Just how unaffordable is Australian housing?

Angus Kidman 23 January 2018

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New figures show how out of reach the great Australian property dream is if you live in a capital city.

Clearly it's not news to anyone under 40 that buying your own home in Australia these days seems about as likely as Tony Abbott releasing his own grindcore version of Macklemore & Ryan Lewis' "Same Love". We've seen attempts at fixes like state first home owners grants and the national First Home Super Saver Scheme. However, most measures seem to have limited effect when set against ongoing property price rises, especially in capital cities.

New data from Demographia ranked 293 cities around the world by dividing the median house price by the median national income (a measure known as the "median multiple"). And in bad news for Australians, every single one of our five biggest cities made the top 21 in that ranking. In other words, right now it's really hard to find somewhere in the world where it's less affordable to buy a house than down under.

Here are the top 10 cities in the Demographia study:

RankCityPrice/income ratio
1Hong Kong19.4
2Sydney, Australia12.9
3Vancouver, Canada12.6
4San Jose, USA10.3
5Melbourne, Australia9.9
6Los Angeles, USA9.4
7Honolulu, USA9.2
8San Francisco, USA9.1
9Auckland, NZ8.8
10London, UK8.5

Outside the top 10, Adelaide came in at 16 with a price/income ratio of 6.6, followed by Brisbane at 18 (6.3) and Perth at 21 (5.9).

It's worth noting one limitation of the data for Australia: it looks at prices for houses only, rather than incorporating pricing for units and apartments as well. CoreLogic provided the ABC with a similar ranking that included both types, and while that lowers the ratios, it's still not great news. To rank as affordable, the ratio should be 3 or under, a status none of our capitals achieved.

CityPrice/income ratio
Sydney9.1
Melbourne7.5
Adelaide6.4
Brisbane5.9
Perth5.7
Hobart5.6
Canberra5.2
Darwin4.3

There are some signs that flat interest rates are having an effect on affordability. The most recent Adelaide Bank/REIA Housing Affordability Report found that 30.3% of a median family income is needed to cover loan repayments, a figure which has dropped by 1.2% from the previous quarter.

Nonetheless, the core lesson is there: you're going to be waiting quite a while to build a deposit and get into your first home. Whatever you do, don't plan to move to Hong Kong as an alternative.

Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears regularly on finder.com.au.

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