Home buyers will be happy to hear that Australia’s average property price to income ratio has fallen back to 2003 levels.
According to recent research conducted by Rismark, the average proce today of an Australian dwelling in relation to disposable income has fallen to just 4.2 times in March 2011 from its recent peak of 4.7 times in December 2009.
The RBA should be pleased by these developments since they were working towards improving housing affordability through interest rates and influence of government policy. While we expect property investors will benefit from robust rental growth, it is unlikely that property prices will increase significantly in the near term as long as the RBA continues to carry out its war against inflation.
In terms of recent statistics, Australian wages have demonstrated a healthy level of growth. It is therefore reasonable to expect a continued improvement in the housing market’s valuation fundamentals for at least another 12 months.
Despite media reports, Australia’s house prices have actually grown more slowly than household incomes since the end of the last boom in 2003.
According to the ABS’s National Accounts data, disposable incomes on a per household basis have enjoyed a compound annual growth rate of 6.3 per cent since March 2003. Whereas the capital city property values have risen by a more modest 5.7 per cent per annum. On this basis, disposable incomes in Australia have risen 7.5 per cent further than capital city dwelling prices over the last eight years.