Australia has the least affordable houses in the world, according to a ranking of international housing markets released late January.
From a total of 23 Australian regions included in Demographia’s Sixth International Housing Affordability Survey, 22 were labelled severely unaffordable and Australia scored the worst housing affordability rating in the world, followed by Canada.
Demographia calculated the ratings by diving median house prices by annual median household income and named Vancouver as the least affordable market in the world.
In Sydney, nearly 57 percent of the average income is needed to pay the mortgage on the average house, compared to just 13.4 percent in Dallas, Texas, one of the most affordable major city housing markets in the world.
The average dwelling price in Sydney rose 11.6 percent last year to $475,000, just above the national average of $439,000, according to RP Data.
- Where do you think is the best suburb to buy? Visit Rate Your Place and review suburbs around your area…
Experts said housing affordability is being eroded by a lack of supply.
“Residential land release in Sydney has been reduced from an historic average of 10,000 lots per year to less than 2,000 in 2007,” said Dr Tony Recsei in the preface to Demographia’s report.
“In the face of the scarcity resulting from such a miserly allotment it is unsurprising that the land component of the price of a dwelling has increased from 30 percent to 70 percent. The result has been a cost increase of some three times what it was a mere ten years ago.”
Demograophia added that land release and planning issues are making the situation worse.
“In Australia, there is consensus in both the government and the private sector that there is a severe housing crisis, with rampant unaffordability and a housing shortage,” the report said.
“It takes from 6.25 to 14.5 years to convert urban fringe land into new houses, which compares to less than 1.5 years before urban consolidation, and which remains the case in the ‘demand-driven’ (more responsive) markets in the United States.”
Demographia urged governments to free up land use rules in order to ease affordability problems without causing a housing market crash.
“The restoration of near historic housing affordability in some markets provides an opportunity to repeal more prescriptive land regulation policies, which would not only minimise the potential for future busts, but would also ensure housing affordability for future generations,” the report said.