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Australia’s property market has been identified as one of the least affordable in the world.
Investing Reviews compared Australia to countries in the European Union, OECD and G20 across multiple factors, including average wages, average property prices and cost of utilities to create an affordability score.
The Australian property market ranked ninth in the world as least affordable. Luxembourg took the top spot, while India was named as the most accessible.
Australia’s property market peaked in March this year, with the average house price in Australia increasing $2000 every week this year.
The average national house price has skyrocketed 20 per cent in the past 12 months but Corelogic data shows an ameliorating effect during the past few months.
The survey’s scale ranges from 1 to 50, with 1 the most affordable and 50 the least.
Top 10 countries with least affordable property
| Rank | Country | Average price of 46sq m apartment | Average annual salary (net) | Affordability score |
|---|---|---|---|---|
| 1 | Luxembourg | $509,443 | $50,676 | 2.84 |
| 2 | Switzerland | $464,150 | $74,257 | 3.11 |
| 3 | South Korea | $551,174 | $27,437 | 3.94 |
| 4 | Japan | $299,442 | $33,655 | 5.33 |
| 5 | Israel | $309,925 | $31,109 | 5.43 |
| 6 | Norway | $247,971 | $40,237 | 5.47 |
| 7 | Germany | $237,750 | $34,918 | 5.52 |
| 8 | Austria | $237,163 | $28,626 | 5.71 |
| 9 | Australia | $235,930 | $30,952 | 5.73 |
| 10 | United Kingdom | $233,206 | $32,374 | 5.8 |
^Source: Investing Reviews
According to Investing Reviews, the countries where first time buyers will have the most trouble affording to buy a home is where there is a combination of high property prices, low salaries and high cost of living expenses.
“As a general rule of thumb, property in countries with lower salaries tends to be much more affordable for locals than property in nations with higher wages,” the report stated.
“This indicates that while property values have risen dramatically over the past few decades in the most developed countries, wages have not been able to keep up, leading to a crisis of affordability for many young people and first-time buyers.
“On the other hand, those who do own property in those countries have experienced a huge boost to their personal finances that they would have missed out on in many other parts of the world.”
Moody’s Investors Service is warning of an ongoing affordability crisis into early 2022 as Australian property prices skyrocket and wages stagnate.
Moody’s analyst Pratik Joshi said housing affordability had deteriorated in all capital cities except Perth, with the deterioration particularly significant in Sydney. Affordability also dropped much more for houses than for apartments, particularly in Sydney.
“In Sydney, house affordability is at its worse than at any time in the past decade,” Joshi said.
“Based on our modeling, Sydney will reach its worst housing affordability in 10 years if prices increase by 4.6 per cent or if average mortgage lending rates rise by just 0.42 percentage points to 3.87 per cent.
“Australia on average would reach its worst affordability in a decade if housing prices increase by 15 per cent or if the mortgage lending rate rises to its average for last 10 years of 4.79 per cent.”
Worsening affordability is negative for new mortgages in residential mortgage-backed securities (RMBS) portfolios.
But Joshi said rising house prices were positive for outstanding mortgages, because borrowers in financial difficulty can more likely sell homes at higher prices to repay their debt and avoid a default.
According to Commonwealth Bank’s State of the States Report for October, Tasmania remains the best performing economy in Australia.
Tasmania is ranked first on construction, retail spending, relative unemployment and dwelling starts, while New South Wales is first for housing finance, and Western Australia has recorded the strongest economic growth.
