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Affordability of Housing - where has it gone?
 The 3rd Annual Demographia International Housing Affordability Survey (2007), released by the US-based Wendell Cox Consultancy, has found that housing affordability in Australia is among the worst in the world. The study compares affordability in six developed countries (159 markets in total) and reports that 59 markets were rated “severely unaffordable” and 22 markets are “seriously unaffordable.”
The least affordable markets are generally in California, Hawaii, the US East Coast, Australia, the United Kingdom, New Zealand and Vancouver. The least affordable market is Los Angeles and Orange County, with a Median Multiple (median house price divided by median household income) of 11.4, far above the “severely unaffordable” threshold of 5.1 and approaching four times the 3.0 “affordability” standard.
However the most pervasive housing affordability crisis, overall, is in Australia, where 7 of 8 markets have Median Multiples 6.0 or above. The survey shows that it takes 6.6 years of median annual household income to buy a median priced home in Australia. For housing to be considered affordable it should be below 3 years of annual household income.
Sydney was ranked 7th, Perth 11th and Melbourne 23rd in the list of least affordable housing markets. The survey concluded that Australia's housing problems were caused by restrictive land release policies, excessive regulatory and zoning controls and high housing taxes.
The affordability ranking is based on the following table:
| Rating |
Median Multiple |
| Severley Unaffordable |
5.1 & Over |
| Seriously Unaffordable |
4.1 to 5 |
| Moderately Unaffordable |
3.1 to 4 |
| Affordable |
3 or less |
The median household income and Median House price figures for Australian capital cities are as follows:
| State |
Average Household Income |
Median House Price |
Median Multiple |
Adelaide |
$43,900 |
$285,000 |
6.5 |
Brisbane |
$54,000 |
$330,000 |
6.1 |
Canberra |
$76,000 |
$375,000 |
4.9 |
Darwin |
$68,200 |
$385,000 |
5.6 |
Hobart |
$41,000 |
$290,000 |
7.1 |
Melbourne |
$57,100 |
$377,000 |
6.6 |
Perth |
$53,900 |
$430,000 |
8.0 |
Sydney |
$61,200 |
$520,300 |
8.5 |
Adelaide and Hobart scored the lowest median house prices,and unsurprisingly, Sydney topping the chart at $520,300.
Interestingly, the Demographia survey reports that housing affordability has been seriously eroded in Perth. Between 1996 and 2006, Perth’s Median Multiple rose from 3.7 to 8.0. The price of residential land in Perth has inflated from $115,000 to $265,000 per lot (block) in just one year.
David Uren, economic correspondent for The Australian, has observed that Western Australia's property bubble has been pricked and prices could drop as far as 20 per cent as buyers flee the market(‘West house prices could fall 20pc’, The Australian, 16 January 2007). He reports that new home lending figures from the Australian Bureau of Statistics show that while demand for property is sliding in the west, it is recovering in NSW.
According to Demographia, within the surveyed countries, virtually all urban markets were affordable within the last 10 to 20 years before the noticeable decline. The road to recovery includes government policies restoring housing affordability with measures such as liberalising land use processes, instituting equitable infrastructure finance and promoting research and education.
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