Mortgage Stress in Australia

6th Annual Demographia International Housing Affordability Survey:2010

Ratings for Metropolitan Markets Australia = Canada = Republic of Ireland

New Zealand = United Kingdom = United States (Data for 3rd Quarter 2009)

NEW MORTGAGE SHARE OF GROSS MEDIAN INCOME

By Dr. Tony Recsei

The political importance of housing affordability in the 2007 federal election was indicated in a Fitch Ratings analysis commissioned by The Sydney Morning Herald Constituencies with greater mortgage stress voted particularly strongly for the winning Labor Party. Moreover, the rate of home repossessions was determined to be a better predictor of electoral margins than either high unemployment rates or lower average incomes. Then Labor Party national secretary Tim Gartrell noted a solid movement toward his party of voters with “just above” the average mortgage repayment of $1,400 to $1,600 per month. A new mortgage on a median priced house is now well above this level, suggesting that the issue of housing affordability could emerge as an even more crucial political issue in the years to come. The new government has indicated concern about the issue. Federal Housing Minister Tanya Plibersek has noted that “we are not building enough homes” and particularly noted the problem of land supply, saying “We still have problems in Australia with housing supply. There is no question of that”, adding: “We need to make sure that we have got enough affordable land to build on, both in green fields and in fill sites” Additional attention is indicated by the Council of Australian Governments, which intends to develop a national housing supply and housing affordability agenda

 The Demographia International Housing Affordability Survey employs the "Median Multiple" (median house price divided by gross annual median household income) to rate housing affordability
EXECUTIVE SUMMARY 

Demographia Housing Affordability Rating Categories
Rating	Median Multiple
Severely Unaffordable	5.1 & Over
Seriously Unaffordable	4.1 to 5.0
Moderately Unaffordable	3.1 to 4.0
Affordable	3.0 or Less

Historically, the Median Multiple has been remarkably similar among the nations surveyed, with median house prices being generally 3.0 or less times median household incomes. This affordability relationship continues in many housing markets of the United States and Canada. However, the Median Multiple has escalated sharply in Australia, Ireland, New Zealand and the United Kingdom and in some markets of Canada and the United States in recent years.