The verdict is in: Sydney has the second-most unaffordable housing market in the world!
This is based on the 2024 Demographia International Housing Affordability Report (DIHA), long considered the “gold standard” in ranking global housing affordability.
The findings mark a significant concern for residents and policymakers as housing prices continue to soar beyond the reach of many, highlighting a growing disparity in housing affordability in Australia, particularly in Sydney.
Impossibly unaffordable
The report puts Sydney in the “impossibly unaffordable” category based on DIHA’s analysis.
The report, now in its 20th year, ranks housing markets based on their median-price-to-income ratios (median multiples). It categorises housing markets from “affordable” to “impossibly unaffordable” under this metric.
The median multiple approach places Sydney just behind Hong Kong, which holds the top spot as the least affordable housing market in the world among over 90 housing markets.
The report reveals that no major housing market in Australia is considered affordable, with several Australian cities (in addition to Sydney), including Melbourne and Adelaide, classified as severely or impossibly unaffordable.
The median multiple and affordability
The median multiple is a key metric used by DIHA to assess housing affordability. It measures the number of years of median household income required to purchase a median-priced home.
A median multiple of 5.1 years and above is categorised as “severely unaffordable.”
Sydney’s median multiple of over 13 means that the average household would need more than 13 years of income to buy a home, underscoring the severity of the affordability crisis.
Comparisons with other global cities
Other cities that follow Sydney in the report include Vancouver, San Jose, and Los Angeles, each facing their own affordability challenges. These comparisons highlight a global trend of housing markets becoming increasingly inaccessible for middle- and lower-income households.
What’s driving Sydney’s low housing affordability?
There are several factors thought to be causing Sydney’s high house prices, including government policies, long periods of low interest rates and strong net migration. The report also cites land-use policies as a major factor.
Restrictive land use policies limit the availability of new housing developments. Urban containment measures, such as greenbelts and urban growth boundaries, have constrained land supply, driving up prices, explains the report.
Additionally, high demand and insufficient supply exacerbate the situation, making it difficult for average earners to enter the housing market.
Potential Solutions and Future Outlook
Addressing Sydney’s housing crisis requires a multi-faceted approach to affordable housing, argues the report.
New Zealand’s recent policy reforms, which focus on expanding land availability for housing development, offer a potential model. Prioritising the wellbeing of people over strict planning doctrines could also lead to more balanced urban planning.
By fostering economic opportunities and accommodating housing demands beyond urban peripheries, Sydney can work towards improving its housing affordability.
Conclusion
Sydney’s position as the second-least affordable market globally according to DIHA underscores a critical need for Australia’s decision makers.
With a median multiple significantly above the threshold for severe unaffordability, Sydney’s housing market presents challenges that require innovative solutions. Learning from international examples and adjusting local policies could pave the way for a more affordable future for Sydney’s residents.