Australia’s most populous cities are grappling with some of the world’s most exorbitant property prices, presenting significant challenges for prospective homeowners in Sydney and Melbourne.
The 2023 housing affordability report by Demographia underscores that in 2022, five of Australia’s largest housing markets were marked by unaffordability, with only Hong Kong trailing behind Sydney in terms of housing affordability.
The analysis compares median property prices to median incomes and generates a ratio that quantifies the affordability of housing. In simpler terms, Sydney’s median house price is divided by its median pre-tax income, resulting in a score of 13.3, whereas Hong Kong’s score stood at 18.8.
Melbourne secured the eighth spot on the list of least affordable markets, boasting a ratio score of 9.9. Similarly, Adelaide found itself among the top 20 most unaffordable markets, with a ratio score of 8.2.
The study meticulously scrutinized 94 global housing markets, with Pittsburgh in the United States emerging as the most affordable market, sporting a ratio score of 3.1.
Australia’s performance was notably lackluster in comparison to numerous other nations, as its five largest capital city property markets garnered the label “severely unaffordable,” with ratio scores exceeding 5.1. Perth attained a score of 5.4 on the affordability scale, while Brisbane garnered a rating of 7.4, as indicated by the Demographia report.
The report highlights that “Australian markets have a median multiple of 8.2, up from 6.9 in 2019,” representing an increase of 1.3 years’ worth of median household income. Evidently, all five of Australia’s major housing markets have been entrenched in the “severely unaffordable” category since the early 2000s.
In recent years, Australia’s standing in the realm of housing affordability has steadily deteriorated, with Adelaide, in particular, sliding down the rankings due to escalating house prices.
Regrettably, the prospects for affordability are poised to worsen in the upcoming years across Australia, as property prices embark on an upward trajectory, notwithstanding the highest interest rates witnessed in over a decade.
The latest data from CoreLogic reveals a nationwide uptick in property prices in August, while major banks predict further increases of approximately 7 percent within the next 18 months.
This persisting issue is largely attributed to the persistent imbalance between housing demand and supply. The confluence of surging population growth and a scarcity of affordable properties entering the market has exacerbated the challenge.
Even in the face of Australia’s housing predicament, Hong Kong retains its status as more costly than Sydney, primarily due to its exceedingly limited size. Nonetheless, Demographia highlights that the affordability score for the Chinese city has undergone significant improvement in recent years.
