Contrary to popular belief the Australian property market is as affordable today as it was in the mid 1980’s.
Head of property research at ANZ, Paul Braddick states that people’s purchasing power is equal to the price of property (including mortgages) the same as it was in 1986 (see graph).
“Prices are justified where they are now,” Mr. Braddick said. “Increasing incomes and a fall in interest rates have basically been capitalised in housing prices.
“People tend to look at the period 2000-03 [when property prices skyrocketed in cities such as Sydney and Melbourne] but they were really only getting back to where they should be.”
Many factors have helped to increase people’s purchasing power over the past two decades but also Australian Property Monitors senior economist Andrew Wilson says banks have not allowed property prices to spiral out of control because they only lend to what people can afford. An increase in the number of households with two wages as well as the increase in women’s earning power has also added to the affordability of housing, which is only going to get better in the next 12 months. The next upturn in some of the markets around the country is expected to occur over the next 12 months as the housing shortage worsens with population increases.
Of course, different markets have different cycles. Currently, Central Queensland and South Australia are in the beginning of the boom phase whereas locations such as WA, and South-east Queensland are reaching the bottom of their property cycle. There are many reasons why we are not in a property bubble as many naysayers so eagerly point out. The property market will prove this over the next 12-24 months as the country’s economy goes into overdrive.