Sydney is ranked as the second least affordable city in the world.
The New South Wales capital has earned this dubious accolade for the second year in a row in Demography International’s report on the cost of housing.
Sydney came in second behind first-placed Hong Kong, while Melbourne also featured in the top ten, coming in ninth.
Adelaide is ranked 14th, Brisbane 15th and Perth 50th.
Sydney is ranked as the second least affordable city in the world
Sydney was ranked the third least expensive city in the world in the report in 2021 before rising to second place in 2022, overtaking Vancouver, by the US think tank.
The city’s median home price of $1.2 million is 13 times the median full-time salary of $94,000 before a mortgage deposit is factored in.
Top 10 least expensive cities in the world
1. Hong Kong
5. San Jose
6. Los Angeles
8. San Francisco
Source: Demography International’s Housing Affordability Report
While the average house price in Sydney has fallen 14.7 per cent over the past year, it has increased by 27.7 per cent during the pandemic, well above the 3.3 per cent increase in wages, data from CoreLogic and the Australian Bureau of Statistics show.
During the height of the boom, when Reserve Bank interest rates were at a record low of 0.1 percent, house prices in some suburbs rose at a level well above the 7.8 percent inflation rate, also known as the Consumer Price Index.
“Sydney rose 6.0 times CPI, Brisbane 5.2 times, Melbourne 4.9 times and Perth 4.2 times,” the statement read.
In each of these five housing markets, house price inflation since 2000 has outpaced price inflation for all product groups that make up the CPI.
The report warned that rising prices could lead to a sharp drop in the standard of living.
“As the pandemic and lockdowns dragged on for another year, the movement of households from denser urban neighborhoods to larger homes, often with large courtyards (gardens), continued in suburban and remote areas,” the statement read.
The result has been unprecedented price hikes in many markets.
As a result, many low- and middle-income families who have already suffered the worst consequences of the housing inflation will see their living standards deteriorate further.
Melbourne also appeared in the top 10 most affordable cities in the world, ranking ninth
Wendell Cox of the Institute for Urban Reform has called rising home prices an “existential threat” to the middle class.
Average house prices in Australia
Melbourne: 887,222 dollars
Brisbane: 767,781 dollars
Adelaide: 694,653 dollars
Perth: 587,274 dollars
Canberra: 946,022 dollars
Source: CoreLogic, February 2023
“There is a broad view that declining housing affordability poses an existential threat to the middle class,” he said.
Housing affordability in 2022 continued to reflect the massive price increases that occurred during the pandemic demand shock.
“There have been some improvements in housing affordability since then, and the demand shock is likely to be replaced by more normal market trends.”
House prices are set to recover once interest rates stop rising, and some new immigrants are choosing to buy homes, as the influx fuels the rental crisis, experts say.
Australia’s annual net migration in the year to September 2022 was 303,700 people – the highest level in 15 years – bringing the total population above 26.1 million.
This was the largest increase abroad since late 2008, and includes skilled immigrants, family reunions and international students.
The number of immigrants was also well above the October budget forecast of 180,000 for 2022-23, and the level of 235,000 projected for 2024-25.
Higher immigration is likely to help housing values recover once the RBA stops raising interest rates, said Tim Lawless, head of research at real estate data group CoreLogic.
New Australian Bureau of Statistics data showed overall population growth of 1.6 per cent returned to pre-pandemic levels.
By comparison, New Zealand’s population grew just 0.2 per cent over the same time frame, while last year the US population grew by 0.4 per cent, with one expert blaming a surge in international students for Australia’s rent crisis.
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