Sydney is the second most unaffordable city in the world to buy a home, a new report has revealed.
The 12th Annual Demographia International Housing Affordability Survey has been released measuring the housing affordability of 378 markets across 9 countries.
Hong Kong was found to be the world’s least affordable metropolitan market for the sixth year in a row with a median multiple — house price to income ratio — of 19.0.
Just behind was Sydney (12.2) whose housing affordability was “the worst experienced outside Hong Kong in the 12 years”, followed closely by Vancouver (10.8) and Melbourne, San Jose and Auckland who tied for fourth place (9.7).
According to the report, homebuyers were traditionally able to get their foot into the market since the median house price was around three times the median income. But the increase in median house price by over 300 per cent “from an average index of 100 between 1900 and 2000 to an index over 300 by the year 2008” has dampened the prospects of those earning a low to middle income of buying a home.
“Relative to incomes, house prices have increased from three times median income to more than nine times income,” the report reads.
“That’s $600,000 they are not able to spend on other things – clothes, cars, furniture, appliances, travel, movies, restaurants, the theatre, children’s education, charities and many other discretionary purchase options.”
It says that while focus by the Productivity Commission and the Reserve Bank has mainly centred on “demand drivers like capital gains tax treatment, negative gearing, interest rates, readily accessible finance, first home buyers’ grants and high immigration rates”, the “real culprit” was the lack of land for new housing stock.
All five major metropolitan areas in Australia — Sydney, Melbourne, Perth, Adelaide and Brisbane — were classified as being “severely unaffordable” for the 12th year in a row.