Is Australia's housing really unaffordable?
A recent survey spells bad news for housing affordability. APM's Andrew Wilson disagrees.PT0M50S http://www.dailylife.com.au/action/externalEmbeddedPlayer?id=d-2d2e1 620 349 January 21, 2013
Australia still has the most unaffordable housing markets in the world despite two years’ of stagnant or falling house prices, according to the latest Demographia International Housing Affordability Survey.
Ahead of New Zealand, United Kingdom, Ireland and Canada, Australia has the largest number of housing markets, including both Melbourne and Sydney, that are classified as ‘‘severely or seriously unaffordable,’’ the ninth annual survey of its kind reveals.
The survey shows Sydney is the third most expensive major housing market in the world with a median multiple of 8.3 followed by Vancouver in Canada with a multiple of 9.5, and, most expensive, Hong Kong where the multiple is 13.5.
Melbourne is ranked as the seventh most unaffordable major housing market with a multiple of 7.5 after London and San Francisco and San Jose in California.
The Demographia survey ranks the affordability of housing in the US, Canada, Britain, Australia, New Zealand, Ireland and Hong Kong by dividing the median house price with the median household gross annual income before tax.
A multiple of three or less is seen as affordable.
The measure, widely used for evaluating urban markets, is recommended by the World Bank and United Nations and used by the Harvard University Joint Center on Housing.
Historically, the median multiple has been remarkably similar in Australia, Canada, Ireland, New Zealand, Britain and the US, the survey said.
But restrictive land supply policies have seen the median balloon in the last decade resulting in many more severely unaffordable markets, particularly in Australia and New Zealand, it said.
The most affordable major housing market was Detroit in the US, which had a median multiple of 1.5 reflecting the depressed state of its economy.
Outside the US, the most affordable markets were Edmonton in Canada (3.5), Dublin (3.6) and Ottawa-Gatineau (3.7).
The affordability of Australia’s major housing markets has improved, however, from a median multiple of 6.7 to 6.5 over the past year.
In the past year, Australia has moved down the ranking with 8 out of the 20 most expensive housing markets. Only four of those were in the top ten most expensive as opposed to five in last year’s survey.
‘‘However, each of the five major markets continues to be severely unaffordable, reflecting vastly overpriced housing,’’ the survey noted.
The last time Australia’s housing markets were classified as affordable was in the 1980s.
The country’s least expensive housing markets were in Shepparton and Mildura in Victoria.