Melbourne house prices have been ranked the eighth most unaffordable in the world when compared to how much people are earning, with the city faring worse than New York and London. Demographia’s annual International Housing Affordability study found Melbourne’s typical house price was 9.9 times higher than the median household income in 2022’s September quarter. This is down from 12.1 times higher the previous year, when Melbourne was ranked the fifth least affordable. The study does not take into account median unit prices, inflation, the cost of living or rents, which have all risen in the past year. It calculates affordability based on median house prices against median household incomes.
Melbourne was more expensive than New York, Singapore, Greater London, Dublin, Miami and Las Vegas. The report also found Sydney had the world’s second least affordable median house price at 13.3 times higher than standard household incomes. And all five of Australia’s major housing markets, Melbourne, Sydney, Brisbane, Adelaide and Perth, “have been severely unaffordable since the early 2000s.
In a well-functioning market, the median-priced house should be affordable to a large portion of middle-income households, as was overwhelmingly the case a few decades ago. A drop in Melbourne’s median house price across the 12 months accounted for the reduction to a 9.9 score. Strict land use regulations implemented since the 1990s and 2000s – such as the Urban Growth Boundary – were contributing to a lack of affordable housing.
The state government should very seriously consider ‘rolling back’ the UGB, which dictates where new housing can be built and which areas are environmentally protected. Cox said that as house prices went through the roof in Australia more people on low incomes would sign up for social housing waiting lists.
While the report did not detail the median household income or property prices its findings were based upon, it used the Australian Bureau of Statistics 2021 Census and Real Estate Institute of Australia data for calculations.
According to the ABS, a Victorian household’s typical annual income was $91,468 in 2021, while PropTrack put Melbourne’s median house price at $903,000 in January. Hong Kong claimed the crown for the overall least affordable house price at 18.8 times above usual wages, followed by Vancouver in Canada, Hawaii’s Honolulu and Californian city San Jose.
