Houses and wages

Another good graph and bonus data table. Cotality have put out another sobering snapshot of the housing market. However, my read may be different to most: Relative to wage growth, dwelling price growth is not out of control or in a 'crisis'. It's performing like most (all?) asset markets perform - skews to the top. But that skew has been relatively egalitarian vs the world. Over half our wealth comes from property where nearly 70% of the adult population owns a house (see forthcoming post on this). Housing performs like other asset classes – when incomes rise, values go up.

• Melb/Vic has been more affordable than others in recent years.
• Melb/Vic wages to price growth ratios have been much closer than the others over the past 5 and 10 years.
• Wages growth has been relatively uniform in all states, even over 20 years.
• The smaller capitals have caught Melb/Vic with ~80% price growth in the past 5 years.

Could argue that the higher house prices and the ‘catching up’ of the smaller capitals/states, have been supported by higher income growth in those state vs. NSW and Vic. Further, as the income growth has been fairly uniform across all states at around 80% over the past 20 years, then should we be surprised when the median prices for dwellings across the states start to exhibit more uniformity? Lending policies are fairly uniform across the states, so it makes sense that house values will reflect incomes to some degree over time. Except Sydney…they have better weather and it’s probably the prettiest capital in Australia where more people want to live.

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