Australia’s housing affordability crisis: a closer look

The latest release from US-based consultancy Demographia has captured global attention yet again with its 20th annual International Housing Affordability Report.

This study delves into the affordability of housing across 94 markets in eight countries, including Australia’s five largest cities.

In his article in The Conversation, Simon Kuestenmacher discussed the report's findings.

He said that the report's methodology is straightforward: it divides the median house price by the median household income, providing a clear metric of affordability—or the lack thereof.

Demographia defines a market as severely unaffordable when a house costs five times the annual income.

It escalates to "impossibly unaffordable" at a multiple of seven.

Unfortunately, no country in the study boasts an "affordable" market, defined as less than three times the median income.

Perth emerges as the most affordable major city in Australia

According to the report, for Australia, Perth emerges as the most affordable major city with a multiple of 6.8, just shy of being labelled impossibly unaffordable.

Brisbane, Adelaide, and Melbourne exceed this, with multiples ranging from 8.1 to 9.8, pushing the boundaries of what we might call "impossibly unaffordable."

Kuestenmacher commented:

"The situation has only deteriorated over time.

Since the early 2000s, all major Australian housing markets have remained severely unaffordable, with the national median multiple worsening from 6.9 in 2019 to a staggering 9.7 today.

This trend underscores a housing market that is twice as bad as the already severe benchmark."

The report's foreword highlights the broader social impact of such exorbitant housing costs, particularly on young people, minorities, and immigrants.

It criticizes the overly restrictive suburban land use policies that have throttled supply and inflated prices.

This rings true for Australia, where expensive housing not only stifles upward mobility but also mocks the notion that hard work can secure financial advancement.

Sydney is the least affordable city

The report also highlighted Sydney as our least affordable city with a multiple of 13.8, indicative of an utterly dysfunctional market for all but the wealthiest.

The city's plight illustrates the drastic measures needed to make housing affordable again, requiring a significant drop in house prices.

Kuestenmacher noted in his article:

"The dialogue around affordable housing often dances around the harsh reality that prices need to fall.

Yet, political hesitancy persists, especially following electoral reactions to proposed reforms that threaten home values.

However, signs of change are appearing.

For instance, NSW Premier Christopher Minns is advocating for ambitious reforms including zoning changes and faster development approvals centered around affordable housing."

He further noted that these efforts reflect a growing realization that without drastic action, the dream of homeownership will continue to slip away for younger Australians.

He said:

"As the demographic landscape shifts over the next decade, with Baby Boomers gradually exiting the housing market, we may reach a tipping point where it becomes politically viable, perhaps even necessary, to enact bold reforms to reduce housing prices."

In conclusion

While the 2025 Demographia report may not bring good news, there is cautious optimism for the 2035 edition, anticipating significant policy shifts that could finally address the deep-rooted issues of housing affordability.

As Kuestenmacher explained:

"For now, the call to action remains clear: we need brave policymakers willing to champion substantial and sometimes unpopular reforms to ensure a fairer housing market for future generations."

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.