Australia’s Cities Are Now Among the Most Unaffordable in the World – But What Does That Really Mean for Property Investors?

It’s official – again.

Australian capital cities, particularly Sydney and Melbourne, are among the most unaffordable places to buy a home anywhere in the world.

A new global housing affordability survey has ranked Sydney as the second least affordable city globally (just behind Hong Kong), with Melbourne not far behind at number four.

That’s the sort of headline that grabs attention – and predictably sets off a flurry of outrage, fear, and political finger-pointing.

But as with most sensationalist headlines, there’s more to the story.

And if you're a strategic property investor, this news isn’t necessarily bad.

In fact, it’s another indicator that Australia’s best capital cities – especially our economic powerhouses – remain in high demand.

Let’s unpack what’s really going on here.

The affordability rankings: what they really measure

The report from US-based Demographia ranks cities based on the “median multiple” – the ratio of median house prices to median household income.

In other words, it’s a simplistic measure: the higher the multiple, the more unaffordable a market is deemed to be.

Sydney came in with a median multiple of 13.8 – that’s to say, the median home costs nearly 14 times the median household income.

Melbourne’s ratio sits at 9.8.

By comparison, cities like New York and London rank lower on the list.

That might sound shocking at first glance.

But here’s the problem: this metric completely ignores a city’s economic structure, planning restrictions, desirability, and future growth potential.

And more importantly, it fails to reflect how real-life homebuyers and investors actually make purchasing decisions.

High prices reflect high demand, and that's not a bad thing

Let’s be honest – Sydney and Melbourne aren’t unaffordable because no one wants to live there.

Quite the opposite.

They’re unaffordable because people desperately want to live there.

These cities are global gateways.

They have robust economies, diverse job markets, world-class infrastructure, top-tier education, and desirable lifestyles.

People vote with their feet – and their wallets – to live and invest there.

So yes, prices are high.

But that reflects strong, persistent demand against a backdrop of limited supply – a hallmark of a resilient, appreciating property market.

Remember, we’re not just investing in property.

We’re investing in locations.

And the best locations will always command a premium.

The real issue: a broken supply system

If we want to talk seriously about affordability, we need to focus less on property prices and more on supply-side constraints.

Planning bottlenecks, zoning restrictions, developer delays, and infrastructure shortfalls all contribute to the housing shortfall, particularly in our capital cities.

We’re simply not building enough of the right kind of housing in the right locations.

That’s the elephant in the room – and no affordability index can change that fact.

The federal and state governments have all made noise about boosting housing supply.

But real structural reform – especially to planning systems – has been slow.

Until that changes, prices in our most desirable cities will remain elevated.

Why This Matters to Property Investors

If you're an investor, don't let affordability rankings scare you off.

In fact, they can highlight exactly where you should be looking.

[tip] Here’s the truth: unaffordability is not the same as uninvestability. [/tips]

Strategic investors look for areas with strong long-term demand drivers – population growth, infrastructure investment, jobs, education, lifestyle – and constrained supply.

Sydney and Melbourne tick every box.

Yes, you’ll pay a premium to buy in these markets – but you’re also positioning yourself for sustained capital growth and resilience through the cycles.

That’s why I still advocate for a “capital city focus” when it comes to strategic investing.

It’s where the long-term money is made.

So, what should you do?

Here are a few practical takeaways for investors:

• Don’t be spooked by headlines. They’re designed to provoke emotions, not guide strategic decisions.

• Focus on fundamentals. High prices reflect high demand, and that’s exactly what you want as an investor.

• Work with the right team. Navigating tight markets takes expertise, especially in today’s complex environment. This isn’t the time to go it alone.

• Buy the best you can afford. Focus on quality assets in investment-grade locations, not just cheap ones that appear affordable on paper.

• Take a long-term view. Wealth isn’t built in a year. Stay the course and let the power of compounding growth do the heavy lifting.

Final thoughts

Australia’s housing market isn’t “broken” – it’s functioning exactly as a high-demand, low-supply market does.

The fact that our major cities are seen as globally unaffordable is simply a reflection of their strength, not a weakness.

For investors with a long-term mindset, this is just one more reminder that property remains a powerful vehicle for wealth creation, provided you invest strategically.

And remember: it's not about timing the market.

As I always say, it's about time in the market, especially in the right locations.

About Joseph Ballota Joseph is a Property Coach who put hundreds of people on the road towards wiping away their mortgage in under 5 years through expert Property Investment Plans.