“Severely unaffordable”: Report lists 5 Australian cities in Top 20 least affordable
Sydney, Melbourne, Adelaide, Brisbane, and Perth are “severely unaffordable” according to a new report on housing affordability.
Residz Team 2 min read
Sydney, Melbourne, Adelaide, Brisbane, and Perth are “severely unaffordable” according to a new report on housing affordability.
Among 92 major housing markets in Australia, Canada, China, Ireland, New Zealand, Singapore, the United Kingdom and the United States, our five biggest cities are listed in the Top 20 least affordable.
Sydney takes the cake
Of the severely unaffordable five, Sydney is off the charts unaffordable. The pretty harbour city is second only to Hong Kong for being so staggeringly unaffordable for middle-income earners it is streets above data points that already classify it as “severely unaffordable.” In the Knight Frank Wealth Report 2022 which lists the most expensive residential markets in the world, Sydney is ranked 7th behind Monaco, Hong Kong, London, New York, Singapore and Geneva.
Price-to-income ratio determines affordability
Demographia’s International Housing Affordability 2022 edition report calculates the “median multiple” to rate middle-income housing affordability. It’s a price-to-income ratio, which is the median house price divided by the gross median household income (pre-tax). A score of 5.1 leads Demographia to list a city as “severely unaffordable.”
The 5 least affordable cities
Hong Kong with a score of 23.2 is far and away the least affordable of the 92 markets studied. Sydney is second on 15.3. Demographia says no market has ever reached these levels of unaffordability since it began reporting 18 years ago. Melbourne comes in at 5th place on 12.1 after Vancouver (13.3) and San Jose (12.6).
Three more cities in top 20 list of least affordable
Trying to buy a home in any of Australia’s smaller cities is also beyond most incomes. Certainly, middle-income earners are having to redirect more of their wages towards housing to have any chance of getting on the property ladder. Adelaide is number 14 on the list of least affordable cities on 8, Brisbane is number 17 on 7.4, and Perth is number 20 on 7.1.
Affordability went down during pandemic
As Demographia points out, housing affordability deteriorated during the pandemic. It says the number of severely unaffordable markets rose 60% during the two first years of the pandemic.
This is nothing to be proud of. The report says in a well-functioning market, the median priced house should be affordable to middle-income households and Australian cities have been severely unaffordable since the 2000s.
Summary
ABS statistics show residential property prices hit record levels for annual growth last year, rising 23.7 percent. However, housing prices are expected to eventually soften, according to CoreLogic, citing sooner-than expected cash rate increases, affordability constraints, and weakening consumer sentiment slowing demand. Nevertheless, saving a deposit while paying high rents, high petrol prices, and high prices for food and consumer goods won’t make houses any nearer in reach for the vast majority of buyers. It would seem the pandemic trend of buying property outside of the “severely unaffordable” cities will be with us for some time to come yet.
Image: Sydney, Australia, by Bernard Spragg, Wikipedia