Which country has the most expensive housing?
Posted On July 20, 2021
A few days ago I read an article in the Australian Financial Reviews (AFR) that claimed Australia has the “world’s most expensive” housing market.
The article was written by former housing economist, Michael McNeil.
The fact that Australia’s housing prices are currently so high is not news.
But it does highlight the massive gap between our income and our housing needs.
Australia is ranked 11th on the list of most unaffordable countries.
The AFR article noted that while we have seen housing prices drop in the past decade, the average price of a detached home is now more than 30 times higher than the average income of the median Australian.
According to the National Housing Foundation, “the median Australian household income has risen by more than 25 per cent since 2008.
This is not only a reflection of higher household incomes, but of the rise in the value of our homes, and the rise of superannuation”.
The article noted we have also seen a decline in the proportion of the population living in houses.
“The proportion of Australians living in detached homes has declined from nearly 10 per cent in 2011 to about 8 per cent today,” it said.
However, according to the Australian Bureau of Statistics, the proportion that is buying their own home has increased by more in the last decade than any other group.
It also noted that we are in the midst of a housing boom.
“[We are] in the middle of an exceptionally strong housing market, with average prices for house purchases in July rising from $4,742 in 2010 to $5,839 in 2016,” it noted.
For those unfamiliar with the term “housing boom”, it’s a time of increased demand for rental housing.
So why is Australia so expensive?
According a recent study, by economists from the Australian National University, Australians spend more on housing than anyone else in the world.
In a country where the median income is just $46,500, Australia is actually the most unaffordable of the 19 countries on the AFR’s list.
I was interested to see if the AFRI’s article reflected the reality of the Australian housing market or was an exaggerated portrayal of it.
My first thought was that the article was just another piece of propaganda to be paraded by politicians and commentators to drive up the value and increase sales of houses.
But the article does indeed have some interesting facts.
Firstly, it notes that the median household income in Australia is $42,000, or $15,200 more than the median US household income.
Secondly, the median home price in Australia has increased at an annualised rate of 14.4 per cent over the past five years.
That means the average Australian household spent about $16,700 more on their housing costs in 2016 than they did in 2013.
Finally, the article noted the Australian economy grew by $2.9 trillion in 2016, which would equate to an increase of just over 3 per cent a year.
But the real issue with the article is the fact that the average household income of Australians is $46.5000, which is almost a $20,000 difference.
And it’s not just the average incomes.
The average Australian households income is $56,200, which equates to an additional $1,100 difference.
What do you think?
Is it true?
Would you be willing to pay more for a better home?
Let us know your thoughts in the comments below.