Australian property is STILL ‘severely unaffordable’

All five of Australia’s major housing markets are still “severely unaffordable” despite last year’s slump.

Unsurprisingly, Sydney is the most unaffordable market to enter, followed by Melbourne, with prices relative to incomes more than twice the rate seen in the 1980s, the Demographia International Housing Affordability Survey for 2018 reveals.

In fact, median income households would need to have at least three years’ more income to afford a median priced home than they would have in 2004.

And this atmosphere has persisted despite last year’s significant property value slump.

The researchers pointed to the OECD’s warning that Australia’s property market is at risk of a “hard landing”.

“Australia’s housing market is a source of vulnerability,” the OECD warned in December last year.

“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.”

What’s the cause?

Demographia researchers Alain Bertaud from the NYU Marron Institute of Urban Management and urban policy analysts Wendell Cox and Hugh Pavletich put the country’s difficult housing landscape down to urban containment policies.

These policies, called urban consolidation in Australia, mean housing development is limited to certain areas. It’s designed to encourage planners to densify rather than spread.

“Australia’s generally unfavorable housing affordability is in significant contrast to the broad affordability that existed before implementation of urban containment,” the researchers said.

“The price-to-income ratio in Australia was below 3.0 in the late 1980s. All of Australia’s major markets have urban containment policy and all have severely unaffordable housing.”

Sydney more expensive than New York

The survey covers 309 metropolitan housing markets across Australia, Canada, China (Hong Kong only), Ireland, New Zealand, Singapore, the United Kingdom and the United States.

Using the ‘median multiple’ – the median house price divided by the median household income – the researchers found Australia’s five markets were “severely unaffordable”, with a median multiple of 6.9 across major markets.

In fact, only two countries, Hong Kong and New Zealand had more unaffordable housing markets. The three countries were the only three to have “severely unaffordable” national markets.

And across individual markets, Sydney was the second-most expensive large city after Hong Kong and well above other famously pricy cities like London, New York and Singapore.

Outside of Australia’s major cities, Toowoomba (QLD), Bendigo (VIC), Bundaberg (QLD), Ballarat (VIC), Fraser Coast (QLD), Geelong (VIC), the Gold Coast (QLD) and the Sunshine Coast (QLD) were also classed as “severely unaffordable”.

Demographia described Gladstone in Queensland as Australia’s most affordable metropolitan market, followed by Rockhampton in Queensland and Darwin.

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