Wednesday, 13 May 2009

Heading for a fall?

The average house price in Sydney is still around the $550,00 mark.

From moneyweek, via the Adam Smith blog, we get:

The average salary multiple over the last 37 years (1971 to 2007) is 4.54. At the 2007 average wage of £24,000, that gives an average house price of £109,000 – a fall of 40% from the peak. But if you exclude the bubble years (from 2001 to 2007), you get a 4.17 average salary multiple – which would give an average house price of £100,091, a fall of 45% from the peak.

The average weekly earnings in Australia are about $1100 per week, or $57,200 pa.

If we use the pommy multiplier of 4.17, that gives us an average house price of $240,000.

House prices only have to fall 57% to reach that level.



Margo's Maid said...

It would be interesting to know the reasons behind Australia's high house prices, BOAB. One of the reasons, I suspect, over recent years, is a lack of land being made available in major cities, and decent infrastructure in outer suburbs.

Boy on a bike said...

All major cities suffer from these problems - read any story about LA, New York, London - they are always complaining about transport and limited land. London is ringed by a green belt that limits development, Manhattan is an island, LA has hills to the east. All have suffered real estate bubbles, and all are now undergoing major asset price deflation.

My answer is "cheap credit".