Today on Smart Company, Craig James of Commonwealth Bank offered this brief article:
The Reserve Bank Governor was asked a question on Australian home prices when he delivered a speech in London on March 10. The comments weren’t well reported, but he highlighted the fact that home prices aren’t rising strongly at present, that arrears rates on mortgages are low, gearing isn’t high and that, overall, home prices “are probably not top of my list of worries.”
However, Glenn Stevens did say something else: “But I think – the other thing I’ll say is that it’s quite often quoted very high ratios of price to income for Australia, but if you get the broadest measures, a country-wide price and a country-wide measure of income, the ratio is about 4 ½ and it hasn’t moved much either way for 10 years. And that is higher than it used to be, but it’s actually not exceptional by a global standard as far as I can see.”
What he was quoting here was the analysis by Rismark International and RP Data on housing affordability. To measure home affordability you need to compare all incomes across Australia with all home prices across Australia – city and regional. Unfortunately a raft of industry bodies don’t do that and it produces spurious outcomes.
The bottom line is that Australian home prices aren’t so extraordinary after all. Once foreign investors start focusing on the facts rather than fiction then perhaps a few more dollars will start flowing Down Under. Because it is a concern abroad, and it’s not being helped by misinformation.
To be sure, one doesn’t know what “industry bodies” Mr James is referring to. But for what it’s worth, the CBA throwing around allegations of misinformation around house prices is a bit odd, especially in reference to international investors.
Last September, it was CBA that used spurious logic and cherry-picked data throughout a presentation especially designed for international investors.
More recently, Deep T. has elucidated CBA’s questionable use of a comparison between its capital position and a raft of international banks. Presumably the juxtaposition was also designed for international investors.
Instead of making vague references to “misinformation” and “concern” abroad (is this the Cold War?), the CBA should be providing better information.