Hong Kong, Sydney and Vancouver are the three least affordable housing markets in the world, according to the 13th annual Demographia International Housing Affordability Survey.
The study ranks middle-income housing in 406 cities across nine countries – including Australia, Canada, Japan, the UK and US – using data from the third quarter of 2016.
Housing markets are ranked using a “median multiple” score, which is calculated by dividing the median house price by gross annual median household income to calculate affordability. For example, if the median house price in London is £440 000 (R7.4m) and the median household income is £51 800 (R870 000), the housing market score would be 8.5.
According to the authors, a normal middle-income housing market would have a median house price, which is at or below three times household earnings. A city with a score of 5.1 or over is considered to be “severely unaffordable”.
For the seventh consecutive year, Hong Kong topped the unaffordable housing list in 2016, with a score of 18.1. While lower than its record-breaking score of 19 the previous year, Hong Kong’s score is nearly 50% higher than second-placed Sydney (12.2).
Hong Kong is a small island with 7 million residents and a further 1.5 billion potential property buyers in mainland China. As a result, demand for housing on the island is intense, with subdivided flats of less than 9m² available for rent for more than £300 (R5 000).
“Sydney is ranked second with a score of 12.2 – unchanged from last year. With a median house price of A$1.4m (R14.1m), a house in Sydney will cost a middle income earner about 12.2 times their annual salary.”
Vancouver, where house prices rose the equivalent of a full year’s household income in just one year, is the third least affordable city with a score of 11.8.
The survey reveals that there are currently 26 severely unaffordable major housing markets worldwide. Prices have risen dramatically since the 1980s when – by Demographia’s calculations – all major markets, with the exception of Sydney, were at the affordable housing level.
The United States has once again emerged as the most affordable major housing market, a title it has held for the past four years. Of the 406 cities included in the survey, the most affordable city for housing last year was Racine, Wisconsin with a score of just 1.8.
