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Australian Property Still Unaffordable

Despite the recent slowdown, Australian property is still very pricey by global standards. Australia's five biggest cities have been called "severely unaffordable" by Demographia, a global think tank dedicated to international housing affordability and urban planning research. Australia's own CoreLogic has disagreed with their figures, however, with the property data firm saying that affordability has improved over the past decade thanks to lower interest rates.  

The 14th Annual Demographia International Housing Affordability Survey covers 293 metropolitan housing markets in nine countries using data from the third quarter of 2017: Australia, Canada, China, Ireland, Japan, New Zealand, Singapore, the United Kingdom, and the United States. Sydney was ranked the second least affordable city in the world behind Hong Kong, with Melbourne coming in fifth, Adelaide 16th, Brisbane 18th, and Perth 21st.

The Demographia survey analysed the median house price in each city and divided it by the median pre-tax gross household income. In Hong Kong, property prices were 19.4 times higher than household incomes, with a price to income ratio of 12.9 in Sydney, 12.6 in Vancouver, 10.3 in San Jose, and 9.9 in Melbourne. Auckland was in ninth spot with a price to income ratio of 8.8, with Adelaide, Brisbane and Perth all recording house prices that were about six times more than incomes. 

According to the Demographia report, "There are 28 severely unaffordable major housing markets, including all in Australia, New Zealand and China... Overall, the major housing markets of Australia, New Zealand and China are severely unaffordable." Despite the unaffordable nature of the Auckland market, New Zealand was recognised as a global leader for restoring housing affordability. Housing has been a major issue in the past four New Zealand elections, with the new Labour government set to remove the Auckland urban growth boundary and free up density controls.

Urban containment was also recognised as a key factor in Australian markets, with the report stressing "Virtually all the severely unaffordable major housing markets… have restrictive land use regulation, usually urban-containment policy... Australia's generally unfavourable housing affordability is in significant contrast to the broad affordability that existed before implementation of urban containment [also called 'urban consolidation']."

Tim Lawless from CoreLogic has disagreed with the Demographia data, putting the price to income ratio at 9.1 in Sydney and 7.5 in Melbourne: "The big difference in results is because Demographia uses 'house' price figures, while CoreLogic uses 'dwelling' prices". Mr Lawless also said that affordability has actually improved in Australia over the last decade, with Sydney property owners spending less of their annual household income paying off their mortgages than they did in 2007. This is mostly down to low interest rates, with Sydney-siders typically spending 48 percent of their income on their mortgage compared to 40 percent in Melbourne and between 28 and 35 percent in other state capitals.


Image source: Ekaterina Kamenetsky/Shutterstock

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