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In global terms, all five of Australia’s major cities fall into the report’s highest category of unaffordability. Surprisingly, Perth - where prices have risen rapidly over the past four years - is now the most affordable of the group, sitting at 8.3 times income. High wages go some way to explaining why Perth remains relatively more affordable, although it is still well above the international benchmark of 3.0, which Demographia considers “affordable”.
The report highlights a sharp turnaround for Adelaide. Just a few years ago, the city’s housing market was among the most accessible in the country. But strong price growth has pushed affordability to record lows. Prices have risen by 9.1 per cent, outpacing both Melbourne and Sydney.
Australia’s national median multiple is 9.7 - worse than Canada (5.4), the UK (5.6) or the US (4.8). On this measure, Australia’s housing is less affordable than virtually any other high-income nation.
Where Demographia sees restrictive planning as the key driver of unaffordability, the Australian experience is more complex. While limits on urban expansion play a role, local resistance to higher density is likely a more pressing constraint as is the desire of Australians for large homes. At the same time, a sharp rise in construction costs since the pandemic has made new projects harder to deliver, compounding the affordability challenge.
The affordability squeeze is unlikely to improve soon. September data show national house prices up 8.9 per cent over the year and on track to reach double-digit annual growth by December. Any further Reserve Bank rate cuts will fuel stronger growth, while generous first-home buyer incentives are driving sharp gains at the cheaper end of the market. New housing supply continues to lag well behind target, with little improvement over the past year.
