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CONTENTS BACKGROUND & METHODOLOGY... 4 Introducing the Housing Affordability Sentiment Index... 3 BACKGROUND & METHODOLOGY... 4 THE HASI... 5 The final HASI score... 6 THE HASI WHEEL... 7 Other demographics assessed... 8 THE HOUSING AFFORDABILITY THERMOMETER... 9 The Housing Affordability Thermometer table... 10 Conclusion... 11 PROFILES... 12 DEFINITIONS... 14 2
Introducing the Housing Affordability Sentiment Index Australians have always had passion for real estate and indeed owning one s own home has long been labelled The Great Australian Dream. The rising costs of housing over the last two decades relative to incomes and the resulting affordability challenges have been much discussed. However, this national research, conducted by my organisation and commissioned by realestate.com.au shows that the desire for Australians to own their own home still resonates strongly. This inaugural Housing Affordability Sentiment Index (HASI) is a unique and robust measure that looks at both the financial capacity of Australians to buy a home based on an analysis of their household earnings and expenses as well as their sentiment regarding the affordability and capacity to buy property both now and in the six months ahead. The unique HASI wheel succinctly encapsulates the past six months experience, the current economic realities and the forward expectations of Australian households regarding Australian real estate. It also measures the sentiment across various segments within the Australian society, such as the different generations, states and territories, rural and urban Australians and across buyers, sellers and renters. The housing affordability thermometer incorporated into this report visually displays where Australians lie in regard to their sentiment of housing affordability from rankings of poor or marginal to rankings of great or excellent. The HASI itself is an index with a base of 100 which will allow ongoing comparisons of housing affordability sentiment in this longitudinal study. realestate.com.au combines the Aussie desire for real estate with our appreciation for online services that effectively meet our needs. realestate.com.au is Australia s most popular real estate website for those looking to buy, rent or share property. We believe this Housing Affordability Sentiment Index will be a great resource for real estate writers, agents and the Australian public in understanding the current and future property sentiment of Australian households. Mark McCrindle Director, McCrindle Research 3
BACKGROUND & METHODOLOGY This inaugural Housing Affordability Sentiment Index (HASI) is a research instrument that provides a visual snapshot of Australians earnings, expenses, and recent affordability experience and affordability expectations in the six months ahead. The research is based on a national survey conducted by McCrindle Research in May 2011 of 2202 respondents, across the following demographics: GENDER Response % Male 1,158 53% Female 1,044 47% AGE Response % 25-31 (Gen Y) 326 15% 32-46 (Gen X) 676 31% 47-65 (Boomers) 790 36% 66+ (Builders) 410 19% LOCATION Response % NSW 305 14% VIC 298 14% QLD 300 14% TAS 294 13% NT 104 5% SA 299 14% WA 298 14% ACT 304 14% URBAN/RURAL Response % Urban 1,543 70% Rural 659 30% PROPERTY STATUS (respondents Response % selected all status that applied to them) Looking to sell 297 13% Looking to buy 478 22% Looking to rent 184 8% Looking to renovate 415 19% Looking to house share 44 2% None of the above 1,173 53% 4
THE HASI The HASI measures four key areas (and 8 sub-areas) which impact upon attitudes towards the property market; earnings, expenses, experiences and expectations. Each of these four areas was subdivided into two areas, so in total eight distinct categories were assessed to find a total HASI score. The four sections and eight subsections are as follows: The earnings quarter measures current income (and how this has changed over the last six months) and current savings (whether they have increased or declined in the previous six months). This section includes the subcategories of: Income: This section assessed whether respondents total household income has improved over the past six months compared to the six months before that. Savings: This section identified whether total household savings have increased or decreased for families over the past six months, compared to the six months before that. The expenses quarter identifies how household bills and expenses and household debt has changed over the past six months. This section includes the subcategories of: Bills: This section assessed whether respondents total household bills and expenses have changed in the last six months, compared to the six months before that. Debt: This section assessed whether household debt levels (including credit card debt and mortgage) have changed in the last six months compared to the six months before that. 5
The experience quarter researches the current experience of Australians, measuring their current financial capacity position and how affordable real estate is in their current situation. This includes the subcategories of: Capacity: This section assessed whether respondents estimate their financial health is better or worse than it was six months ago Affordability: This section assessed whether respondents estimate housing affordability is more or less achievable than it was six months ago. The expectations quarter analyses Australians expectations about their financial capacity and affordability looking ahead six months. Capacity: This section assessed whether respondents estimate their overall financial health will be better or worse in six months time. Affordability: This section assessed whether respondents estimate housing affordability will be more or less achievable in six months time. The final HASI score On each of the questions related to these eight areas, survey respondents had to complete a seven point likert scale where 1=significantly worse off or declined massively and 7= much better off or increased massively and 4 was the median point (neither declined nor increased). The various scores were then averaged, so an earnings score of 3.76, in other words, is 24 basis points below the median of 4. All of the scores were then averaged to give a final response and this was then converted into an index with a base line of 100. This forms the Housing Affordability Sentiment Index. 6
THE HASI WHEEL The HASI wheel visually demonstrates how the current situation of affordability (earnings and expenses) and the current sentiment (experience and expectations) relate. The outside of the circle represents an extreme positive sentiment (7 on the index), while the middle point represents an extreme pessimistic sentiment (1 on the index). The middle circumference represents the base score of 4. The HASI wheel below shows the national sentiment towards housing affordability and the Housing Affordability Sentiment Index of 85. 7
Other demographics assessed HASI scores were also generated according to the states and territories of Australia, the current generations buying property, urban/rural residents, and property status whether buying, selling, renting or renovating. The full HASI wheels for these can be found in the appendix of this report, but for a cross tabulation of these results, please see the Housing Affordability Thermometer table below. 8
THE HOUSING AFFORDABILITY THERMOMETER The Housing Affordability Thermometer is another visual tool that shows where each demographic sits on the HASI. It provides a summary in a glance about whether the sentiment is negative or positive. The Thermometer assumes a neutral score of 4 as an affordability par. Anything below the 4 (and scores stretched down to 3.49) is in the negative zone, anything above a 4 (no scores were recorded above 4 in this survey), represents a positive situation. 9
The Housing Affordability Thermometer table 2011 HASI Decimal Affordability Expectations Earnings Expenses Experience HASI Thermometer NATIONAL 85 3.55 Poor 3.76 3.32 3.41 3.72 STATES NSW 84 3.53 Poor 3.72 3.32 3.36 3.71 VIC 84 3.52 Poor 3.80 3.27 3.38 3.63 QLD 83 3.50 Poor 3.72 3.30 3.32 3.69 WA 83 3.49 Poor 3.66 3.19 3.35 3.75 SA 85 3.54 Poor 3.70 3.33 3.42 3.71 ACT 89 3.68 Poor 3.87 3.42 3.54 3.88 TAS 85 3.55 Poor 3.76 3.31 3.43 3.71 NT 92 3.75 Marginal 3.90 3.50 3.64 3.97 GENERATIONS GEN Y 93 3.78 Marginal 3.97 3.45 3.61 4.07 GEN X 86 3.57 Poor 3.71 3.33 3.42 3.83 BOOMERS 86 3.59 Poor 3.81 3.32 3.49 3.74 BUILDERS 83 3.50 Poor 3.82 3.27 3.40 3.51 URBAN/RURAL URBAN 86 3.59 Poor 3.80 3.34 3.45 3.77 RURAL 82 3.47 Poor 3.68 3.28 3.28 3.62 PROPERTY STATUS BUY 93 3.80 Fair 3.99 3.39 3.73 4.12 SELL 87 3.60 Poor 3.69 3.23 3.55 3.95 RENT 86 3.57 Poor 3.69 3.37 3.29 3.91 RENOVATE 86 3.59 Poor 3.73 3.24 3.51 3.87 10
Conclusion In every demographic group tested in the HASI in May 2011, none sat on the index over the base mark of 100. This shows that the sentiment towards housing affordability in Australia is relatively pessimistic. In particular, Australians are struggling with the rising cost of living; with a score significantly lower than the middle line (4) in the expense section of the index, mainly fuelled by negative sentiments towards bills and debt. However, there was a sense of optimism shown by respondents that in six months time their general financial health would be improved, with slightly higher rankings in the expectation section (comprised of future capacity and future affordability). When exploring the general financial health of respondents, the reasons behind the HASI were clear. There was a continued theme of financial struggle, caused by the rising costs of living experienced by Australian households. 11
PROFILES realestate.com.au realestate.com.au, owned by the REA Group, is Australia s market leader in online real estate advertising. The site offers consumers more property listings that any other online portal nationally, with over 7 million unique (1) browsers visiting the site each month. The company was established in 1995 in a garage in the Melbourne suburb East Doncaster. Like many internet start-ups, in the early days there were many challenges to overcome. Despite limited capital and various setbacks along the road to success, the company remained steadfast and focused in its vision to deliver innovative online marketing services for the real estate industry. Today realestate.com.au is part of a multinational ASX 300 company. As realestate.com.au recognises the challenges many Australians face in entering the property market, it is committed to offering consumers and customers the latest insights and trends around housing affordability and property, no matter what stage of the property lifecycle they may be at. Over the past few years, significant technology investments have been made in developing products to ensure the site remains at the forefront of innovation. This includes the recent release of realestate.com.au s app for iphone and Android TM which have collectively have reached more than 284,000 downloads (3). Sites the REA Group own are: - realestate.com.au: Australia's number one property site - reamedia.com.au: Home of property and lifestyle brands - realcommercial.com.au: Australia's number one commercial property site - property.com.au: Australia's largest list of properties to buy or rent - hubonline.com.au: HubOnline provides web design services and CRM Tools specifically for Real Estate Agents - casa.it: Italy s number one residential property site - athome.lu: Greater Luxembourg s number one residential property site athome Group also operates in Germany (athome.de) and the Alsace and Lorraine regions of France (immoregion.fr). - squarefoot.com.hk: The only independent English-language property site dedicated to property in Hong Kong. The Chinese-language site launched in 2010. 12
McCrindle Research McCrindle Research exists to conduct world class research and communicate the insights in innovative ways. We are a market and social research agency that counts amongst our clients 100 of Australia s largest organisations. McCrindle Research has developed an international reputation for our demographic studies, social trends research, consumer analysis, and generational insights. Footnotes: (1) realestate.com.au attracted 7,662,698 unique browsers during the month of March 2011.Nielsen Market Intelligence, Nielsen SiteCensus, Omniture SiteCatalyst (2) 570,469 March 2011, source Mobile traffic sourced from Omniture Site (t) Report (3) As at 26 May 2011, the app for iphone has attracted 272,877 downloads. Source: Apple ITunes App store. Apple, iphone and the Apple logo are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. As at 26 May 2011 the Android App attracted 11,199 downloads. Source: Android Marketplace. 13
DEFINITIONS HASI The Housing Affordability Sentiment Index is a unique study that measures the current financial situation of Australians and their sentiment towards affordability. It provides an index measure with a benchmark and a base of 100. HASI WHEEL The HASI wheel visually demonstrates how the current situation of affordability and the current sentiment relate. The outside of the circle represents an extreme positive sentiment (7 on the index), while the middle point represents an extreme pessimistic sentiment (1 on the index). The middle circumference represents the base score of 4. HASI THERMOMETER The Housing Affordability Thermometer is a visual tool that provides a summary in a glance about whether the sentiment is negative or positive across a particular demographic. The Thermometer assumes a neutral score of 4 as an affordability par. Anything below the 4 is in the negative zone, anything above a 4 represents a positive sentiment. SENTIMENT This survey does not attempt to uncover economically how housing affordability is tracking. The approach instead is interested in how Australians think and feel about buying, selling, renting or renovating a home, and tracks these sentiments rather than housing prices themselves. 14
APPENDIX State by State HASI graphs 15
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Generational HASI graphs 19
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Urban & Rural HASI graphs 21
Property Status HASI graphs 22
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