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28 Sep 2020

Australian Residential Property: Housing Affordability

‘Lies, dam lies and statistics’ is a phrase used to describe the persuasive power of numbers to support a view.

If numbers are to be believed then housing affordability (paying a mortgage) has not been this cheap since the 1990’s if you exclude 2008 Global Financial Crisis.

Click for chart.

The driver has been the collapsing interest rate.

The problem with a collapsing interest rate is that residential property prices have been driven to record high levels requiring ever larger dollar amounts to be borrowed to make the acquisition.

This recession was expected to deflate residential property prices so where is the forecast 20% plus price collapse?

Just like an elastic band, if you continue to stretch and stretch, the elastic band will eventually break and that also applies to asset prices.

Remember what Benjamin Graham taught as part of his value investing principles, stay invested according to your appetite for volatility and when fear and panic take hold, react by buying more quality assets at discounted prices.


At Newealth we are always looking to support and promote our clients wherever possible and if you have any ideas or comments, please feel free to email me or to call me on +61 2 9267 2322.

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