Australia has no affordable housing markets, and Sydney is the second least affordable housing market in the world, a new report analysing 293 housing markets has found.
The 14th Annual Demographia International Housing Affordability Survey looks at housing affordability in 293 metropolitan housing markets (metropolitan areas) in nine countries for the third quarter of 2017.
The countries covered in the report are Australia, Canada, China, Ireland, Japan, New Zealand, Singapore, the United Kingdom and the United States.
Compiled by Wendell Cox from Demographia and Hugh Pavletich from Performance Urban Planning, the report classed middle-income housing affordability as the median house price divided by the median household income.
It looked at 293 housing markets, of which a total of 92 were “major metropolitan markets” (markets with more than one million residents).
Notably, the analysts found that there were no “affordable” housing markets in Australia (classed as having a median multiple score of 3.0 or under) and that all the major housing markets of Australia were “severely unaffordable” (with scores of 5.1 or above).
In fact, the researchers found that Sydney is again the second least affordable market in all 293 markets, behind Hong Kong.
When dividing median house price by median household income in Sydney, the researchers arrived at a median multiple of 12.9, “the highest ever recorded outside Hong Kong in the Demographia International Housing Affordability Survey”.
The report reads: “Sydney is again Australia’s least affordable market, with a median multiple of 12.9, and ranks second worst overall, trailing Hong Kong.
“Sydney’s housing affordability has worsened by the equivalent of 6.6 years in pre-tax median household income since 2001. This is a more than doubling of the median multiple. In contrast, Sydney’s housing affordability [decreased by a quarter as much] between 1981 and 2001.”
The researchers noted that the UBS Global Real Estate Bubble Index rates Sydney as having the world’s fourth worst housing bubble risk (tied with Vancouver).
Melbourne was found to be the fifth least affordable major housing market internationally (with a score of 9.9), with only Hong Kong, Sydney, Vancouver and San José as less affordable.
The Victorian captial’s median multiple has deteriorated from 6.3 in 2001 and under 3.0 in the early 1980s.
“Just since 2001, median house prices have increased the equivalent of more than three years in pre-tax median household income,” the researchers said.
The other major Australian markets also fared badly:
Adelaide was “severely unaffordable” with a 6.6 median multiple, making it the 16th least affordable of the 92 major markets;
Brisbane was ranked 18th least affordable (with a median multiple of 6.2); and
Perth was the 21st least affordable major housing market (at 5.9).
The most affordable markets in Australia, which the report classed as being “moderately unaffordable” (with a rating under 4.0), are Gladstone, Queensland at 3.2, and Rockhampton, Queensland at 3.9.
Overall, however, Australia’s 22 housing markets have a “severely unaffordable” median multiple of 5.9.
The report reads: “There are no affordable or moderately affordable markets in Australia.
“Overall, 15 markets in Australia are rated severely unaffordable.”
The least affordable housing markets that are not in capital cities are the Sunshine Coast, Queensland (9.0) and the Gold Coast, Queensland-New South Wales (8.4).
The researchers suggested that “urban containment” was a large contributor to the affordability problem.
They write: “Australia’s generally unfavorable housing affordability is in significant contrast to the broad affordability that existed before implementation of urban containment (called urban consolidation in Australia).
“[T]he price-to-income ratio in Australia was below 3.0 in the late 1980s. All of Australia’s major markets have urban containment policy and all have severely unaffordable housing.”
According to the report, the most affordable housing market in the 293 markets is Youngstown, Ohio, in the Unites States, which had a score of 1.9.
In fact, the 10 most affordable major housing markets are all in the United States.
Ireland and the United States have the most affordable housing, with national median multiples of 3.7 (moderately unaffordable).
Canada is third at 3.9 and is followed by Japan, which has a “seriously unaffordable” rating of 4.1.
The United Kingdom (4.5) and Singapore (4.8) are also rated “seriously unaffordable”.
However, the least affordable countries for housing are the “severely unaffordable” markets in China (Hong Kong), at 19.4, Australia (6.3) and New Zealand (5.8).
In all, there are 26 severely unaffordable major housing markets in 2017, with Hong Kong leading the way with a median multiple of 19.4 (up from 18.1 last year).
Sydney is second, followed by Vancouver (12.6), San José (10.3) and Melbourne (9.9).
The least affordable 10 also includes Los Angeles (9.4), Honolulu (9.2), San Francisco (9.1), Auckland (8.8) and London (8.5).
Increasing focus on affordability
The report comes amid increasing calls for the government to address housing affordability in Sydney and Melbourne. While the federal government has recently released draft housing affordability package to help “improve housing outcomes for Australians”, there have been mounting calls for state and federal governments to move forward with housing reforms to improve the accessibility of the housing market.