The recent downturn in the property market has not been enough to ease affordability pressures, with Australia’s housing remaining among the least affordable in the world, new research has revealed.
According to global housing affordability advocacy group Demographia’s latest annual research, Australia’s housing market remains among the least affordable in the globe.
Demographia assesses housing affordability in major markets across the world through the use of a “median multiple”, which divides the median house price by the median household income.
The research found that all five of Australia’s major markets (Sydney, Melbourne, Brisbane, Adelaide and ) were listed as “severely unaffordable”, recording a median multiple of 5 or above – meaning the median house price was over five times the median household income.
On average, Australia’s major housing markets posted a median multiple of 6.9 – the third highest (among eight national housing markets) in the world, behind only Hong Kong and New Zealand.
This comes despite an 18-month downturn in the Australian housing market that saw national home values decline by 8.4 per cent, led by sharp corrections in Sydney and Melbourne.
“Housing remains severely unaffordable in all of the major markets, and by a substantial margin in Sydney and Melbourne,” Demographia noted in its report.
“Despite what has been called the largest Sydney price reduction in 35 years, house prices relative to incomes are more than double the rate of the early 1980s.”
The group noted that in Sydney and Melbourne, median income households need at least three years more of income to pay for the median-priced house than in 2004 when the first Demographia Survey was published.
Reflecting on the Demographia research, the Organization for Economic Co-operation and Development commented: “Australia’s housing market is a source of vulnerability.
“Prices have more than doubled in real terms since the early 2000s and household debt has surged.”
Australia’s housing affordability pressures could be set to worsen, with the latest data from property research group CoreLogic reporting rapid growth in dwelling values, particularly in Sydney and Melbourne.
According to CoreLogic, national home values have now risen by 4 per cent in the three months ending December 2019, driven by Sydney and Melbourne, where values increased by 6.2 per cent and 6.1 per cent, respectively, over the same period.
Advisory firm Deloitte recently observed that property prices could exceed their 2018 peak in the coming months if this trend continues.
Like most analysts, Deloitte has attributed this rebound in residential property prices to policy certainty off the back of 2019’s federal election, rate cuts from the Reserve Bank of Australia, regulatory easing from the Australian Prudential Regulation Authority and “continually strong” population growth.
“Prices might have tumbled for a time – especially from late 2018 to mid-2019 – but are now amid a moon-shot,” Deloitte observed.