USA academics have released a report that has nearly all of Australia’s capital cities ranking in the top 25% of least affordable markets for middle-income home buyers. The report focuses on the ability of ‘median income’ households to purchase median-priced homes.

To compare the different markets within a country and across the world, it uses a metric called the ‘median multiple’ – a ratio of median incomes to median house prices. Included countries are- the USA, Australia, Canada, Hong Kong, Ireland, New Zealand, Singapore, and the United Kingdom. Under this criteria, Hong Kong, Sydney, and Vancouver are the most unaffordable markets for those buyers.

US Cities Pittsburgh, Rochester, and St Louis are the most affordable. 

Sydney, Melbourne, Adelaide, Brisbane, and Perth all sit in the least affordable 25% of cities in the list of 94 markets included in the study. Across the Australian market, Perth is 50% more affordable than Sydney for a middle-income household.

“Affordability is disappearing in high-income nations as housing costs now far outpace income growth,” the study said.

“The crisis stems principally from land use policies that artificially restrict housing supply, driving up land prices and making home ownership unattainable for many.”

In Australia, the latest Bureau of Statistics data show 210,800 dwellings are being built every year. For supply to meet demand this figure needs to rise to roughly 240,000 homes.

This increased property demand continues to put pressure on property prices. 

According to Tim Lawless Corelogic’s (Property Data firm)  Head of Research:-

“When you look at how much income needs to be dedicated to servicing a mortgage in Sydney, if you’re on a median household income and you’re buying a median-priced property, theoretically you’re going to be spending about 60 percent of your gross income in purchasing a median-priced dwelling- Clearly no lender is going to lend to you on that ratio.“

Tips from Economists include the potential for an increase in material supply in the next 12-18 months, with it taking some time for affordability to return to something that is more normal. Don’t try to purchase your dream home first-up. Relax your expectations- investigate the market and perhaps bring your expectations in line with reality.