Feeling poorly or just plain poor? Well, the results of a global study by Credit Suisse Research make some interesting reading.

Michael Matusik from Matusik Property Insights.


The report shows that Australians are now comfortably the richest population in the world, with a median wealth of $US194,000 per adult.


Closer to home, the Australian Bureau of Statistics (ABS) tells us that our average household wealth (that’s assets minus liabilities) topped $728,000 last year – the latest figures available. And one in five Aussie households, apparently, has reached “millionaire” status – up from 15 per cent eight years ago.


A sizeable chunk of our assets comes from the value of our family homes, which account for about 40 per cent of our net worth. Superannuation and investment property are in equal second place, contributing about 15 per cent each.


The average outstanding home loan was just $74,200 in 2011-12, with investment property loans averaging just $42,100. Thus, by many measures, we are quite well off. But I can well imagine the howls from the naysayers, so let me add that while these figures do not erase the realities of rising cost-of-living pressures, they do provide a certain balance in the face of some misconceptions about the economy and, in particular, about our housing affordability.


Let’s look at how some of those common misconceptions measure up. The perception, for example, that median property prices are six to seven times earnings is way off.


At present, when using ABS figures, the numbers are well under five times earnings. The 25-year average, by the way, is just above four-and-a-half times earnings, which makes us very close to the long-term average. Something else to consider is the ratio of mortgage size versus dwelling asking prices.


Currently, that figure sits at 10-year lows, which means there is an enormous amount of pent-up leverage to be had. Just because households are not leveraging at present, does not mean that they can’t or won’t.


And as to how much we spend on housing, the average amount has changed little over the past 15 years. Currently, just 14 per cent of household income is spent on housing costs, versus 12 per cent 10 years ago. First-home buyers do spend more than that – the 25-34 year age group spends 21 per cent – but this figure has come down from the 25 per cent on average that they paid seven or so years ago.


Singles pay slightly more now – 19 per cent versus 16 per cent 10 years ago. But in the mid-1990s, when housing was perceived to be very affordable, this sector was spending 18 per cent of their income on shelter. Overall, more than 80 per cent of Australians pay less than 30 per cent of their income for housing – the commonly cited benchmark for affordability. Just one in eight households pay between 30 and 50 per cent; and just 6 per cent pay more than 50 per cent.


So, based on these figures, which have changed little in recent years, Australian housing is really not unaffordable at all and perception is not always reality.


For more information visit www.matusik.com.au


Source: News.com.au