New Report Says Australia 2nd Most Expensive Housing in the World

The 14th Demographia International Housing Affordability Report says that Australian property is severely unaffordable. The annual survey carried out by economists from the London School of Economists looks at a number of cities in developed nations and compares income to house price ratio’s to determine the relative affordability of housing.

It is fair to say that Australia performs poorly. Sydney is the 2nd least affordable city, and Melbourne is just behind it.

Brisbane, Perth and Adelaide fair much better but are still ranked as severely unaffordable.


You can read the full report, including the details analysis here. It is impressive and a great piece of work. But what are we to make out of all of this? Prices continue to go up notwithstanding the relationship that this report makes between income and house prices to measure affordability. This is a logical assumption to make, of course, a high income will lead to a high propensity to spend (and borrow) and hence leads to higher prices. But we have been hearing year after year that Australia has unaffordable house pricing, but still, nothing changes.

So I thought I would do a quick check to compare GDP growth in the economies of the nations featured. Below you will see the graph of the relative change in house price affordability (from the Report) and you will also see the change in GDP (Gross Domestic Product) for the relative economies over the same period.

Income to House Price ration since 1987

GDP Growth since 1987

Over this period the UK’s GDP has effectively tripled, Canada’s has quadrupled, New Zealand’s increase by a factor of 4.5, Ireland by a factor of over 9, and Australia’s by a factor of 6.5. The three counties with the fastest GDP growth have also experienced the fastest rise is poor affordability. Perhaps there is more to house price growth then purely current incomes, which is what the Demographia report solely looks act.

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Written: 23 January 2018, Updated: 6 April 2020

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