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
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