The Stats Guy: Global report reveals huge cost of our housing

All five Australian major housing markets have been severely unaffordable since the early 2000s.

All five Australian major housing markets have been severely unaffordable since the early 2000s. Photo: TND/Getty

The US-based consultancy Demographia published its 20th annual International Housing Affordability Report measuring the affordability of 94 housing markets in eight countries.

Australia’s five largest housing markets are included in the report. 

The methodology is rather simple. Take the median cost of a house in each market and divide that number by the median household income in the same market. The median, of course, describes the middle price – half the houses cost more than the median, while the other half are cheaper. 

Demographia calls a housing market with an income multiple of five severely unaffordable. If a house cost more than seven times the annual income, the market is described as impossibly unaffordable. Yikes. 

Not one of the eight countries included in the study features an “affordable housing market” where less than three annual median incomes would buy a median house. Best placed are regional centres in the US such as Pittsburgh (3.1), Rochester (3.4), and St. Louis (3.4).  

You guessed correctly that Australian cities came nowhere near these ratings. The most affordable Australian city included in the report is Perth (6.8).


Source: Demographia

Due to high household incomes, driven by generous wages in the mining industry, homes in Perth narrowly miss out on the impossibly unaffordable rating and are classified only as severely unaffordable. What a success! 

Severe unaffordability is the best Australia has to offer. Brisbane (8.1) has become impossibly unaffordable. For Adelaide (9.7) and Melbourne (9.8) we must think of a superlative for the word impossible.  

Things have only gotten progressively worse. All five Australian major housing markets have been severely unaffordable since the early 2000s, or even before that. Before the pandemic, in 2019, Australian markets collectively had an income multiple of 6.9.

That was already a godawful result, but they have become much worse. By now the Australian markets sit at 9.7. Ouch, our housing is two times worse than being severely unaffordable

The foreword of the report says it well:  

“High housing prices, relative to incomes, are having a distinctly feudalising impact on our home state of California, where the primary victims are young people, minorities and immigrants.  

“There is a genuine need to substantially restore housing affordability in many markets throughout the covered nations. In Canada, policy-makers are scrambling to “magic wand” more housing but continue to mostly ignore the main reason for our dysfunctional costly housing markets – suburban land use restrictions.” 

The same is true in Australia where housing also has severe social implications. Outrageously expensive housing limits the potential for upward mobility and mocks the idea that hard work alone will get you ahead.  

You will have noticed that I avoided even mentioning Sydney up to this point. Our largest city is also our most unaffordable one and might appear beyond hope.  

At an income multiple of 13.8, Sydney has become utterly and completely dysfunctional for all but the wealthiest Australians. Radical reform is needed.

Sydney serves as an excellent case study. Talking about making housing more affordable is a polite way of saying house prices must fall dramatically to give young people even a fighting chance to eventually become home owners.  

This is the part where the column turns into an interactive group project. I urge every single reader to please notify me when they find a single politician that talks about the need of chopping house prices down to size.

Who argues in favour of a national house price target? Could we commit to a target that housing mustn’t supersede an income multiple of seven in any given market? Such a target couldn’t be enforced but it would act as a guide for housing policy.

You will find politicians paying lip service to housing affordability without ever saying it needs to become cheaper. 

I urge our political class to forget the example of Bill Shorten who managed to lose the unloseable election by essentially telling voters their homes might fall in value as a result of his policy reforms.

Australia’s housing policies have been timid ever since Shorten’s election loss. Politicians hoped that house prices would magically correct themselves.  

As dire as things are in Sydney there might be hope after all. The young (he’s aged 44) NSW Labor Premier Christopher Minns is willing to push seemingly unrealistic housing targets on local governments, change zoning, push for high density developments around train stations, and fast-track approval for developments with substantial affordable housing offerings.

It will take much more co-ordinated efforts between federal, state, and local governments to drive prices down further but there are real reforms in sight. Queensland doesn’t charge first home-buyers stamp duty anymore. 

For the roughly two-thirds of Australians who live in a house they partially (mortgage) or fully own, such developments will be viewed very critically. It’s just a matter of time for more radical housing reforms to become politically mainstream.

In 10 years, ageing Baby Boomers will slowly start dying. This means a big home-owning voting block disappears while the cohort of renters and wannabe home owners only goes up.

Sooner or later, it will be politically risky to not actively drive down home prices. For now, it takes very brave politicians who push through significant housing reforms.

We are talking about things proven to drive down prices such as scrapping stamp duty in favour of a land tax; fast tracked approvals; radical densification of the middle suburbs; a push of AirBnbs back into the rental market; taxation of holiday homes – the list of radically unpopular reforms is long. Their eventual appearance however is baked into the demographic and political system. 

Such reforms might arrive just in time for young Gen Zs (born 2000-17) who will start their family formation journey in the early 2030s at scale. The real losers of the housing affordability crisis so far are and will continue to be Millennials (born 1982-99) and younger Gen Xers (born 1964-81). I therefore expect only bad news from the 2025 version of the Demographia International Housing Affordability Report but I am looking forward to the 2035 edition.  

Demographer Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. His latest book aims to awaken the love of maps and data in young readers. Follow Simon on Twitter (X), Facebook, LinkedIn for daily data insights in short format. 

Stay informed, daily
A FREE subscription to The New Daily arrives every morning and evening.
The New Daily is a trusted source of national news and information and is provided free for all Australians. Read our editorial charter.
Copyright © 2024 The New Daily.
All rights reserved.