Australia continues to have the least affordable housing options in the world

According to the 2023 Demographia International Housing Affordability report, Sydney’s housing market has once again been ranked as the second least affordable in the world, marking the second consecutive year in which this has occurred. This situation is seen as a threat to the quality of life, as the report rates Sydney as the 93rd most affordable out of 94 metropolitan markets in terms of middle-income housing. The report notes that house prices in Sydney have risen at a rate six times faster than inflation, indicating that the pandemic’s demand shock has continued to affect house affordability in 2022.

There have been some improvements in housing affordability, and it is possible that more will occur as the demand shock subsides and the market returns to normal. A recent report from the September 2022 quarter evaluated housing affordability based on income in relation to housing prices across several countries, including Australia. Sydney was found to have the least affordable market with a median multiple of 13.3, making it the second least affordable market globally. The median multiple for Australian markets has increased from 6.9 in 2019 to 8.2, equivalent to an additional 1.3 years of median household income. All of Australia’s major housing markets have been considered severely unaffordable since the early 2000s.

Melbourne, Adelaide, and Brisbane were ranked among the least affordable housing markets, with Melbourne in 9th place, Adelaide in 14th, and Brisbane in 15th. Perth was ranked at 50th place. Housing affordability has been severely impacted in Australia’s major housing markets. Median house prices in Adelaide have increased at a rate of 6.1 times that of inflation measured by the Consumer Price Index (CPI) since 2020. Sydney has seen an increase of 6.0 times the CPI, Brisbane 5.2 times, Melbourne 4.9 times, and Perth 4.2 times. In each of these five housing markets, the rate of house price inflation since 2000 has exceeded that of all the product groups included in the CPI. The most affordable housing markets were found in the United States, with Pittsburgh being the most affordable, followed by Rochester (New York) and Cleveland

During the 44th Parliament, housing affordability was not given much attention, despite the Government’s commitment to review housing and homelessness policies and programs as part of the federation white paper process and the white paper on the reform of Australia’s tax system. However, the status of these reviews is unclear since both white papers have been discontinued.

On January 7, 2016, the Government announced the formation of an Affordable Housing Working Group, tasked with finding ways to increase the supply of affordable housing for low-income people and implementing trials of such arrangements. The Working Group released an issues paper and solicited submissions on ways to boost the supply of affordable rental housing. The consultation process was completed on April 6, 2016.

One way to increase the supply of affordable housing in the medium to long term is through institutional investment in the affordable end of the residential market. However, institutional investors have shown little interest in affordable housing due to perceived risks and low returns. To overcome this, government incentives and financial instruments similar to the discontinued National Rental Affordability Scheme may be necessary.

The Affordable Housing Working Group is considering the merits of several financing instruments, such as Housing Supply Bonds and an Affordable Housing Finance Corporation Model, to increase the supply of affordable housing over the long term. However, immediate changes to the levels and indexation of CRA may be needed to provide relief to low-income households experiencing housing stress, as recommended by the Henry Review of the tax system and the McClure Review of the welfare syste

Next (Kenya to get 3D printed Houses)

Australia continues to have the least affordable housing options in the world

This Month

Overview

Explore

Join Us