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Unaffordable property market st...

Unaffordable property market still attracting buyers

Despite being rated as 'unaffordable', the Australian property market continues to see strong demand, suggesting that prices are in fact perfectly in line with the overall economy.

For over a decade the Australian real estate sector has had a reputation for being one of the most unaffordable in the world, although property experts don't seem to be particularly worried given the fact that demand for housing does not seem to be in decline.

The recent Annual Demographia International Housing Affordability Survey has labelled the country’s property market as ‘vastly overpriced’, although Australian Property Monitors chief economist Andrew Wilson says this is a meaningless rating when looked at in the context of the overall economy, Property Observer reports.

House prices have fallen slightly in the last three years after rising by an average of around ten per cent a year for the first decade of this century.

However, given the current boom in Australia's mining industry as well as the country's general resistance to the global economic crisis, demand for housing has continued to be the main driver of price increases.

It is also important to remember that this index compares prices in US Dollars, and therefore the high value of the Australian dollar is a large component of this perceived overvaluation. When, and if, the Australian dollar weakens this will naturally make the Australian property market seem more affordable on an international basis.

In 2012 the country's population grew by 1.6 per cent thanks to high levels of immigration, resulting in a housing shortage in some areas of Australia.

House prices are therefore reasonable given the fact that demand remains high, and should not be considered as anything other than normal when looked at in this context.

All information provided is of a general nature only and does not take into account your personal financial circumstances or objectives. Before making a decision on the basis of this material, you need to consider, with or without the assistance of a financial adviser, whether the material is appropriate in light of your individual needs and circumstances. This information does not constitute a recommendation to invest in or take out any of the products or services provided by SMATS Services (Australia) Pty Ltd or Australasian Taxation Services Pty Ltd.

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