Any large fluctuations in home prices remain ‘unlikely,’ according to the latest HIA Economics Group Perspectives on Australian House Prices report, which looks at mortgage repayments as a ratio of total earnings in order to check the country’s housing market pulse.
“Mortgage repayments represent a powerful indicator, as they incorporate prevailing house prices and interest rates into one measure,” explains the report. “When taken as a proportion of earnings, a useful perspective on house purchase affordability is provided.”
The HIA Economics Group has calculated that, over a 23-year period between 1990 and 2012, the relationship between average mortgage repayments and earnings has varied significantly, bottoming out in the late 1990’s and peaking in 2008.
Since 1990, however, average mortgage repayments have accounted for roughly 40% of earnings.
“Currently, the ratio is slightly above its long-term average. This suggests that the relationship between earnings, interest rates and house prices is balanced and consistent with stability in the market. Accordingly, any large price swings are probably unlikely in the near future.”