Australia is leading the world with the largest number of housing markets considered “severely or seriously unaffordable”.
Despite two years of falling or inactive property prices, Australia still has the most unaffordable housing markets in the world, reports the latest Demograhia International Housing Affordability Survey.
The Demographia method ranks the affordability of housing in the US, Canada, Britain, Australia, Ireland and Hong Kong by dividing the median house price in a particular market with the median household annual salary (before tax).
Using this method, a housing market is seen as affordable if a multiple of three or less is achieved (ie you can afford to buy a house with three times the annual household salary).
The results of the research show that Sydney is the third most expensive housing market in the world with a median multiple of 8.3. Vancouver in Canada comes in second place with a multiple of 9.5 and the most expensive city on the planet is Hong Kong where the multiple is a staggering 13.5.
Australia’s second entry into the top 10 is Melbourne, rated as the seventh most unaffordable housing market with a multiple of 7.5. London sits on the list in fourth spot, closely followed by San Francisco and San Jose in the US.
Australia has four of the top 10 most expensive housing markets, which is a slight improvement on last year where there were 5 markets in the top 10. As a whole, the affordability of Australia’s housing markets has improved, down from a multiple of 6.7 last year to 6.5 over the past year.
‘‘However, each of the five major markets continues to be severely unaffordable, reflecting vastly overpriced housing,’’ the survey said.
The median multiple was for many years been remarkably similar in Australia, Canada, Ireland, New Zealand, Britain and the US, the survey noted.
However, 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.
Detroit in the US was listed as being the most affordable major housing market with a median multiple of just 1.5.
Demographia’s method for measuring housing market affordability is endorsed by both the World Bank and United Nations.
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