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House prices in Australia Compared to the G8 countries

Is it cheaper to buy a home in Australia or in one of the G8 countries? CANSTAR has compared average house prices and interest rates to find where it’s most affordable.

Median house price and home loan in Australian cities

What does it cost to buy a house in Australia?

As the median house price in Australia can be skewed by the rising trend in Sydney and Melbourne, we have compared median house prices and home loans in a few of our capital cities.

Table: Interest paid on a home loan for the median house price,
at the average variable interest rate over 30 years
City Median House Price Median Home Loan with 20% Deposit Average Basic Variable Interest Rate Interest paid over 30 years
Brisbane $497,000 $397,600 4.60% $336,179
Sydney $1,000,000 $800,000 4.60% $676,416
Melbourne $707,000 $565,600 4.60% $478,226
Adelaide $485,000 $388,000 4.60% $328,062
Source: CANSTAR Repayments Calculator; Australian Property Monitor (APM) Price Finder

For further information on variable home loan products available for refinancing, the below comparison table has been formulated with direct links to the providers website. These have been sorted by our star ratings (highest to lowest). Please note that this table features products that are based on a loan amount of $600,000 for a property in NSW with a LVR of 80%.

Compare Home Loans for Australian Properties with CANSTAR

Median house prices and home loans in G8 countries

How do the above numbers to buy a house in Australia compare to our international buddies in the G8 countries?

As we don’t research or rate home loan products in the G8 countries, we have had to rely on Google and news sites to estimate average variable home loan rates around the world, so do keep in mind that these calculations are a bit of lighthearted comparison.

In the table below we have shown the median house price in the local currency, and then converted that price to Australian dollars (at a current exchange rate) to provide an estimation of the Australian-equivalent cost. Hopefully that makes sense!

Table: Interest paid on a home loan for the median house price, at the average variable interest rate over 30 years, ranked in order of expense.
Country Median House Price Average Variable Interest Rate and Central Bank Official Cash Rate (OCR) Interest paid over 30 years
Japan AU $591,321 / $249,382

(JPY 49,130,000 in Tokyo, JPY 20,720,000 in Osaka)

Ave variable 0.50%

(Cash rate 0.00%)

$37,849 / $15,964
France AU $374,501

(€250,000 or €2,000/ square metre)

Ave variable 2.21%

(Cash rate 0.00%)

$113,270
Germany AU $389,226

(€260,000)

Ave variable 2.45%

(Cash rate 0.00%)

$131,687
Canada AU $472,834

(CA $470,297)

Ave variable 2.15%

(Cash rate 0.50%)

$138,822
United Kingdom AU $553,442

(GBP £298,000 across England)

Ave variable 2.52%

(Cash rate 0.50%)

$193,084
Italy AU $880,912

(€588,000 for 120 square metres at €4,900/ square metre)

Ave variable 2.80%

(Cash rate 0.00%)

$344,981
United States of America AU $925,529

(USD $710,700 in California)

Ave variable 3.12%

(Cash rate 0.50%)

$408,564
Russia AU $333,313

(RUB 16, 830,000 at 187,000 rubles/ square metre in Moscow)

Ave variable 13.29%

(Cash rate 11.00%)

$816,311
Source: CANSTAR Repayments Calculator; G20Australia 2014; Organisation for Economic Co-operation and Development (OECD).

Assumes a 20% deposit. A list of resources used to estimate median property prices and average home loan rates is contained at the conclusion of this article.

It’s cheaper overseas

Compared to paying around $350,000 in interest on a loan in Australia, many countries present a cheaper option.

Compared to house prices in other OECD countries, Australia’s house prices have a high price-to-income ratio, and we also have a high price-to-rent ratio. The OECD has deemed our house prices overvalued and expects to see a price correction at some point if interest rates rise or wages plateau.

house price to income ratio around the world

Of course, there are a lot of other factors to consider when buying property overseas, so it’s best to do some research before you start dreaming about the big move! Here are some of our notes on just a few of the countries listed:

Japan

You might think that now’s a great time to buy, when interest rates are so low and prices are quite reasonable. According to the OECD, Japan currently falls into the category of OECD countries where houses appear undervalued and prices are still falling or roughly flat.

So why is Japan’s home ownership rate only about 61%? Commentators say the average wage does not usually make home ownership affordable, but in fact their average monthly wage is around the same or better than ours at 478,624 JPY or $5,701 per month (Statistics Bureau of Japan).

What’s more, public transport and food are cheaper; healthcare is subsidised and dental care is included in the public health insurance system.

Just remember what you’re getting for the price – homes in Japan are tiny by Australian standards. Most Aussies would have to drastically downsize the amount of stuff they own or pay for a storage unit in order to live in Japan.

Russia

How can Russians afford to pay such high interest rates? Put simply, people don’t take out loans.

80% of Russians own their own home, but less than half a percent of them used a loan to purchase it. Reportedly, there are only approximately 300,000 mortgage contracts in place across this massive country.

Houses are not as expensive as in Australia, so people prefer to save up the entire purchase price rather than pay excessive interest on a mortgage. But it’s still a lot of money.

Global affordability database Numbeo has data suggesting that in Moscow, a person earning the average wage would have to save at least 24 years’ worth of wages to buy a 90 square metre apartment. That’s a whole lot of budgeting and saving going on.

Germany

At 46%, Germany has the lowest rate of home ownership in the European Union. This may seem strange when they have an average interest rate of just 2.45% and an official cash rate of 0.00%.

In fact, Germany’s Prime Minister has asked the Central Bank to raise the cash rate “sooner rather than later” to normalise interest rates for savers and those on the pension. He said keeping rates low just to support the economic outlook would be less than helpful, comparing the situation to a “drug addict”.

Renting is a much more popular option than buying in Germany and France because they are able to obtain long-term leases of up to 6 years with fixed rent for that time period.

The OECD reports that houses in Germany have appeared undervalued, but prices are rising thanks to strong growth in household disposable income and low interest rates.

France

In France, the property you are able to buy will be determined by your income, and you cannot buy a property if the repayments would be more than 33% of your income. Also, every borrower is required to take out invalidity and death insurance on their mortgage. The premium for this can be quite steep, costing about 0.50% of your loan amount.

France has a home ownership rate of about 64% and is a popular retirement location for ex-pats.

Home is where the heart is

There may be some cities where it’s cheaper to buy a house than in Australia, but as the song goes, I’ll still call Australia home.

If you feel the same way, make sure that you’re not paying more than you have to. You can use the CANSTAR website to compare home loans across a broad range of interest rates, loan terms, fees and features, to find the loan that best suits your dream home.

 

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