My phone was lighting up with messages when I woke up on Tuesday morning.
Not with tips for the Melbourne Cup… but rather from friends and family asking if I’d seen the Four Corners report that aired on ABC on Monday night.
It was a report on the housing affordability crisis. I hadn’t watched it but did manage to catch the replay.
Here are my three key takeaways on that report and affordability more generally.
Firstly, affordability isn’t a new problem. The Four Corners report cited a headline from a 1963 paper questioning how young Australians were ever going to afford to own their own home amid spiralling house prices (the Sydney median house price was about $15,000 at the time).

Secondly, I was left feeling unsure as to whether housing is unaffordable or not.
The Four Corners report – and most commentary on affordability – does a good job at explaining that house prices have increased in value. That proves house prices are less affordable, but does it automatically mean they’re unaffordable?
The average household income in Australia in December 2020 (when it was last recorded) was $122,148 per annum. That works out to be $91,886 after tax, which is $7,657 in monthly, after-tax income.
The median dwelling price (i.e., houses and units combined) in Australia, as of 31 October 2021, is $686,339.
Repayments on an 80% loan for a dwelling of that price come to $2,139 per month – 28 per cent of the household monthly, after tax income.
Repayments on a 90% loan for a dwelling of that price come to $2,601 per month – 34 per cent of the household monthly, after tax income.
Is it ‘affordable’ for a household to put 28 to 34 per cent of their income towards their mortgage?
People’s answers will differ. Personally, I would have thought 30 to 40 per cent of after-tax income going toward a mortgage is doable.
Unfortunately, the Australian Bureau of Statistics doesn’t break down household incomes in as much detail as house prices. We can see household incomes state by state, but don’t get numbers on incomes in the cities versus the regions, or on a city-by-city basis, like we do with houses.

This leads me to my third takeaway.
There is no doubt in my mind that it’s unaffordable to live in a house in Sydney today.
The median house value in Sydney is $1,333,767. 
Based on the Sydney median house price, for repayments on an 80 per cent loan to sit within 30 per cent of a household’s after tax income, a household would have to earn $250,000 per annum. That’s double the average household income throughout Australia.
But just because Sydney is unaffordable doesn’t mean house prices in Australia are unaffordable.
The median house price in Melbourne is 73 per cent compared to Sydney’s, Brisbane is 55 per cent, Perth 41 per cent and Adelaide 44 per cent.
Do people in Melbourne earn 25 per cent less than what people earn in Sydney? Do people in Brisbane, Perth and Adelaide earn half of what a household earns in Sydney?
I doubt it on all the above.
History says that Sydney is the first market to grow in value until it gets to a point
Each market gets to a point where people can justify the affordability and lifestyle benefits of a smaller city, against the income and career benefits that a bigger city offers.
That could see people move from Sydney to Melbourne, Melbourne to Brisbane, etc.
In my hometown of Brisbane, the median house price between 1970 and 2021 has sat somewhere between 50 per cent and 78 per cent of the Sydney median house price. It’s a similar story in Melbourne, Perth and Adelaide.
I don’t think it’s unaffordable to buy a house in Australia today. I think it’s unaffordable to buy a house in Sydney, and I think with borders opening up again we will see people move away from Sydney for a better lifestyle.
From an investment perspective, I think that offers good prospects for growth in places like Brisbane, Adelaide and Perth.
Do you know how much of your household budget goes to paying your mortgage? What if you include other household expenses like rates, water, electricity and insurance?
You can download a FREE copy of my budget tool which will help you figure that out!

Crypto investments?

Q – I saw this week that Commonwealth Bank is now facilitating buying and selling cryptocurrency. What are your thoughts on bitcoin and other crypto investments?

A – I had this question a few times in the past fortnight, and yes, I did see that news.
First of all, I’m no expert on cryptocurrency.
I mostly understand its practical use as a safe way to store money.
I don’t understand what causes cryptocurrency to increase or decrease in value. The supply side is straight forward – supply of Bitcoin, for example is capped at 21 million ‘coins’. What I don’t understand is what drives demand for the cryptocurrency, given that all they are is a way to store money.
Other than people speculating, what has caused a bitcoin to go from being worth $1,000 to $83,000 in the space of 5 years?

I don’t want the anxiety of investing in something I don’t understand, so it’s not for me personally.
Having said that, I do acknowledge lots of people have made good money out of cryptocurrency.

James Fitzgerald