19-03-2014, 07:40 PM
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If you look at the graphs carefully, there is no doubt that asset inflation has made housing a no brainer investment since the ratio of house price to income ratio is significantly higher now than in the early 80s. Can't help but worry for next generation with jobs now less stable and asset prices so much higher...
‘Stress tests’ finds home prices are fair
• SARAH DANCKERT
• THE AUSTRALIAN
• MARCH 19, 2014 12:00AM
Houses in Western Australia and South Australia appear undervalued, according to the report by research group Moody’s Analytics. Source: TheAustralian
AUSTRALIA’S property markets might be a hot topic for discussion, but house prices on a state-by-state basis are not as overheated as many think, according to new research.
While much heed has been paid to the rate at which prices are rising in Sydney and the expensiveness of property in Perth, it appears those in Victoria are the most overvalued and susceptible to domestic economic events, interest rate increases and the rate at which new housing becomes available.
Conversely, houses in Western Australia and South Australia appear undervalued, according to the report by research group Moody’s Analytics.
Using a range of metrics to “stress test” state markets, including house price to household income ratios, the researchers found that prices in NSW, Queensland, the ACT, Tasmania and the Northern Territory appeared close to fair value.
Previous reports had focused on Australian house prices at a national level and what might happen to the overall market in response to a global economic slowdown, Moody’s Analytics senior economist Glenn Levine said. But the new report reviewed the housing market of each state and looked at economic occurrences such as interest rate rises, changes in commodity prices and domestic “shocks”, as recently witnessed in Victoria following large-scale factory closures and the impending exit of the car industry.
“This suggests that state-specific housing policies could be beneficial, particularly when the market is overheated,” Mr Levine said.
According to the researchers, a healthy housing market is one with a stable price-to-income ratio. The report found that, aside from a blip in the late 1980s, that ratio has trended steadily higher across most states since 1980. From the mid to late 1990s, the ratio had risen sharply, Mr Levine said.
At the same time, data shows the amount of debt households around Australia owned had risen significantly over the period from 1990 to 2007, before flatlining.
“Yet international comparisons confirm that Australian household debt ratio remains elevated.”
If you look at the graphs carefully, there is no doubt that asset inflation has made housing a no brainer investment since the ratio of house price to income ratio is significantly higher now than in the early 80s. Can't help but worry for next generation with jobs now less stable and asset prices so much higher...
‘Stress tests’ finds home prices are fair
• SARAH DANCKERT
• THE AUSTRALIAN
• MARCH 19, 2014 12:00AM
Houses in Western Australia and South Australia appear undervalued, according to the report by research group Moody’s Analytics. Source: TheAustralian
AUSTRALIA’S property markets might be a hot topic for discussion, but house prices on a state-by-state basis are not as overheated as many think, according to new research.
While much heed has been paid to the rate at which prices are rising in Sydney and the expensiveness of property in Perth, it appears those in Victoria are the most overvalued and susceptible to domestic economic events, interest rate increases and the rate at which new housing becomes available.
Conversely, houses in Western Australia and South Australia appear undervalued, according to the report by research group Moody’s Analytics.
Using a range of metrics to “stress test” state markets, including house price to household income ratios, the researchers found that prices in NSW, Queensland, the ACT, Tasmania and the Northern Territory appeared close to fair value.
Previous reports had focused on Australian house prices at a national level and what might happen to the overall market in response to a global economic slowdown, Moody’s Analytics senior economist Glenn Levine said. But the new report reviewed the housing market of each state and looked at economic occurrences such as interest rate rises, changes in commodity prices and domestic “shocks”, as recently witnessed in Victoria following large-scale factory closures and the impending exit of the car industry.
“This suggests that state-specific housing policies could be beneficial, particularly when the market is overheated,” Mr Levine said.
According to the researchers, a healthy housing market is one with a stable price-to-income ratio. The report found that, aside from a blip in the late 1980s, that ratio has trended steadily higher across most states since 1980. From the mid to late 1990s, the ratio had risen sharply, Mr Levine said.
At the same time, data shows the amount of debt households around Australia owned had risen significantly over the period from 1990 to 2007, before flatlining.
“Yet international comparisons confirm that Australian household debt ratio remains elevated.”