Latest NewsHOUSING AFFORDABILITY STEADY OVER 6 YEARS: RismarkWednesday, 23 November 2016

The perception that housing is becoming less affordable is untrue, according to a new housing index which indicates affordability has remained steady or even fallen over the last six years.

Investment strategy firm Rismark Australia has released a new index that shows median house prices remained between 3.7 and 4.3 times disposable income over the last six years.

Currently, the index has median house prices at 4.1 times household disposable income, while it was 4.2 times disposable income at the end of last year.

Rismark criticised the methods used by overseas groups to calculate whether Australian housing is over- or under-valued.

"These measures typically suffer from a range of shortcomings, including the fact that they ignore non-capital city regions (around 40 per cent of homes are located outside of the capitals), often only examine wages as opposed to "household incomes", and frequently restrict their analysis to detached houses when one quarter of all homes are semis, terraces, and apartments," the company said in a statement.

The index uses the RP Data database on all property transactions made in Australia, including for detached houses and apartments in both capital cities and country areas.

It uses the Reserve Bank definition of disposable income to calculate its figures.

According to the index, real income has risen 11 per cent over the past six years, making many goods cheaper by comparison and causing disposable income to rise 44 per cent.

In the meantime, the rise in median house prices has been lower, at 41 per cent, from $270,000, to $380,000.

CommSec chief economist Craig James said there is a perception that Australian housing is expensive both locally and overseas.

"While we try to explain that the issue is more perception and poor use of data rather than reality, it is difficult to change entrenched views," Mr James said.

The index, however, does not take into account particular areas where house prices may have risen or fallen more sharply.

"But in a broad macro sense, it is clear that the myth that Australian home prices have become dramatically less affordable in recent years has been busted," Mr James said.

Rismark managing director Christopher Joye says the index's indication that house prices had not increased relative to disposable incomes explains the Australian property market's resilience during the financial crisis.

"It also reconciles with RBA analysis highlighting Australia’s internationally low mortgage default and mortgage stress rates," Mr Joye said.

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