DEMOGRAPHIA, which has long advocated against restrictive land use and planning policies, this week released its 9th Annual International Housing Affordability Survey, covering 337 metropolitan markets in Australia, Canada, Hong Kong, Ireland, New Zealand, the United Kingdom and the United States.
According to the survey, which measures housing affordability by dividing median house prices by gross annual median household income, the United Kingdom, Australia and New Zealand continue to experience pervasive unaffordability, while the least affordable market is Hong Kong.
Using the 'median multiple' measure, housing markets are considered "affordable" at or below 3 times gross annual household income, "moderately unaffordable" at or below 4 times income, "seriously unaffordable" at or below 5 times income and "severely unaffordable" when above 5.
The report states that in "affordable and normal housing markets", house prices should not exceed 3.0 times annual household incomes. It continues to say that if markets do exceed this standard, "it indicates that there are political and regulatory impediments to the supply of new housing that need to be dealt with."
Of the 81 major metropolitan markets (those with a population of more than 1,000,000) surveyed, there were 20 affordable major markets, 23 moderately unaffordable major markets, 14 seriously unaffordable major markets and 24 severely unaffordable major markets.
The report finds that all of the major markets of Australia, New Zealand and Hong Kong and one-half of the major markets in Canada and the United Kingdom were severely unaffordable. Six of the 51 major US markets were rated as severely unaffordable.
According to the report, Detroit, with a Median Multiple of 1.5, was the most affordable major market. Other affordable major markets included Atlanta, Cincinnati, Rochester, St. Louis, Cleveland, Indianapolis and Jacksonville.
At the other end, the most unaffordable major market was Hong Kong, with a Median Multiple of 13.5. (ranked 81st). Vancouver was found to be the second most unaffordable major market (Median Multiple of 9.5), followed by Sydney (8.3), San Jose (7.9), San Francisco and London (7.8) and Melbourne (7.5).
After Sydney and Melbourne, the next most unaffordable major market in Australia was Adelaide, with a Median Multiple of 6.5, followed by Perth (Median Multiple of 5.9) and Brisbane (5.9). However, these were not the most unaffordable markets in Australia.
When comparing all 39 markets in Australia (of which nine were rated as seriously unaffordable, with the remaining 30 markets rated as severely unaffordable), the least affordable was Port Macquarie, with a Median Multiple of 8.6, followed by Coffs Harbour (8.0) and the Sunshine Coast (8.0). The least expensive markets were Shepparton (4.5) and Mildura (4.6).
The report argues that housing affordability issues are caused by failures to maintain a "competitive land supply", stating that there is "overwhelming economic evidence" that indicates that urban containment policies, especially land rationing mechanisms such as urban growth boundaries, raise the price of housing relative to income. However, it does not deal with the economic, social and environmental impacts of unrestricted land supply.
On its website, Demographia declares that it is "pro-choice with respect to urban development" and that "people should have the freedom to live and work where and how they like."
The 9th Annual Demographia International Housing Affordability Survey is available from the Demographia website at <http://www.demographia.com/>.