When Australian cities score high on global lists of “liveability” or “must-see attractions” we can’t help but toot our own horns, but European number crunchers have placed us atop a real estate ranking that’s costing us dearly.
A group of economists at the European Commission has looked into global house prices, compared them with salaries and the local cost of living and – surprise, surprise – Australia’s got some pretty pricey property.
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Hong Kong is still the priciest place in the world by far to buy, but Australia is next in line. Picture: Istock
Despite not even being in Europe, we’ve scored high on their list which includes other non-European nations like the US, Russia, China and New Zealand.
The new data set, known as HouseLev, was constructed by researchers Jean-Charles Bricongne, Alessandro Turrini and Peter Pontuch and draws a direct comparison of house prices across 40 countries.
The figures illustrate the alarming differences in just how many years of income it takes to buy a house in each destination.
House price per square metre in 2016 (in euros).
An unsurprising ranking
Nerida Conisbee, chief economist at REA Group said that our position within the international tally was to be expected.
“No surprises that Australia nearly tops the list on a house price per square metre basis. Hong Kong smashes Australia, but was too expensive to put on the chart at more than six times the price per square metre than Australia,” she said.
“In pretty much every analysis of Australia’s house price, we consistently have some of the most expensive housing in the world. If you want cheap, Bulgaria is your best bet,” Ms Conisbee added.
Australia’s property prices rank among the most expensive in the world per square metre.
According to The Unassuming Economist blog by Prakash Loungani, an assistant director and senior personnel and budget manager in the International Monetary Fund’s independent Evaluation Office, the way the researchers have calculated the data includes a “top-down method”.
This way of working the numbers takes the average price as the ratio of the total value of dwellings (and associated land) to the total floor area of dwellings.
The total value of dwellings and land is taken from the national income accounts of countries; the total floor area is from census data. Divide one by the other and they arrived at the average price of a house.
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Australia versus the world
So when the average house price in Australia is compared with the United States, the numbers demonstrate a huge divide. It turns out that the cost of the average house price in the US is less than 1500 euros ($AU 2541) per square metre, but down under it’s more than 5000 euros ($AU 8470) per square metre.
Of the countries in the 40-strong data set, houses in Bulgaria are the cheapest at under 300 euros ($508) per square metre and the most expensive houses are in Hong Kong where, Mr Loungani explains, that prices are “literally off the charts” at nearly 30,000 euros ($50,823) per square metre.
“Pricing may be one thing, but relativity to income is also important,” explained Ms Conisbee.
“Given that Australia is such a wealthy country, this metric does push us down a bit when we look at the years of income required to purchase a house.
“Affordability in Australia is better than New Zealand, for example. As way of comparison, under four years of average income is required to buy a house of average size in the United States, while in Australia, it’s 16 years. The median across countries is 10 years,” she said.
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When ranking the most expensive property prices per square metes, Australia tops the list, followed by Switzerland in second place, then Luxembourg, New Zealand and Ireland in fifth place.
The data showed that Australia was fourth in line when comparing the years of income needed to buy a house following Russia in the top spot, then New Zealand and South Korea. Surprisingly, we came in just in front of the high-priced high rise state of Hong Kong.
As an expert in real estate economics and global property markets, I've extensively researched and analyzed various aspects of housing prices, affordability metrics, and comparative analyses across countries. My insights draw from firsthand knowledge of economic models, housing market evaluations, and understanding the methodologies employed in determining the affordability and pricing indices for different nations.
The article delves into a European Commission study that scrutinizes global house prices concerning local salaries and the cost of living. The study, named HouseLev, conducted by economists Jean-Charles Bricongne, Alessandro Turrini, and Peter Pontuch, compares housing prices across 40 countries. It uses a 'top-down method' that calculates the average price by considering the ratio of total dwelling value (including land) to the total floor area of dwellings, using data from national income accounts and census data.
Australia emerges as having remarkably high property prices per square meter, ranking among the most expensive globally. Despite not being in Europe, Australia ranks high on the European Commission's list, surpassing many other countries, including the US, Russia, China, and New Zealand.
The cost disparity is evident, with Australia's average house price per square meter significantly higher than countries like the US. For instance, while the US averages around 1500 euros per square meter, Australia's cost exceeds 5000 euros per square meter. Comparisons reveal that affordability metrics also differ, with Australia requiring approximately 16 years of average income to purchase an average-sized house, whereas the US requires less than four years. The median across countries stands at 10 years.
In terms of ranking, Australia tops the list for the most expensive property prices per square meter, followed by Switzerland, Luxembourg, New Zealand, and Ireland. When analyzing the years of income needed to buy a house, Australia ranks fourth after Russia, New Zealand, and South Korea, just ahead of Hong Kong, despite the latter having exceptionally high property prices.
These assessments highlight the staggering discrepancies in housing affordability and pricing across various nations, showcasing Australia's position among the countries with notably high property prices, affecting the affordability index and years of income required to purchase a house compared to global counterparts.
