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How affordable is real estate in your city?

How affordable is real estate in your city?

Only Hong Kong has less affordable housing than Sydney, Demographia's global survey of more than 350 cities has found.

Sydney is now ranked second behind only Hong Kong in a list of the world’s least affordable markets, according to a global survey of more than 350 metropolitan cities.

Now in its 12th year, Demographia’s International Housing Affordability Survey has ranked 87 major metropolitan markets (cities with populations of more than one million) in nine countries according to their price-to-income “median multiple” scores, based on 2015 Q3 data.

According to the survey, markets with multiples of 5.1 or higher are categorised as “severely unaffordable”, while those with multiples of three or below are considered affordable.

The top five Australian capitals all had median multiples above six – the 12th straight year all cities have been ranked severely unaffordable. The average Australian house costs 5.6 times the median household income.

Brisbane had the fifth-least affordable housing, with a median multiple of 6.1, while Sydney was the least affordable at 12.2 – one of only three global cities, along with Hong Kong and Vancouver, to score a double-digit median multiple.

All three cities were also found last year by international financial services company UBS to be among the most vulnerable to the risk of a large downward price correction.

Only two Australian property markets out of 51 analysed were ranked affordable – Karratha and Kalgoorlie, both WA regional cities that the report identifies as having been “hit hard by declining resource markets”.

The report notes that Sydney’s 2.4 point increase to its median multiple from 2014 “is the largest year-to-year [affordability] deterioration ever indicated” in the survey’s history.

It also notes a loss in housing affordability for Melbourne, with the Victorian capital rising one point from 2014 to rank as the world’s sixth-least affordable major metropolitan market.

As well as Sydney, Hong Kong and Vancouver, San Jose in California and Auckland were the only global cities to be ranked as more unaffordable than Melbourne.

The report notes that the country’s price-to-income ratio was below three up until the late 1980s.

Despite Demographia’s findings around housing affordability in Australia, figures reported since the survey’s Q3 analysis show some easing in price growth. Dwelling values fell in the final quarter of 2015 in Sydney, Melbourne and Perth, according to CoreLogic RP Data numbers, although they were up slightly in Brisbane and Adelaide.

Australia’s largest mortgage lender, the Commonwealth Bank, recently predicted property value growth in the Sydney and Melbourne markets would be flat or marginal in 2016 as finance lending and construction both moderated.

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This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. The commentary provided from external companies that are not a member of the Commonwealth Bank of Australia Group of Companies (the CBA Group) does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. The CBA Group does not accept any liability for losses or damage arising from any reliance on external companies and their products, services and material.