International Housing Affordability Report by Demographia ranks Sydney second worst

Residents are paying through the nose to live in Sydney, with a new report ranking housing affordability here second worst in the world.

Australia has been declared the least affordable housing market in the English-speaking world, with three of the nation’s capitals ranked among the 10 most unaffordable global cities.

The annual Demographia study ranked Sydney the second most unaffordable city to buy a home — the 15th time in 16 years the Harbour City has been ranked in the global top three.

Melbourne came in at number seven while Adelaide sat at number nine.

The findings have prompted warnings from experts that Australians are delaying having children and moving further away from home because of the soaring cost of housing.

Sydney was deemed “impossibly unaffordable”, with prices 13.8 times the average income, according to Demographia’s newly released International Housing Affordability report.

Sydney: Beautiful one day, impossible to afford a house the next. Picture: Getty Images

The report, which examines housing markets across the English-speaking world, compared 94 areas across Australia, Canada, Ireland, New Zealand, Singapore, United Kingdom, Hong Kong and the United States — and found only Hong Kong had a worse ratio of prices to incomes than Sydney.

Across Australia as a whole, prices were an average 9.7 times typical incomes, which was higher than in the US, UK, Canada, Ireland and New Zealand.

Demographia noted that Australian housing affordability had deteriorated markedly in recent years, with the ratio of prices to incomes at 6.9 back in 2019.

All five of Australia’s major housing markets have been severely unaffordable since the early 2000s or before, the report said.

The report said there had been a strong association between severely unaffordable housing and net domestic migration in many countries.

Deteriorating housing affordability was eroding the middle-class, the report added.

“For decades in the high-income world, a hallmark of a strong middle class was the widespread ability to own a home — house prices generally rose in line with household incomes,” it said.

UNSW city planning Professor Bill Randolph.

Separate data released on Thursday showed net overseas migration, the difference between the number of international arrivals staying in Australia for longer than 12 months, and the number of long-term and permanent departures, was 547,267 last year — down from a record of 564,645 in the 12 months to September 2023.

The reading is likely to reignite Coalition criticism against Labor, with the Opposition claiming the Albanese government has overseen a migration surge while failing to bolster the supply of housing and infrastructure.

UNSW City Futures Research Centre director Professor Bill Randolph said housing affordability meant people had less money to spend in other areas of the economy.

“The amount of money or debt capital tied up in housing through mortgages is a real weight on the economy and it means that capital isn’t available to spend on other things,” he said.

“If you spend half your money on a mortgage you don’t spend it on going out, new clothes or a new car because you can’t afford it.”

He said the lack of discretionary spending could dampen economic growth other areas.

Economist Saul Eslake said housing affordability had a flow on effect of people “delaying having children or having fewer children” as well as where people chose to live.

“It forces people to make choices they might not otherwise have about where they live,” he said.

“It can force people to spend far more time than they would choose commuting, or alternatively it can cut people off from sources of employment.”

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