Only Hong Kong and Vancouver dearer than Sydney's severely unaffordable housing: 11th Demographia 2015 survey

Sydney has been ranked the third most unaffordable major property market in the latest annual Demographia International Housing Survey.

Melbourne took sixth spot on the unaffordability index.

Hong Kong was ranked the most unaffordable place to buy a house, followed by Vancouver.

The report noted historically, the median multiple had been "remarkably similar" in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States, with median house prices from two to three times median household incomes.

"However, in recent decades, house prices have been decoupled from this relationship in a number of markets, such as Vancouver, Sydney, San Francisco, London, Auckland and others," the report said.

Source: Demographia

The US was the most affordable place to buy a house of all the countries surveyed, with 14 major property markets ranked as being affordable.

New Zealand property values rose 4.9% last year, less than half the pace in 2013, according to recent QV figures, but Auckland ranked ninth.

The 11th annual Demographia survey analysed 86 major property markets in New Zealand, Australia, the United Kingdom, United States, Canada, Hong Kong, Ireland and Singapore.

Source: Demographia

The most affordable major metropolitan markets in 2014 were in the United States, which had a moderately unaffordable rating of 3.6.

Canada and Ireland were rated "seriously unaffordable," with a median multiple of 4.3, along with Japan (4.4), the United Kingdom (4.7) and Singapore (5.0). Australia (6.4), New Zealand (8.2) and Hong Kong (17.0) were severely unaffordable.

Hong Kong's median multiple of 17.0 was the highest recorded (least affordable) in the 11 years of the Demographia International Housing Affordability Survey.

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Source: Demographia

Again, Vancouver was second only to Hong Kong, with a median multiple of 10.6.

Housing affordability in Sydney deteriorated to a median multiple of 9.8, which was followed by San Francisco and San Jose (each 9.2).

Melbourne had a median multiple of 8.7 and London (Greater London Authority) 8.5.

Three other markets had median multiples of 8.0 or above, including San Diego (8.3), Auckland (8.2) and Los Angeles (8.0). 

For the 11th year in a row - each of the years the Demographia International Housing Affordability Survey has been published - all of Australia's five major metropolitan areas were severely unaffordable.

Sydney's median multiple of 9.8 was a substantial increase from last year's 9. It was based on an $812,000 median price and an $82,800 median household income.

Housing affordability also deteriorated in Melbourne, rising to a median multiple of 8.7 in 2014 from 8.3 in 2013, based on $658,000 and $75,900 income. Housing affordability deteriorated slightly in Adelaide (from 6.3 to 6.4 based on $410,000 median and $63,600 median income), Perth (from 6.0 to 6.1 $535,000 and $87,200) and Brisbane (from 5.8 to 6.0 $465,000 and $78,000). 

The top 10 most unaffordable city markets in the world:

1. Hong Kong
2. Vancouver
3. Sydney
4. San Francisco
5. San Jose
6. Melbourne
7. London
8. San Diego
9. Auckland
10. Los Angeles

Source: Demographia

Among all 378 markets, there were 98 affordable markets, 88 in the United States, five in Canada, three in Ireland and, for the first time, there were affordable markets in Australia, perhaps the only surprise in what has been a highly repetitive predictable survey.

The most affordable surveyed Australian market was suggested as Karratha, in Western Australia's Pilbara, with a median multiple of 2.6. Kalgoorlie, also in Western Australia was judged the second most affordable Australian market, with a median multiple of 2.8.

"These improvements appear related to resource industry related demand decreases," the report's author Wendell Cox noted.

But amid the smaller surveyed markets Tweed Heads sat in the highly unaffordable at a 9.1 median multiple and Port Macquarie, with a median multiple of 8.2. 

In 2008 the survey suggested Australia was perhaps the least densely populated major country in the world, but state governments there have contrived to drive land prices in major urban areas to very high levels, with the result that in that country housing in major state capitals has become severely unaffordable.

House price data for Australia is from multiple sources, the most important being the Real Estate Industry Association of Queensland (Queensland Market Monitor), the Real Estate Institute of Victoria, the Real Estate Institute of South Australia, the Real Estate Institute of Western Australia, Australian Property Monitors, the Real Estate Institute of Australia and various real estate internet web sites.  

The report noted in Australia, housing affordability multiples have been published that compare average household incomes and median house prices.

"To make valid comparisons between international markets, it would be necessary to also calculate these "average/median" multiples for the markets outside Australia to which comparisons are made (and to provide historical data). However, "average/median" multiples have been inappropriately compared to median multiples," Wendell Cox advised.

"This treatment portrays Australian housing affordability, which is among the worst in the high-income world, more favorably than the reality." 

While Property Observer takes housing affordability seriously, the results of the report are, as noted, predictively repetitive. So which of the three most expensive cities would you prefer to live in?

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