Sydney and Melbourne “severely unaffordable”
Sydney and Melbourne “severely unaffordable”
24 January 2020
According to the latest Demographia global survey of housing affordability, as in each of the previous 15 Demographia surveys, all of Australia’s five major housing markets are “severely unaffordable.”
Despite what has been called the largest Sydney price reduction in 35 years, house prices relative to incomes are more than double the rate of the early 1980s.
In Sydney and Melbourne, median income households need at least three years’ more income to pay for the median priced house than in 2004, when the first Demographia Survey was published.
OECD expressed the following assessment of the Australian housing market (December 2018): “Australia’s housing market is a source of vulnerability. Prices have more than doubled in real terms since the early 2000s and household debt has surged. The market has started to cool over the last year, with prices falling most notably in Melbourne and Sydney. So far, data point to a soft landing without substantial consequence for the overall economy. Nevertheless, risk of a hard landing remains.”
Sydney is again Australia’s least affordable market, with a Median Multiple of 11.0, and ranks third least affordable overall, trailing Hong Kong and Vancouver. Sydney’s median prices are nearly four times the affordable benchmark, which is measured by dividing the median house price by the median household income.
Melbourne has a Median Multiple of 9.5 and is the fourth least affordable major housing market internationally. Only Hong Kong, Vancouver, and Sydney are less affordable than Melbourne. Melbourne is three times the benchmark.
Adelaide has a severely unaffordable 6.9 Median Multiple and is the 14th least affordable of the 92 major markets. Brisbane has a Median Multiple is 6.3 and is ranked 17th least affordable, while Perth, with a Median Multiple of 6.0 is the 19th least affordable major housing market in this year’s Demographia Survey.
Other “severely unaffordable” regions include the Sunshine Coast, Gold Coast, Geelong, Hobart, Fraser Island in Queensland and Canberra, followed by Brisbane, Ballarat and Cairns.
The report blames state and federal urban consolidation policies that restrict the amount of new land made available for developing new housing estates, typically on urban fringes.
Bob Day, a former contributor to the Demographia report, ex-senator and former national president of the Housing Industry Association, said: “The local housing problem is simple demand and supply. Land is being prevented from being used for houses by state and federal governments.”
“The real culprit is the refusal of governments to provide an adequate and affordable supply of land for new housing stock to meet demand,” he said. “The ‘scarcity’ that drives up land prices is wholly contrived – it is a matter of political choice, not geographic reality.”