4. Housing Affordability

4. Housing Affordability

Housing Affordability

There is a vast difference between ‘affordable housing’ and ‘housing affordability’ which is outlined in the following pages.

Housing affordability is simply a statistic that calculates how much of your income it takes to buy a house in the local real estate market.

It assumes you work, or are employed within the system and you need to buy a house in an established residential area where the value is governed by competition in the open real estate market, all under the control of government regulations.

Housing affordability is connected directly to the open real estate market place and economic policy and generally refers to the proportion of median household income needed to buy a median priced house in a particular real estate location.


This promotes much discussion, statistical reports, government committees and policies but doesn’t really help a family wanting a place to live. The Australian Government definition says:

“The term housing affordability usually refers to the relationship between expenditure on housing (prices, mortgage payments or rents) and household incomes.”

The Sydney Morning Herald recently reported on a Housing Industry Association’s housing affordability index report for the June quarter 2017 which measures the capacity of households to service mortgages. The Herald writes:

“Two years ago, it took 1.75 average full-time wages to affordably service a standard loan on an average-priced Sydney home, but that has reached 2.06 average full-time wages, the association’s affordability report said. In the rest of NSW, it takes 1.39 full-time wages to service a standard loan on a median-priced home”

The Australian Bureau of Statistics reports:

“Households with a younger household reference person have seen significant falls in home ownership. In 2013-14, just over a third (34%) of all households with a reference person under 35 years were owner occupiers, a decrease from 48% in 1994-95.”

Housing Affordability Trens Australia

A report by Core Logic explains further:

“The obvious divergence between dwelling values and income growth has occurred against a backdrop of lower mortgage rates, the lowest wages growth on record and disparate economic conditions across the states and territories.”

They further wrote that:

“Another factor influencing affordability are high transaction costs. The expense of stamp duty is creating an additional barrier for new housing market entrants. Stamp duty costs on the median priced dwelling are now more than $30,000 across both Sydney and Melbourne which is adding to the savings challenge for prospective buyers looking to participate in home ownership.”


The four measures utilised by Core Logic are;

  1. The ratio of dwelling prices to annual household income.
  2. The proportion of household income required for a 20% deposit.
  3. The proportion of household income required to service an 80% loan to value ratio (LVR) mortgage.
  4. The proportion of household income required to pay the rent.

Core Logic gives an overview:

“Clearly, addressing the issue of housing affordability is a complex task which is multi-dimensional, multi-disciplinary and requires the cooperation of local, state and federal governments as well as the private sector. What is particularly required is a coordinated housing policy coupled with a strategy that blends land release, zoning changes, infrastructure development and decentralizing employment opportunities into areas where housing costs are substantially lower.”

The only conclusion we can draw from all of this is:

  1. It now takes more than two household incomes to buy a median priced house in Sydney.
  2. House ownership is fast becoming out of reach for younger people.
  3. Government, real estate companies and development corporations have no idea how to solve the problem they have created.


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