Housing more affordable than 30 years ago: Experts
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Housing more affordable than 30 years ago: Experts

Housing more affordable than 30 years ago: Experts

by Sasha Karen | April 26, 2018

A real estate investment advisory body has claimed that property is more affordable now than nearly 30 years ago, and that other experts may not have been looking at the right numbers.

House, coins, housing affordability

When analysing the current state of housing affordability in Australia, income, house prices and mortgage repayments must all be considered together, according to the Property Investment Professionals of Australia (PIPA) and its chairman, Peter Koulizos.

PIPA examined annual figures, looking at the average size of a home loan, the standard variable rate, principal and interest loan repayments and the annual average wage from 1990 to today.

Year

Average loan size

Standard variable rate

Annual P&I loan repayments

Average annual wages

Percentage of annual salary

1990

$66,300

17.0%

$11,340

$23,600

48.1%

1995

$90,900

10.5%

$9,972

$28,236

35.3%

2000

$139,700

6.8%

$10,932

$31,928

34.2%

2005

$210,800

7.1%

$17,004

$39,728

42.8%

2010

$300,200

5.6%

$20,676

$49,712

41.6%

2018

$389,000

5.1%

$25,344

$61,984

40.9%

“The key figure to look at is the last column — the percentage of an average person’s income needed to make the mortgage repayments,” Mr Koulizos said.

By using this data, Mr Koulizos found that home loans are at the same level of affordability as they were in 2010, and are more affordable than 28 years ago.

“In 2018 figures, you need 40.9 per cent of the average annual salary to pay the mortgage,” the PIPA chairman said.

“Compared to 1990 when you needed 48.1 per cent of the average annual salary, property owners are in a better position.”

The key to all of this, the chairman said, is the interest rate, which is why the current low rate keeps property price-accessible.

“Why such an improvement in affordability in such a short period of time? It’s due mainly to markedly lower interest rates in 1995 as compared to 1990,” Mr Koulizos said.

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