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Sydney's housing affordability problem - in three tweets

Courtesy of Cameron Kusher, head of research at CoreLogic Australia, come these excellent and, to some, disheartening, maps of the median house price in Australia's largest and most expensive capital city, Sydney, that he posted on Twitter earlier this week.

The first shows the median house and apartment price as at the end of 2016.

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The tale of two housing inquiries

How can two parliamentary inquiries only 19 months apart reach vastly different conclusions? Michael Pascoe comments.

In terms of houses, you'll be struggling to get anything under $1 million anywhere in the city, particularly within a 20 kilometre radius of the CBD.

The news is a little more comforting for apartments with most suburbs still recording a median price of between $400,000 to $1 million within the same area. The exceptions to the rule are Sydney's eastern suburbs and many parts of Sydney's north shore, which have price tags in excess of $1 million.

So Sydney residential property is expensive, and, in many's people's minds, unaffordable.

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That makes the next map from Kusher all the more interesting.

It shows the median house price in Sydney, looking at what they were five years ago compared to what they are today.

Perhaps appropriately, the areas shaded in red — indicating a median price over $1 million — have gone from a smattering in 2011 to the vast majority of the map in the space of just five years.

They're literally red-hot.

That's not all that surprising given CoreLogic notes that the median Sydney dwelling price has nearly doubled in the period between early 2009 and late 2016, something that was no doubt assisted by a reduction in the RBA cash rate of 575 basis points over the same period.

Prices in the city rose by 15.5 per cent in 2016 alone, corresponding with a further 50 basis points of rate cuts delivered by the RBA.

Home loan rates have tumbled, allowing households to borrow more to fund property purchases.

That's reflected in the final chart that comes courtesy of Pete Wargent, co-founder AllenWargent property buyers, that shows the average mortgage size by Australian state and territory, looking at the change from late 2012 through to the end of 2016.

The data comes from the Australian Finance Group, and was posted on Twitter by Pete earlier today.

While this is for individual states and territories, not capital cities, it’s a fair bet that it’s largely reflective of borrowing levels in Australia’s capital cities given sheer population size.

Reflective of Sydney’s mantle as the most expensive city in the country, the average home loan size in New South Wales stands head and shoulders above those seen in other parts of the country.

Wargent notes that the average mortgage size has grown by a whopping 33 per cent since September 2012, leaving it at a record high level in excess of $600,000.

Safe to say, the last chart helps to explain the evolution seen in Sydney housing prices over the past few years. It also demonstrates why new RBA governor Philip Lowe has hinted that financial stability concerns will play a more central role in determining the outlook for monetary policy settings during his tenure.

This story first appeared in Business Insider. Read it here or follow BusinessInsider Australia on Facebook.

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