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Australian housing 'severely unaffordable'

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.

130 comments

  • > But restrictive land supply policies have seen the median balloon in the last decade

    And this statement is where this article departed from reporting, and ventured into opinion. There are lots of places in Australia, in different states, with different land supply policies, and yet all of them have produced the same housing bubble.

    It is cheap credit that feuled this boom. Australia still has a very good employment situation, and therefore, a good credit profile. As soon as that turns south, the price of houses plummets, regardless of land supply policies.

    This is poor journalism.

    Commenter
    Pi
    Location
    Melbourne
    Date and time
    January 21, 2013, 5:46PM
    • Oh dear, lets all read that again shall we? - "SEVERELY UNAFFORDABLE".

      Surely, surely, we're heeding the warning signs?

      Surely?

      :)

      Commenter
      FONZ
      Date and time
      January 21, 2013, 6:09PM
    • Cheap credit was part of facilitating the boom, but it was secondary to the massive subsidies to landlords:

      (a) Negative gearing, whereby a landlord can deduct cash losses on property from non-property income; and

      (b) The capital gains tax concession, where capital gains are taxed at half the rate of tax on income you get from honest work.

      What these things have meant is that people with one or two hundred thousand dollars to spare have become landlords, pricing young working couples out of the housing market. They get their capital gains taxed very lightly, while in the meantime, they get to write all their expenses off immediately. Cheap credit is only the icing on the cake.

      Commenter
      Greg Platt
      Location
      Brunswick
      Date and time
      January 21, 2013, 6:15PM
    • It is a chain of greedy events, firstly the housing and rental shortage leading people to take in cash in hand boarders at top dollar for a mere share room, then once prices climbed sharp, building supply places saw opportunity to revalue sale price of materials to suit house price rises creating massive clear profit as wholesale prices hardly increased, thus the cost of building artificially increased due to this greedy rise. Politicians fed the market and manipulated banks as most members have big property investments. Finally no more loan qualifiers left and prices started a decline and lowering interest rares no longer encouraged buyers, whom know if they hold off buying prices will still crash massively as occurring and feel it will drop for 2 yrs and settle at more realistic prices. Govt ministers wont like this happening to their investments so will find a way of intervening in property and loan markets. POWER TO THE PEOPLE

      Commenter
      BRIAN
      Location
      glenroy
      Date and time
      January 21, 2013, 6:21PM
    • Precisely right pi. Expect the rba to try and avert a house price correction by lowering interest rate. It won't work because it will cause the sharemarket to rise further discouraging property investors to cut there losses and invest in shares.

      Commenter
      e2
      Date and time
      January 21, 2013, 7:40PM
    • Restricting any product forces it to become scarce and inflates the price. An urban growth boundary does just that - especially when most of the growth areas are held by a few big developers. They then have an vested interest to release land in small parcels to maintain their prices. We now have a situation of developers controlling Melbourne affordability, not the Govt.

      Commenter
      Jen
      Location
      Melb
      Date and time
      January 21, 2013, 8:22PM
    • Your comment is very flawed. There is a serous shortage of available building land due to highly restrictive town planning legislation in Australia. Sure the former Brumby government allowed a large amount of land to be re zoned, but land is being "land banked" by the speculators who possess it. It is being released very slow in order to keep the prices high and profits to the speculatores even higher.
      In relation to your comment about Australia having a low unemployment rate well if we are to count only the "unemployed" (and that does not include those who work only a few hours a week which would drive thre number even higher,) then that would be true at around 500,000. But fails to take into account the emornous army of other welfare dependants we have in Australia such as the 815,000 invalid pensioners we have or the vast number of single mothers also living from welfare.
      Regardless of the shallow self congratutory statements made by our politicans about the strength of the Australian economy , (based entirely on the strength of iron ore and coal prices). We have a very fragile and narrow based domestic economy.
      The excesses of the credit boom have created an enormous foreign debt problem in Australia which will have very serious consequences if nort addressed.
      This article is a brave and truthful piece of journalism that states fact rather than propanganda that furfills the wishes of certain vested interest ie banks , real estate agents, investors , media and all others who gain from the real estate bubble we have in Australia

      Commenter
      Peterman
      Date and time
      January 21, 2013, 8:56PM
    • I agree, the "affordability" concept using multiples is bunk. If banks are happy to lend at 5 times your income to buy a home, then guess what? Median house prices are going to be 5 times the median income! It's not rocket surgery! When (If) Aussie banks decide to pull credit lines, house price multiples will follow. Whether houses are "affordable" to the average Joe is irrelevant.

      Commenter
      clueless
      Date and time
      January 22, 2013, 12:49AM
    • You sound like a journo..."Restrictive land supply policies...." Or worse still a pollie or real estate agent. Well we don't need more land releases, what we need is a look at the avarice of the market for $140,000 USD in the USA in a normal city you get a five bedroom with pool in backyard, double garage, maintained gardens and sometimes all the furniture thrown in! In Europe yes Paris and London are expensive but go a little further afield and houses start around $60,000 AUS and that is what my rellies paid for a chalet in Austria 2 storey close to a town 17th century and fronting it's own lake. Something wrong with land release? I don't think so I think there is something wrong with Real Estate Agents and the REIV propping up an overinflated property balloon and we all know what happens to balloons they go "BUST"

      Commenter
      Pickled Herring
      Location
      Frankston
      Date and time
      January 22, 2013, 7:12AM
    • Congratulations fellow Melburnians, you have accumulated one of the highest debt loads worldwide while trading land parcels between yourselves.

      Let's aim for the top five in the next 3 years!

      Commenter
      Peachy
      Date and time
      January 22, 2013, 8:11AM

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