The last few months have been extremely busy for me - three large UxD projects running concurrently - and I've been holding off writing anything so that I could say something about those jobs, but I saw this in the media yesterday and felt obligated to point it out. (Past readers will know how much this sort of thing bugs me...).
The article in question contained the following quote:
"By 2016 we will spend so much of our discretionary income on mortgages there will be nothing left for putting food on the table. We will be paying 15 times our yearly income to buy a home, if wages, debt and house prices keep growing at the present rate."
Now, there are a few things wrong here, which you should be awake to when reading.
1. Unrealistic assumptions: how realistic is it that wages, debt and house prices will continue to increase at a steady rate over a period of 9 years. These three economic characteristics are fairly volatile - house prices, for example, have been particularly unsteady over the past 10 years, so there should be no real expectation that they'll be anything other than volatile in the forthcoming 10 years.
2. Uncritical extrapolation: at some point, when extrapolating data into the future like this, it is important to take a 'reality check' and see whether the end point makes any sort of common sense. Would, for example, a family buy a house at a price that means they couldn't eat?
3. Definitions: to me, discretionary income is what we have left after all necessary payments have been taken out. So, to my mind a mortgage payment is not discretionary; nor, for that matter, is food.
4. Forgetting the alternatives: since it's not necessary for people to actually own their own home - they could rent - the notion that they would buy a house and put themselves in such debt that the interest repayments would effectively bankrupt them in all other respects is, again, somewhat ludicrous.
Sadly, this undermines an otherwise fairly solid look at the property market & the issue of housing affordability in Australia.
I promise I'll write something about my recent projects soon...
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