House prices have substantially increased in recent years but housing costs haven’t really shifted in over two decades. Costs and disposable income for housing remain the same at 17% since 1993. Judging housing affordability just by looking at house prices may be incorrect as Australian households usually split purchasing, renting and owning their house equally.
The median house price in Australia has increased from $140,000 in 1997 to $540,000 in 2017, representing a 7% annual increase. However, disposable income has increased by 68% in the last 20 years as well. Housing costs have peaked in 1993 because of weak income growth and the strong housing cost increase but rent and mortgage costs have remained stable since then.
Actual housing costs relative to income remained at 16% of disposable income. Low and high income groups have since decreased their spending as a share of income but the middle income group has modestly increased their spending. However, interest rates are a lot lower now and living standards have substantially increased for low, middle and high income families. Saving rates have increased as well. These mean that housing costs are now a larger share of expenditure.
The housing stress rate is highest in Queensland with 13.5% of households in stress while ACT and NT combined have the lowest stress rate at 8.1% because of high incomes. The NSW housing stress rate is lower than in Queensland and Victoria.
Housing costs in Australia have been stable as a share of disposable income but the truth is, the bigger problem is the lack of affordable rental housing for lower-income families. An aging population with low homeownership rates might become a problem in the future.
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