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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

3

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

Introducing the Housing Affordability

Sentiment Index

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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

selected all status’ that applied to them)

Response %

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%

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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.

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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.

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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.

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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.

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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.

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The Housing Affordability Thermometer table

2011 HASI Decimal

HASI

Affordability

Thermometer Earnings Expenses Experience

Expect-

ations

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

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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.

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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.

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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.

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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.

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APPENDIX

State by State HASI graphs

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Generational HASI graphs

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Urban & Rural HASI graphs

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Property Status HASI graphs

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