A person looking to rent a family flat in the world’s most expensive neighbourhood would reportedly need an annual salary of AU$840,000.
The Neighbourhood Price Index 2019 study, commissioned by apartment search engine Nestpick, broke down the affordability for neighbourhoods within 50 significant cities around the world.
City of London, which covers the central business district of the UK capital, ranked as the most expensive location to rent.
The minimum salary required to afford a small single-person flat there is US$121,442 (AU$171,000) while a whopping US$598,636 (AU$840,000) paypacket was required for a family apartment.
The research assumed 30 per cent of salary could go towards rent, which is the same threshold used by Australian authorities to define housing affordability.
The City of London beat out Monaco localities Monte Carlo and Condamine, which came in second and third for the least affordable. The two glamour locales had the most expensive rents per square metre, but its flats were smaller — so slightly cheaper overall — than London.
Two other London suburbs — Kensington & Chelsea, and the City of Westminster — rounded out the top five.
Sydney was the only Australian city considered in the research. The central business district, coming in at 128th, was shown to be the most expensive area, with a US$90,279 (AU$127,000) salary required for a small single-person flat and US$123,403 (AU$173,700) needed for a family dwelling.
Bermuda and Shanghai had the biggest inequality “gaps”, with a person on minimum wage needing to work 977 hours and 825 hours respectively to pay one month’s rent. That’s 24 weeks and 21 weeks on a 40-hour week.
“The salaries needed to live in a lot of the world’s most popular neighborhoods are above the average wages of the cities themselves, which shows that the cost of real estate is growing faster than wages,” said Nestpick managing director Ömer Kücükdere.
“Take cities like San Francisco where employees, especially those in tech, are earning very high salaries but still need to live hours away from work due to the exorbitant rent prices.”
San Francisco, along with Monaco, Seoul and Bermuda, were the most expensive places to rent a single-person flat.
Kücükdere said that employers in these cities have had to think laterally to overcome the lack of affordability for its staff — like providing shuttle buses.
“[But] more needs to be done to tackle the disparity between rent and salaries if we want to halt this alarming trend from affecting more cities around the world.”
Nestpick was motivated to commission the research to show skilled workers from developing countries the cost of living in cities that they could potentially relocate to.
“For instance, take the thousands of STEM workers coming out of India every year and relocating for jobs in the United States, the UK, Canada and elsewhere,” said Kücükdere.
“While they’re being offered substantially higher salaries than they would receive in their home country, it’s without understanding the local cost of where they’re going to work, and what it means about their level of disposable income after rent.”
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