In January 2016 Sydney and Melbourne both received the dubious honour of being ranked inside the top 10 least affordable major metropolitan housing markets in the latest edition of the Annual Demographia International Housing Affordability Survey. Demographia’s ‘median multiple’ approach has firmly established a benchmark for housing affordability by linking median house prices to median household incomes. It is as simple as it is ingenious and it is probably the index most cited with regard to housing affordability.
The ‘median multiple’ is not a perfect measure because it does not account for house sizes or build quality. But it is the only index that allows a quick comparison of different housing markets, and it is the best approximation of housing affordability measures we have to date.
Business owners and investors are confronted by headlines about tin sheds selling for millions of dollars in Sydney with land prices soaring in some cases way beyond what is a viable proposition for the average Australian. Ordinary Aussies are now also faced with a growing national housing affordability crisis, many Aussies wouldn’t be surprised to learn that housing in Australia’s major cities is among the least affordable in the world.
In a recent survey, Sydney came in number two on the list, with the survey claiming a median home in the city will cost buyers 12.2 times their median annual income.
Compared to the previous edition of the survey, buyers in Sydney now require an additional 2.4 times their median income to afford a median home, which is the largest annual increase recorded in the survey’s 12-year history.
International housing affordability think tank Demographia recently released its 13th survey on house prices around the world, analysing prices from the third quarter of 2016. The survey found that Sydney has the second most unaffordable major city housing in the world. Melbourne trailed closely behind, coming in at number 6 on the list.
Australia on the whole, was found to have the third most expensive housing market in the world. Hong Kong took first spot and New Zealand came in second place.
The survey compares average home prices to median income, and comprised 94 major cities and 406 areas in total and among the 94 severely unaffordable markets, 33 are in Australia,
The results suggest that housing that is three times the median income, or less, is unaffordable and in addition, houses that cost more than five times the median income are considered severely unaffordable.
Sydney’s housing is 12.2 times the median income and Melbourne’s is 9.5 times the median income and therefore way out of reach of the average Australian wishing to establish his/her family in what would be considered the hub radius of the cities.
Brisbane, Adelaide and Perth were also ranked severely unaffordable, coming in at 6.2, 6.6, and 6.1 times the median income respectively.