Last month, RBA assistant governor, Luci Ellis, tried to argue that Australian housing was not that expensive intentionally, claiming that “Australia is somewhere around the middle of the pack of mid-sized countries” on the metric of dwelling price-to-income ratios, and that “similar comparisons of household debt-to-income ratios across countries also put Australia in the middle of the pack”.
At the time, I debunked Ellis’ claims by providing data showing that Australia had the second most expensive housing across English-speaking nations behind New Zealand when measured against both GDP and total compensation (incomes) of employees:
Australian household debt is also the second highest in the world, according to the Bank for International Settlements, and way above the other English-speaking nations:
Over the weekend, The Economist updated its Global House Price series, which confirmed that Australian housing is the second most expensive across English-speaking nations after New Zealand when measured against average incomes:
It is also more expensive than the non-English-speaking advanced nations on this metric:
When valued against rents, Australia is the third most expensive English-speaking nation:
Whereas it ranks above all non-English-speaking advanced nations except Sweden:
Commenting on the results, The Economist noted:
On this basis homes are fairly valued in America by an average of our two measures. But across Australia, Canada, New Zealand, and to a lesser extent, Britain, they look severely overpriced. Policymakers may well be left scratching their heads, however: increasing housing affordability for citizens and encouraging investment from foreigners are likely to be irreconcilable goals.
The RBA clearly needs to adjust its compass. Australian is nowhere near the “middle of the pack” when it comes to either housing valuations or household debt. We are near the very top.
