Economist tears roof off affordability study

An article on is talking about Housing affordability in Australia, and that Australia is still the second most expensive country to buy property, according to the Demographia International Housing Affordability Survey released on Monday 21 Jan 2013.

However, this report has been criticised by the Australian economist Dr Andrew Wilson who said that comparing the Australian housing market to others was like making comparisons with Jupiter.

Some people will quickly say that he is wrong and that it is easy to compare other countries, however, it isn’t as easy as some people think.

Look at the Philippines for example, a country that I feel may well be the most expensive country for property, when compared on an equal comparison basis.  I saw a house in Manila, similar to mine in Brisbane, and the one in Manila was more expensive.

So, what do I mean when I say “an equal comparison basis”?

A 5 bedroom house in Sydney, Australia is more expensive than a 1 bedroom squat in Manila, Philippines. So yes, Australia is more expensive..
But, an equal comparison basis…. A 5 bedroom house, on a 800sm block in Sydney, compared to a 5 bedroom house, on a 800sm block in Manila and what do we find ? Manila is more expensive than Sydney.

The UK is the same, a similar sized house in the UK is very likely to be more expensive than the same in Australia.

The ninth annual Demographia survey, looked at only seven countries, (United States; United Kingdom; Canada; Australia; New Zealand; Ireland and Hong Kong) and compared the costs of Australia’s mainly detached houses to the other countries wide variation of much smaller housing.

If we compare just the UK and Australia, and look at House sizes, the average Australian New House (206 sqm) is THREE times the size of the average UK house (76 sqm) source

The most expensive countries were:

  1. Hong Kong with a Median Multiple of 13.5
  2. Australia at 5.6
  3. New Zealand at 5.3
  4. United Kingdom at 5.1  (The Australian Median Multiple is only 10% more than the UK, but for a property THREE times as big)

The most expensive cities were:

  1. Hong Kong, with a Median Multiple of 13.5.
  2. Vancouver ranked second most unaffordable, at a Median Multiple of 9.5
  3. Sydney was the third most unaffordable, at 8.3 
  4. San Jose had a Median Multiple of 7.9
  5. San Francisco 7.8 and
  6. London 7.8 
  7. Melbourne 7.5

One way to fix the problem of expensive housing in Australia is for developers to build tiny houses on tiny blocks, and for people to live in cheaper but tinier homes, just like other countries do.

But…  Are Australians prepared to do that, or will they continue to pay the extra for the larger houses.  They obviously can, as they do.

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