Last year, I published an article, How the RBA undervalued housing, which questioned the Reserve Bank of Australia’s (RBA) official dwelling price-to-income ratio that claimed that Australian capital city home values were only around five times annual household disposable incomes as at June 2010:
Using alternative income data, derived from the the Australian Bureau of Statistics (ABS) Household Income and Income Distribution Survey, I estimated that the RBA’s dwelling price-to-income ratio was understated by between 33% and 50%.
Today, RP Data has released research, derived from the 2011 Census, confirming that the RBA’s dwelling price-to-income ratio is significantly understated. According to RP Data, the national median capital city dwelling price to median household income was 6.3 times in 2011, well above that estimated by the RBA:
Interestingly, RP Data’s calculations also contradict the dwelling price-to-income ratio quoted by its index partner, Rismark International: