In Economics & Finance, Property Market, Research & Surveys

The just-released 2013 edition of the annual Demographia International Housing Affordability Survey reports that Australian houses are among the least affordable in the world.

Using methods recommended by the UN, the World Bank and Harvard University, median priced houses in Australia cost more than 5 years’ median income.

Up to and through most of the 1980’s, houses cost about 3 years’ income – the upper limit of ‘affordability’ according to the UN & World Bank. By 2001, affordability in Sydney and Melbourne had halved (i.e. prices had doubled when measured against incomes), while in the other capitals, including Adelaide, affordability had eroded by one third.

Today (well, actually, in the September 2012 quarter), capital city median house prices range from just under 6 years’ income (Brisbane) to more than 8 years income (Sydney). Adelaide sits at 6.5 years’ income.

Why then, are prices still so high in Australia?

According to Demographia, two major factors exist in every location where housing remains unaffordable:

  1. Heavy constraints on the supply of available land for housing
  2. High costs and long timelines for developing land approved for housing.

Only 0.18% of Australian land is used for urban areas. For comparison, the corresponding figure in the US (where housing is much more affordable) is 3%. Yet Australian local authorities continue to impose some of the most restrictive limitations on land development of any country in the world.


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