Data from the Rismark National Dwelling Price-to-Income Index released recently suggests that housing affordability in Australia is not as bad as some market analysts estimate.
The ratio of property prices to average incomes has been estimated by some analysts to be as high as seven to eight times. This would price a major portion of Australians out of the housing market as mortgage lenders do not offer products to satisfy such high income ratios.
Home loans are usually granted to borrowers on the basis that the balance of the mortgage is no more than around three to four times the applicants’ joint income. A ratio of seven to eight times joint salary would not meet most lenders’ affordability criteria.
The data from Riskmark suggests that the real level of affordability – around four times income – is true regardless of where the property is located and what the property type is. This means that housing remains affordable for most working Australian couples regardless of where they to live.
Riskmark implies that the ratio hasn’t worsened since the end of the last property boom in 2003.
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