The newly released annual Demographia report on housing affordability has found that Australia has some of the least affordable housing markets in the world. Sydney was ranked as the second-least-affordable housing market behind Hong Kong.
However, what was more surprising was that Australia had the dubious distinction of having four of the ten least-affordable housing markets covered by the survey. Melbourne was ranked the tenth-most-unaffordable housing market. Wingecarribee, west of Wollongong and Tweed Heads came in at seventh and eighth respectively.
This is sobering news given the report covers major world centres such as London and New York. And for many commentators this outcome came as a shock: how could regional Australia – which is perceived as less dynamic than the capital cities and with ample space for housing – be so unaffordable?
Andrew Beer, Dean of Research and Innovation at the University of South Australia, tackles this question in an article published in The Conversation. According to Beer there are 3 factors affecting regional house pricing.
First these are attractive destinations for retirement and leisure living, attracting Baby Boomers and cashed up Gen Xers who are buying properties they will only occupy for a few weeks a year. This has a long term and cumulative impact on the market.
Second is that country Australia is less prosperous than our cities and average incomes are lower in country towns. This means households are spending a higher percentage of their earnings on rents or mortgage.
Thirdly is the challenge in building new housing. While housing construction costs are slightly higher outside capital cities, it is the cost of land that presents the biggest barrier.
You can read the article in The Conversation.