December 2, 2021

Overvalued or Undervalued Market Analysis

In this month’s white paper, InvestorKit reviews and provides a deep-dive into the housing affordability of the 8 Capital Cities and 25 most populated non capital regions by comparing each city’s median house price in line with local incomes. Housing affordability can be looked at in many ways; debt to income, income to repayments, time to save a deposit and more. For the purpose of this analysis debt serviceability through the use of mortgage payments at various interest rates vs incomes were the key focus.

A dual income household was considered, with 30% of their net incomes being the affordable benchmark. We then compared this to median house prices with an 80% loan to value ratio, on P&I repayments at both 3.5% and 4.5% home loan interest rates over 30 year loan terms. Using this comparison we could then say, median house prices would need to grow by (undervalued) or fall by (overvalued) X% amount to have the repayments (at 3.5% or 4.5% interest rates) match the 30% of net income affordable benchmark. 

Following this over/under valued assessment, we introduced more layers to this review by completing a deep dive into each locations market pressure (supply/demand analysis), recent 10 year performance (market cycle positioning), yields, and commentary for what we feel 2022 holds for each of these locations.

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Meet the Authors

Junge Ma
Research Analyst
Arjun Paliwal
Director & Head of Research

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Overvalued or Undervalued Market Analysis

Here's what you
will discover...

Which cities’ house prices have exceeded the locals’ home loan serviceability?
Where can you enjoy relative affordability and prospects for capital growth?
Which markets are selling fast and are investor-friendly with healthy yields?