Australian houses ranked world’s second most expensive

A new data set comparing house prices across countries has ranked Australia as the second most expensive on a per square metre basis:

A new data set called HouseLev put together by Jean-Charles Bricongne, Alessandro Turrini and Peter Pontuch fills the gap. It provides the average price per square meter of housing in 40 countries, from as far back in 1970 for most countries to the most recent available, generally 2017 or 2018.

The authors use two methods, top-down and bottom-up, with the latter intended to provide a check on the former or a back-up estimate when the top down method is not feasible due to missing data.

The top-down method computes the average price as the ratio of the total value of dwellings and associated land to the total floor area of dwellings. The total value of dwellings and land (‘the numerator’) is generally taken from the national income accounts of countries; the total floor area (‘the denominator’) is from the census data of countries. Divide one by the other and, presto, you have the average price of a house.

So now we have an answer to the first question posed earlier. As shown in Figure 1, it turns out that the cost of the average house price in the United States is under 1500 euros per square meter and over 5000 euros per square meter in Australia. (For metrically-challenged U.S.-centric readers, that’s about $150 per square foot in the United States.)

Of the countries in the data set, houses in Bulgaria are the cheapest at under 300 euros per square meter and the most expensive houses are in Hong Kong (SAR)—prices there are literally off the charts—nearly 30,000 euros per square meter!—and hence not shown in Figure 1.

How reliable are these estimates? Here’s where the bottom-up approach comes in. The authors have painstakingly gone through the websites of real estate agents and collected the data on sales offers in different locations. These data are then aggregated up to give a country-level average. Reassuringly, for most countries, the top-down approach and the bottom-up approach give similar estimates of house prices—the median difference in only 7 percent and the biggest difference is 12 percent.

Figure 2 shows that it takes under 4 years of average income to buy a house of average size in the United States and over 16 years in Australia. The median across countries is 10 years.

The creators of the data set also looked into whether high ratios of house prices to incomes can signal a correction in house prices. They find that if the ratio is greater than 10, there is concrete risk of a significant downward correction of house prices in the following three years (see their paper, Bricongne et al. (2019), for the details).

The full paper is downloadable here (see annex).

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Comments

  1. Aust will be more in the middle next year

    To me reading above it’s now a very probable outcome that the Aust property bubble is set to burst

    We are going to experience Ireland 2.0

    We are not far away

    • At the peak of the Irish bubble, the highest median multiple in any one city, was Dublin at 6.5
      All other cities were below 5.
      Australia now: Sydney 10, Melbourne 10, nowhere below 6

      Ireland in 2008 will look like the lucky country for getting its bust over with then. Not only do Strayans think they’re different, they think it was sheer political-economic genius to use every dirty trick in the book to prevent the bust at that cycle end, and commence inflating it to even higher levels for the next time.

      • not only that, but Ireland had super large IT industry (40%) to fall on afterwards, industry that boomed immediately after the housing bust

        • DR I’ve copped a lot of pushback on my extreme view but come on, this crash is so close now
          It’s virtually obvious now

          I feel very sad for so many people, the only joy I’ll get is when the C Joye capitulates to price falls this year.

      • Phil i had to scream 2020 the great Australian housing crash
        I’ll be a nobody soon, no one will even read what I say
        It’ll be bcnich WHO
        My views aren’t far away from mainstream on this site
        4/5 months away from MSM media commentary

        Unfortunately for us this is the year AUSTRALIA has to take its medicine

        I’m looking forward to being just someone in the pack, it’s lonely being the one with such an extreme view

        I’m looking forward to being average Joe

          • Ginger I just want to be average Joe
            I’m sick of being that guy (lunatic) with autism ADD and Aspy
            I just want to blend in with everyone else

            And the funny thing is when we hit the crash I’m going to be the positive person talking about the bounce out and the positives that come from a downturn
            This country is a greedy fcker of a place, it’ll change

          • EP
            I don’t need at say much anymore now. It’s becoming pretty clear to everyone on this site

            Nothing worse than someone who said I told you so, listen the fckn Joye, everyday he tells his property forecast in AFR or TV he runs through the whole history of when he was correct, can’t stand it. His mistake his big ego got in the way

            BUT I say to everyone on here, GET cash out now $1, $2, $5 $10s small denominations, have a good supply on hand, in a few months when the mother fxckers wake up, they’ll put restrictions on withdrawals

          • EP I don’t speak with my family anymore, (true). I have been telling them for 2 years what’s coming, some of my siblings are geared to the eyeballs, one is a crap artist in Toorak driving a Porsche with those number plates 85 or something like that.
            They kept telling me in deluded, increase your dosage, you are paranoid, so I told them all to get fcked at Xmas.
            I knew what was coming this year and I am not hanging around for the misery that’s coming. Bankruptcy divorce and one pretentious fck, I am concerned he will not cope at all, deep down worries me for the worst outcome.
            I used to have a lot of friends, I don’t have that many now, they stopped inviting me out “doom and gloomer”, it’s been a bit of a lonely time but I am not going to pretend with all the greedy ponzi BS.

            I said to my GF, you wait in 6 months they will all be ringing me to ask me what’s going on, solution etc. I used to work in financial markets so I get a lot of calls over the years on my thoughts, but when property started to boom again, they stopped calling. They’ll be back

        • I had similar sentiments to you 10 years ago when I figured that the ridiculously expensive house prices couldn’t last. I’ll accept that in USD terms Australian house prices will probably continue to drop but not in AUD terms. For any mortgage defaults the banks, aided by the government, will keep the properties off the market or flog them offshore. Rents will remain high or edge higher.
          Just keep paying your taxes to provide the amenities for the owner of the place you are renting like a good serf. Things are not going to get better.

          • SACO
            Not everything falls that much, you tell me but property is very fragmented, low end art deco’s inner melb and syd are great, low body corp and nice rental.
            It’s probably mid marker, Brighton, North Shore Syd, thos prices are fckn ridiculous. In a depression what type of house you live in isn’t important, as long as you have a roof
            Employment, Electricity, availability of food, health pharmaceuticals what car you drive an what suburb are just a function of the Ponzi Scheme
            We are moving to an era of absolute essentials

    • Paulo Coelho:“And, when you want something, all the universe conspires in helping you to achieve it.”
      So BCnich your belief,the sun spots,wishes of all the bears on here are all coming together to create this virus out of nowhere to deliver that final sucker punch on the face of this bubble of ever increasing greed

      • Pessimist, it’s not the virus that’s going to wipe us out, it’s rising interest rates, that DLS just said in the post, when banks get in trouble they have to raise rates.

  2. Only 2nd most expensive?

    Further cuts by the RBA, as demanded by the real estate industry and our mighty Big 4 Building Societies, should give us a good chance of goosing our prices and household debt statistics into No. 1 position.

    Though having regard to the size of Australia and our population most fair observers would concede that we are already truly winners in this international league of loserdom.

    With victory in sight the RBA would be crazy not to cut next week.

  3. Fox and the Hound

    Of course you need to pay if you want to experience these world-beating levels of economic diversity, vibrancy and political corruption.

  4. As long as bond yields are lower than property yields, it’s all fine. I read that somewhere recently.

  5. median to median comparison only goes so far
    what makes Australia much worse than what median says is price distribution

    there are no cheap suburbs in our big cities, hardly anything sells for half the median
    In Sydney for example, half the median house price (550k) buys nothing even 50km from Sydney
    there were only few dozen sales under $550k last year – stuff like this
    https://www.realestate.com.au/sold/property-house-nsw-eastern+creek-131308714
    https://www.realestate.com.au/sold/property-house-nsw-heckenberg-132541598
    median house price in the cheapest suburb of sydney Macquarie Fields is 630k almost 60% of citywide median

    on the other side most of world cities have much broader price distribution so one can buy similar house for third or quarter median price
    median house price in cheap suburbs of New York like Newark or Peterson 20km from Manhattan is 1/3 of citywide median

      • ugliness is subjective but some other poor qualities quality of build, energy efficiency, mould, asbestos, .. are real

    • A friend bought an apartment in an inner area of Brooklyn for $500k. Only takes 20 minutes to centre of manhattan by train. Find the equivalent here.

        • beside few hotspots Brooklyn is not that expensive
          there are quite a few HDFC CO-OPs is areas close to Manhattan (e.g Williamsburg) where families making over $100k can buy 3 bdr units for 400k – 500k

  6. @peachy
    I’ll give you a chance to win back your money
    MB (DLS) forecast by Anzac Day will be 10%+ falls

    I’ll hold back in AUG 20% + falls bet

    • Not my thread but that is dependent on DLS making that call. He may or may not think it but it is another matter for him to make it public.

      • I agree, it’s a little joke more about peachy not DLS
        Ginger he knows it but he can’t say it and I understand why
        He’s a smart guy he knows what’s coming
        I’m not really interested in I told you so with MB
        The only one I want to see capitulate is the JOYE

        Ginger there is no need to say, honestly I’m not a told you so guy, I told gunna I care more about the pain people will suffer.

        And maybe I’d like to get rid of the abuse on here

        It’s coming ginger and it’s going to shock and frighten many people this year

        Bit of fun with peachy, not directed as offensive to MB

        But I’m pretty annoyed with DLS about the MB SPRUIKBOT
        I hope they bring it out