No bubble despite ‘difficult affordability conditions’
Australia’s property market has been tipped to avoid a bubble, despite most Australians having to spend more than 30 per cent of their after-tax income on their mortgages.
Residex has reported that the median family in Sydney is repaying $3,845 per month on a home valued at $824,000, which equates to 52 per cent of their after-tax income.
Melbourne families are devoting 41.7 per cent of their disposable income to repay $2,903 per month, according to the May statistics.
Darwin repayments are running at 36.2 per cent and $2,687 per month, Perth is priced at 32.3 per cent and $2,459, while Brisbane has reached 32.3 per cent and $2,181.
The level of repayments in the rest of Australia is 29.2 per cent and $2,482 in the ACT, 29.2 per cent and $1,924 in Adelaide, and 26.9 per cent and $1,686 in Hobart.
Residex has also reported a 16.9 per cent year-on-year increase in house sales for the 12 months to 31 May 2014.
Residex founder John Edwards said the data “clearly points to the difficult affordability conditions for the median family in most capital cities”.
However, Mr Edwards said house sale statistics for May suggested the market was cooling.
“The growth rates in May are not sufficient to confirm this lower rate of growth is about to be a new feature, but my best guess is this will in fact be the case,” he said.
“Housing markets, particularly Sydney, were moving to a boom-like performance. This was dangerous and could have led to a bubble and a severe correction if it continued.
“The slowing of the market at this point in time suggests we are going to avoid this outcome. Having said this, the market is still overvalued and in reality too expensive.”
The biggest growth in house sales in the past 12 months came from Brisbane, with a 24.4 per cent annual increase.
That was followed by Sydney and Adelaide with 23.4 per cent each, and Melbourne with 22.3 per cent.
There were also increases of 18.9 per cent for Darwin, 9.8 per cent for Hobart, 7 per cent for Perth and 4.2 per cent for the ACT.
Article form Real Estate Business
Wednesday, 25 June 2014