The economy of Australia is a highly developed market economy and is dominated by its service sector. Housing is a significant part of Australia’s economy, with residential construction accounting for around 2% of total employment and 6% of the country’s GDP.
There are many types of property to buy in the Australia, and many who move there choose to buy rather than rent, but this is not always the best choice, because before buying a house it is necessary to analysis the real estate market, doing financial planning and determining the risk profile. Prices vary greatly across the different countries and it has no sense buying an overrated house and spending more that its real value or buying a house that you cannot pay. In this work, we are going to analyse the real estate market and finding the 10 most affordable Australian cities to buy a home.
If we consider the price to income ratio, the less expensive city is Hobart, where are necessary 4.47 years to buy an apartment. Adelaide is in the second place with 4.57 years, followed by Canberra with 5.01 years, Gold Coast with 5.71 years and Brisbane with 5.76 years.
If we consider price to rent ratio of the city centre, the real estate market is undervalued in Canberra, so in this city buying an apartment is better than renting. In Hobart, Adelaide, Gold Coast and is better to rent, but not always, because under certain circumstances buying is better. In Perth, Melbourne, Sydney, Newcastle and Darwin the real estate market is undervalued, so in these cities buying an apartment is better than renting.
If we consider price to rent ratio outside the city centre, in Canberra, Hobart, Gold Coast, Adelaide and Brisbane is better to rent, but not always, because under certain circumstances buying is better. In Perth, Newcastle, Sydney, Melbourne and Darwin the real estate market is undervalued, so in these cities buying an apartment is better than renting.
If we consider the mortgage as percentage of income, the less expensive city is Adelaide, where the mortgage payment is about 33.5% of the incomes. Hobart is in the second place with 33.67%, followed by Canberra with 36.83%, Brisbane with 42.05% and Gold Coast with 42.49%. The most expensive city is Darwin with 147.18%.
Finally, it is recalled that there could be many occasions to buy an apartment at discount price when the real estate market is overvalued and not only when it is overvalued. In addition, that could be many expensive apartments despite the real estate market is undervalued.
About the data used in this work
Real estate market analysis is made considering an apartment of 90 square meters which price per square meter is the average of price in the city centre and outside of city centre. The indicators used are:
- Price to income ratio. It is calculated by dividing apartment price to median familial disposable income for a year. Lower value is better.
- Price to rent ratio. It is calculated by dividing the apartment price to the received rent income or the estimated rent that would be paid if renting. Lower values suggest that it is better to buy rather than rent, and higher values suggest that it is better to rent rather than buy.
- Mortgage as percentage of income. It is calculated by dividing the monthly cost of the mortgage to take-home family income. Lower value is better.
The data used in this work are provided by Numbeo and are relating to mid-2019.