomers.
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
I know for a fact house prices were much cheaper in the 70s. My parents bought for around $12k, mum was on about $3k as a secretary. It's "worth" around $800-$900k now.
I don't doubt what you say is true, but could it be that the land was re-zoned in the early 70s after your parents bought?
My grandparents had 3 acres in the boonies of Brisbane in the 60s up until 1973. It was re-zoned from agricultural to residential "A" in 1972 and the value suddenly went from about $22k to $72k in a matter of a couple of months and they were forced to sell out to the developer mafia by rates going up 3.5x. They moved out and bought a residential A house on a (for the time) tiny block in the same suburb and it cost quite a lot more than $12k so they didn't even get rich in the process.
BTW that "boonies" suburb was Sunnybank which I think is now classified as "inner south".
Point is that you need to be very careful with numbers from the early 70s because things changed so fast. in 1971, inflation was almost non-existent, but in 74 it hit 17%. in 1971, if you could get a mortgage from a bank (credit was rationed) then it was probably at about 4%, if it was a finance company, maybe 6-7%. By 1975 I was getting 10% on my *passbook* account.
Around that time, you would have to compare house prices with wages for a given *month* (or at least a quarter) because everything was doubling every 3 years.
1970 and 1971 and most of 1972 may have been pretty good, but conditions became a nightmare after that, and they didn't really improve until 1985 or so. This may be why hardly any of the studies I see go back earlier than the early eighties.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy