A media outlet reports today that AMP's Shane Oliver reckons Sydney housing is expensive because the representative dwelling price is $634,000. Shane is actually wrong by $119,000 (or 23 per cent). According to the biggest database of home sales in Australia, which basically covers all transactions, the median dwelling price in Sydney is currently $515,000. And Shane might be interested to learn that contrary to what he claims, Sydney dwelling prices have only risen by a compound annual growth rate of 2.7 per cent over the last eight years. That means Sydney dwelling prices have likely declined over this period in 'inflation-adjusted' terms (after a very strong run-up prior to 2003). If we look at Sydney detached houses (as opposed to all dwellings), the compound annual growth rate falls to just 2.3 per cent.
In income-adjusted terms, the comparison is even more stark: the ABS reports that average disposable household incomes have grown by 6.3 per cent per annum since March 2003 (note that this is the 'per household' income growth rate, which is lower than the ABS's aggregated number). This is a massive difference. It means that whereas disposable household incomes across Australia have on average risen by 63.4 per cent, Sydney dwelling prices have grown by only 24.6 per cent. That is, incomes have outpaced Sydney dwelling prices by an extraordinary 38.8 percentage points over the period March 2003 to March 2011.
It is useful to straighten out the facts before you offer opinions on these subjects...
