Even if Australia is a beautiful place to live, it is far from affordable. Results from the Demographia International Housing Affordability Survey show that some of the country’s major cities rank near the bottom of the list of areas with affordable housing. Out of the 325 cities analyzed, Perth ranks 291st, Melbourne ranks 321st, and Sydney ranks 324th. At 6.3, 9, and 9.6 respectively, each one has a median housing price to median household income ratio at least three to six points higher than the 3.0 price to income ratio demarcating affordable from unaffordable housing. Compared to these places in Australia, living in New York or London seems almost reasonable.
Residential property prices in Australia have risen 250% in the past ten years, mainly due to the Government’s concentration on incentives for investors and speculators. A first home buyer’s program and negative gearing incentives for home and property owners have taken a toll on the housing market, creating such “inexcusable” conditions according to Australian Greens housing spokesman Senator Scott Ludlam.
The 2008 Senate Select Committee on Housing Affordability’s investigation into this issue reveals that the Government spent about $50 billion annually on capital gains exemptions and negative gearing incentives, while only spending $512 million over the course of five years to improve the supply of affordable housing. Rental affordability is not much better, as indicated by the gap of 493,000 affordable and available rental properties in Australia.
Ludlam and others have started to call this a “crisis,” an adequate term given migration trends all over the world. Cities with unaffordable housing, such as New York, London, and San Francisco, are losing people moving to the less expensive suburban areas. If Australia continues to have housing bubbles and affordability issues, cities like Melbourne and Sydney may experience high out-migration rates in the coming years, which would not bode well for cities on the rise.