A housing survey reveals Australia as completely unaffordable…so how come so many people are so eager to fix their bad credit report and get in to the property market in Australia?

By GRAHAM DOESSEL CEO of MyCRA Credit Repairs and www.fixmybadcredit.com.au.

The Demographia International Housing Affordability Survey has continued to place Australia amongst its most unaffordable places to live, with our country held as the second most unaffordable housing market.

325 urban markets were featured in the survey, from the United States, UK, Canada, Australia, Ireland, New Zealand and Hong Kong. It rates housing affordability, based on the Median Multiple – that is, the median house price divided by the gross annual median household income of specific urban markets, for the 3rd Quarter of the previous year.

Featured in Broker News, the survey pinpointed Sydney as the third costliest city in the world – dropping it one spot from last year.

But overall affordability is still looking grim for Australia on a world scale, according to Demographia.

“While Hong Kong is the most severely unaffordable housing at a staggering 12.6 Median Multiple (the highest ever recorded within the history of the Surveys) – Australia with its abundant land supply has the most pervasive housing affordability problem (5.6 MM); followed by New Zealand with a small population of just 4.4 million (5.2 MM); the United Kingdom (5.1 MM); Canada (3.5 MM); Ireland with its housing bubble collapsing (3.4 MM) while the United States overall is affordable (3.0 MM),” Demographia says.

Australia’s national unaffordability ratio came down from 6.1 times in 2010 to the still ”severely unaffordable” ratio of 5.6 times. They claim reduced house prices helped slightly improve the rating.

So are we struggling to keep our heads above water in this country? That point is interesting.

Certainly our homes are expensive, and it is a struggle for many people to break in to the housing market. Coupled with the tight lending criteria of banks, including requiring a squeaky clean credit rating, who could be blamed for thinking we live in a very unaffordable country?

The Australian Property Forum argues differently. It says the Demographia survey should be ‘debunked’ and is not an accurate reflection of Australia’s affordability scale:

“But almost half a million families and individuals bought homes in Australia last year. So while housing may be unaffordable to some (has it ever been otherwise?) plenty of people do seem to be able to afford to buy houses. So how come so many people are buying houses in a country that Demographia claims to be completely unaffordable? APF says.

APF says there are substantially different factors impacting the housing markets in each country:

* Differences in tax rates and cost of living pressures across various countries make a comparison of spending power based on gross income meaningless.

* A better measure of a household’s ability to afford property would be to consider household discretionary income and total wealth. This would include non-wage income (such as income from interest, shares or other investments), and wealth stored in other assets (such as shares or equity in existing property) that may be liquidated or borrowed against in order to fund a new property purchase

* Rental income (and real income from any other investments including savings interest) should be included, along with any liquid assets or easily leveraged assets such as equity in existing property. The reality is that people can and do use those forms of wealth to buy property.

* The official median house price figures that Demographia use for Australia are sourced from the Australian Bureau of Statistics. However these ABS figures only include freestanding houses. They don’t include units or townhouses, meaning that Demographia are overstating median house prices in Australia compared to the other countries assessed in their survey (countries where units and townhouses are included when calculating the median house price).

So what is the real measure of affordability?

I am sure millions would suggest housing is unaffordable for them, particularly in our capital cities where the dream of home ownership has become a distant memory for many first home buyers.

But in reality, people are still managing to purchase.

Every day, we see hundreds of people desperate to buy homes. Who CAN afford to buy, but who are held back not by affordability but by their bad credit history.

I guess the truth lies somewhere in the middle.

For more information on credit repair before buying a home, contact us on 1300 667 218 or visit the main site www.mycra.com.au.

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