What housing affordability crisis?

Glenn - The Census Expert

Glenn is an ABS data expert with huge intellect and capacity to convert demographic data into profound insights about places. He has contributed numerous blogs and consulting projects covering economic development, housing consumption and affordability, migration, fertility, ageing, role and function of ‘place’, communities of interest and more. Glenn works with over 120 councils bringing the client perspective into the development of our information products. He is a Census data expert, having worked at the Australian Bureau of Statistics for 10 years. If there's anything Glenn doesn't know about the Census, it's probably not worth knowing - so ask Glenn!

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7 Responses

  1. Alex says:

    Are mortgage repayments a good measure of housing affordability?

    Surely a downturn in economic conditions prompts people to reduce mortgage repayments, possibly to interest only levels. If this were the case then you could argue housing is less affordable as interest only payments increase the FV of the mortgage?

    Conversely, perhaps by changing repayments mortgage holders are keeping housing as ‘affordable’ as in 2011, if you consider affordability to be some relationship between incomes and repayments.

    I also cant tell if this includes investor mortgage repayments? They are the ones more likely to be buying due to low interest rates and may be keeping mortgage payments high as indicated by increasing rents.

    Great article though!

    • Thanks for the comment. Yes, mortgage payments are generally not a great measure of the cost of housing, and the Census can muddy the waters because people can pay extra or bring their payments back over time. Rent is a much better measure of the ongoing cost of actually living in a dwelling, and this has certainly increased.

      I suspect, however, that given mortgage payments went down only slightly nationwide, most people have actually maintained their payments at previous levels and are paying off extra on their mortgage. This may not apply to the first home buyers that I looked at, and this probably needs so me more attention. I don’t think many owner occupiers are paying interest only.

      Census data doesn’t include any information on mortgage payments by investors. The residents of that household are the subject of the Census, and they would be renting.

  2. Ned says:

    Wow. Seriously disappointing write up guys. You’ve mistaken affordable debt for affordable housing. Glad to see rents get a mention at the end there because that is where the real story is…


    • It’s only meant to be a simplistic analysis, and there will be an upcoming blog where we look at rental affordability, which as I noted is the main concern at the moment. And if interest rates go up, people could be in trouble. The article is really just pointing to the fact that mortgage payments actually did go down over 5 years, even in the first home buyer age group. Debt is indeed more affordable, and debt is generally what people use to buy houses.

  3. Leo Savas says:

    The real measure on this matter is best quantified by other more relevant measures such as;
    1 The Average wage versus the Average House price in the average suburb. I believe that this ratio has increased from a multiple of 3 some 20 years ago to something like 10.
    2. The discretionary spending of the average house hold as impacted by the mortgage repayments on a weekly basis.
    3. The potential payback period for a mortgage now to that of 20 years ago. It is the case that an interest payment only capacity does not cumulate wealth and so it is now the case that the mortgage repayment will expand to two to Three generations.

    In a country where such oppressive house ownership conditions prevail we need to look at the long term consequences. It is blatant that the nation needs to restructure its wealth distribution otherwise we will end up like the US where the poorest are poorer than in all other western countries on the planet.
    One does not need to address such things as capital gains or negative gearing to bring about some sanity in the real estate. One needs only to place a restriction on land values by zoning to fixed price levels and legislating for no more than 10% net profit on building costs.
    Relying on market forces to stabilize real estate prices is naivety to the extreme or surrounding to the power of Greed. Only Capitalist ideology subscribes to such ideals and socially unintelligent citizens and politicians.

  4. Chris Paris says:

    Very useful analysis especially as you reveal the contrast between falling mortgage payments 2011-16 and increasing rental costs. Your analysis shows that different households in different tenure circumstances face very different combinations of costs and benefits through their lives as purchasers or renters of their homes. It will often be the case a rental dwelling which is deemed not to be ‘affordable’ for its tenants is very ‘affordable’ for its owner (the landlord), especially during a period of low interest rates, easy access to loans and a tax regime that privileges property investment. I look forward to your analysis of rental affordability.

  5. Simone Alexander says:

    Interesting Glenn – shows how complex the concept of housing affordability is. At a Grattan Institute event recently one of the speakers suggested that the biggest hurdle for first home buyers was saving the deposit, and when they get past that, paying off the mortgage was far less cumbersome (at current interest rates of course). This analysis certainly gives further weight to that perspective.

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