Housing affordability is improving but Australia is still the second most expensive country to buy property, according to a global survey released on Monday.
However, the Australian economist Dr Andrew Wilson criticised the Demographia International Housing Affordability Survey, saying that comparing the Australian housing market to others was like making comparisons with Jupiter.
The ninth annual Demographia survey, which looked at 337 metropolitan markets in seven countries, shows that when it comes to buying property, on a national level, only China is more expensive due to the highly competitive Hong Kong market.
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The report says that rising incomes and flat or declining house prices had seen a slight improvement in Australia’s affordability. “However, each of the five major markets continues to be severely unaffordable, reflecting vastly overpriced housing,” it says.
The survey uses a methodology called the “median multiple”, which is the median house price divided by gross before tax annual median household income to rate a country’s housing affordability.
A rating of more than 5.1 is considered “severely unaffordable”. Australia scores 5.6.
Not surprisingly, Sydney is the least affordable, with a median multiple of 8.3. Melbourne scores 7.5; Adelaide 6.5, Perth 5.9 and Brisbane 5.8.
Some regional Australian centres also rated highly, with Port Macquarie top of the regional list at 8.6, followed by Coffs Harbour at 8.0 and the Sunshine Coast, also at 8.0.
The survey finds that Sydney is the third most unaffordable major market after Hong Kong and Vancouver in Canada.
Results indicate that the 20 “most affordable” major city markets were in the US. The US also had 20 “moderately unaffordable” major metropolitan markets, while Canada had two and Ireland one.
All of the major cities in Australia and New Zealand were found to be “severely unaffordable”.
But compared with other countries, even country areas were considered expensive. “More than three quarters of the markets in Australia were severely unaffordable, while more than 60 per cent of New Zealand markets were severely unaffordable,” the report says.
This compares with Canada, where less than 20 per cent of the markets are severely unaffordable. Ireland has no severely unaffordable pockets, with just 10 per cent of the US out of reach.
But Dr Wilson, the senior economist at the Fairfax-owned Australian Property Monitors, questioned the validity of the survey by making world comparisons. “You may as well be comparing the Australian housing market to the one on Jupiter, because they are different animals,” he said.
He issued a “please explain” challenge to the authors of the survey.
“If Sydney is so unaffordable, why do we have so much activity in the housing market?
“Why are prices rising?”
Dr Wilson said that unlike the US, Australia had some of the most stringent banking controls in the world.
“If you can’t afford it, the banks won’t lend you the money,” he added.
The economist said that the Australian market had proven itself to be one of the most resilient housing markets in the world. “We’re now entering a growth phase after a very modest correction phase,” he said.
Dr Wilson said that the reason Sydney was expensive was the shortage of supply, as the Demographia survey identifies.