Australian cities "severely' unaffordable
Written and accurate as at: Nov 20, 2023 Current Stats & Facts
The 2023 Demographia International Housing Affordability report provides a sobering view of the housing situation in Australian capital cities, particularly highlighting the severe unaffordability of these markets. This report, which assesses middle-income housing affordability in major housing markets across eight nations, including Australia, utilises the "median multiple" metric to gauge affordability. This metric is a price-to-income ratio, calculated by dividing the median house price by the gross median household income.
Key findings from the report relevant to Australian cities are as follows:
Severe Unaffordability Across Major Cities: The report categorises Australia's major property markets - Sydney, Melbourne, Brisbane, Adelaide, and Perth - as "severely unaffordable" since the turn of the millennium. This rating is based on the median multiple metrics, with a score over 5.1 indicating severe unaffordability.
Source:2023 Demographia International Housing Affordability
Rankings of Australian Cities: Sydney has been ranked as the second least affordable city globally for the second consecutive year, with a median house price of $1.3 million and average state wages at $94,000. Melbourne is the ninth least affordable, with Adelaide, Brisbane, and Perth also featuring high on the list of unaffordable cities. However, Perth ranks 50th, indicating a relatively better situation than others.
Comparison with Inflation: Since 2020, the rise in house prices in Australian cities has significantly outpaced inflation. Adelaide’s house prices rose by 6.1 times the inflation rate, Sydney by 6.0 times, Brisbane by 5.2 times, Melbourne by 4.9 times, and Perth by 4.2 times. This disparity illustrates the widening gap between housing and general living expenses, exacerbating the affordability crisis.
Impact on Population: The report underscores the existential threat that deteriorating housing affordability poses to middle-income households. Low and middle-income families are particularly hard-hit, facing a declining standard of living. Homeowners are also struggling with increasing interest rates, compounding the affordability issue.
Housing Unaffordability and Inequality: The report aligns with experts like the OECD and economist Thomas Piketty, suggesting that rising housing prices are a major driver of rising middle-class expenditure and increasing wealth inequality. The dominant form of land use regulation, urban containment, which restricts housing construction, is highlighted as contributing to this issue. Addressing this requires reforms in land use policies to improve housing affordability and mitigate the cost of living crisis.
In conclusion, the 2023 Demographia International Housing Affordability report paints a concerning picture for Australian capital cities, with severe unaffordability affecting a broad spectrum of the population. This situation demands urgent attention from policymakers and urban planners to implement reforms to alleviate the housing affordability crisis and its wider socio-economic impacts.