Housing affordability crisis: social divide affects a generation. Men and women of Australia, we have a problem.
That problem is housing affordability and the exclusion that this issue delivers to part of the community in our biggest cities. You will recall my October column in The Weekend Australian Magazine parodying the middle-aged tut-tutting of the spending priorities of the millennial generation.
Perhaps it’s time to look at some of the facts behind the affordability crisis.
The best measure of housing affordability at a global level is a series of reports by the US-based consultancy Demographia. The 2017 report released in January looked at 92 cities with more than one million residents across nine countries comparing the median cost of housing with median household income. Sydney ranks second on this list after Hong Kong with a median multiple of 12.2, meaning that it takes more than 12 years of household income to buy a median house in the harbour city.
Melbourne ranks sixth with a median multiple of 9.5 while Adelaide, Brisbane and Perth all rank within the top 20 commanding median multiples of between 6.1 and 6.6. What gives this dataset impact is its global comparison and the common sense of its data. The median house price in Sydney is now $1.077 million and the median household income in Sydney is $88,000. On these figures alone it is apparent the average household cannot afford to buy an average house in Sydney without parental or some other form of support.
Five years earlier in 2012, at the peak of the mining boom, the Sydney multiple was 9.2 while the Melbourne multiple was 8.4. In the last five years household income in Sydney has increased by $9000 while median house prices have increased by $439,000. Sydney’s post-tax income growth since 2012 does not cover house price growth even with today’s low interest rates. House prices are sprinting away from Middle Australia in Sydney and to a lesser extent in Melbourne and in other capitals.
As concerning as this issue is for our nation, and especially for the capital cities that drive the Australian economy, there is another aspect to the Demographia dataset that I find compelling. Maybe Sydney and Melbourne are simply joining the ranks of elite global cities that have always struggled to deliver affordable housing?
How does the cost of housing in Sydney and Melbourne compare with housing costs in global cities like London, New York and Tokyo? The area of Greater London say within the orbital M25 contains over eight million residents in an urban mass that is 60km in diameter. London is a global financial centre. The city has six international airports that connect with 350 global cities. London’s richest suburbs like Belgravia and Mayfair attract buyers from the Middle East and Russia. And yet the London housing multiple of 8.5 is less than that of Melbourne let alone of Sydney. London delivers better affordability than Australia’s biggest cities.
Read for full story at: theaustralian.com.au