Salient to Investors:

Sydney is the most unaffordable housing market in the English-speaking world. Demographia report Australian homes cost 6.7 times the gross annual median household income in Q3 2011 versus 3.1 times in the US and 5 times in the UK.

Apartment ownership is rising as more are being buyers priced out of the housing market. Apartments and townhouses accounted for 35 percent of new housing construction in Q3 2012 versus 29 percent 5 years earlier and 21 percent 20 years ago. 13.7 percent of Australians lived in their own apartments and townhouses in 20111 versus 12.4 percent in 2006.

RP Data report apartment prices rose 0.5 percent in 2012 versus a 0.5 percent decline for houses.

Sydney is 5 times the size of New York City and has 991 people per square kilometer versus 10,425 in New York, 3,124 in Los Angeles and 5,199 in London.

Debt as a proportion of disposable income climbed to 147.8 percent in Q3 2012 versus 76.5 percent 15 years earlier.

John Kim at CLSA Asia-Pacific Markets said apartments will be a big component of future residential living in Australia, and developers will have to get into apartments.

Traders are pricing in a 61 percent chance the RBA will hold rates at a half century-low of 3 percent next month. UBS, Commonwealth Bank of Australia, and Barclays forecast no rate cuts in 2013.

National Australia Bank said buyer demand is strongest for new inner-city, low-rise apartments and townhouses, and will strengthen for high-rise apartments in city centers and inner-ring suburbs in the next 12 months.

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