Global House Prices – February 2017

We’ve all read the news reports about decrepit cottages and tiny garages fetching sky high prices, so it will come as little shock to learn that property in Australia and New Zealand’s major cities rates among the least affordable on the globe.

The 13th International Housing Affordability Survey on global house prices was recently released by international housing affordability think tank Demographia, looking at sales prices from the third quarter of 2016. It found that Sydney was the second most unaffordable major city in the world, and Melbourne wasn’t too far behind, clocking in at number six on the list. Hong Kong, Vancouver, Auckland and San Jose in the USA came in at numbers one, three, four and five respectively.

The survey compares average home prices to median income, taking in 94 major cities and 406 areas in total. Houses that are three times the median income or less are considered affordable, houses 3.1 to four times the median income are considered moderately unaffordable, houses 4.1 to five times the median income are considered seriously unaffordable and houses that cost more than five times the median income are considered severely unaffordable.

To put this in perspective, Sydney’s housing is 12.2 times the median income, Auckland’s is 10 times its median income and Melbourne’s is 9.5 times its median income. Adelaide, Brisbane, and Perth were also ranked severely unaffordable, coming in at 6.6, 6.2, and 6.1 times their median incomes respectively. Looking at countries as a whole, both New Zealand and Australia are considered seriously unaffordable, with figures at 10 and 6.6 respectively, highlighting the concern that both nations have a national housing affordability crisis on their hands.

Oliver Hartwich, Executive Director of The New Zealand Initiative, provided the foreword to this year’s survey. He referenced countries such as Germany and Switzerland which have been able to maintain relatively stable housing markets over many decades. This was largely down to the way in which local councils are funded, which gave them a more responsive and flexible housing supply side. The survey is an interesting read www.demographia.com/dhi.pdf.