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The report says for housing markets to rate as "affordable", housing should
not exceed three times gross annual household income (the Median Multiple). If
this "affordability threshold" is breached, it indicates local political
impediments to the provision of affordable housing that need to be dealt with.
Housing markets are rated as "affordable" at or below 3
times gross annual household income (Median Multiple), "moderately
unaffordable" at or below 4 times income, "seriously unaffordable" at
or below 5 times income and above 5, rated "severely unaffordable".
The authors say that historically, the Median Multiple has been remarkably similar in
Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States, with median
house prices having generally been 3.0 or less times median household incomes in the principal
affordability indexes (historical data has not been identified for Hong Kong). This affordability
relationship continues in many housing markets of the United States and Canada. However, the
Median Multiple has escalated sharply in the past decade in Australia, Ireland, New Zealand,
and the United Kingdom and in some markets of Canada and the United States.
In 2010, housing in Ireland overall was moderately unaffordable with a Median
Multiple of 4.0. Housing was generally affordable in Ireland as late as the middle 1990s.
In today's report, Dublin was the least affordable market with a Median Multiple of
4.8 and along with Cork (4.1) was seriously unaffordable. Three of Ireland’s five markets were
moderately unaffordable, Waterford (3.2), Galway (3.6) and Limerick (4.0). Ireland had no severely
unaffordable markets and had no affordable markets.
The 325 markets are ranked by housing affordability in Schedule
1. All of the 115 affordable markets (having a Median Multiple of 3.0 or below)
were in Canada and the United States (Table 5). There were 106 affordable markets in the United
States and 9 affordable markets in Canada. There were no affordable markets in Australia, Ireland,
New Zealand or the United Kingdom.
The fast growing Atlanta, Georgia, USA is the most affordable
of the 82 major metros, with housing prices at 2.3 times household income. Being
an "open market," Atlanta over produced market priced housing, but did
The median home price is the level at which half
of all homes are sold for more and half are sold for less.
The most affordable major market (over 1,000,000 population) was
Atlanta, with a median house price of $129,400, and a Median Multiple of 2.3. Indianapolis
($120,200) and Rochester ($121,500) tied for 2nd most affordable major market, at a Median Multiple of 2.4.
Cincinnati, Cleveland and Detroit tied for 4th
most affordable, with a Median Multiple of 2.5,
followed by Buffalo, Las Vegas and St. Louis at 2.6. Eleven other US major markets were rated
affordable, including fast growing Dallas-Fort Worth (2.7), Houston (2.9), Jacksonville (2.9) and
All major markets in Australia and New Zealand, as well as Hong
Kong were severely unaffordable.
Hong Kong ranked as the least affordable major market (82nd),
with a median multiple of 11.4.
Sydney ranked second least affordable (81st),
with a Median Multiple of 9.6, having slipped behind last year’s most unaffordable market, Vancouver at 9.5, which
Melbourne ranked 79th, with a Median Multiple of 9.0. Plymouth & Devon, San Francisco,
London and Adelaide all had Median Multiples of more than 7.0 (Table 4).
Hugh Pavletich of New Zealand's
Urban Planning, the initiator and co-author of the Annual Demographia
International Housing Affordability Survey says: "For metropolitan areas to rate as 'affordable'
and ensure that housing bubbles are not triggered, housing prices should not
exceed 3.0 times gross annual household earnings. To allow this to occur, new
starter housing of an acceptable quality to the purchasers, with associated
commercial and industrial development, must be allowed to be provided on the
urban fringes at 2.5 times the gross annual median household income of that
urban market (refer Demographia Survey Schedules for guidance)."
"The critically important Development Ratios for this new
fringe starter housing should be 17 – 23% serviced lot - - the balance the
actual housing construction."
The fringe is the only supply / inflation vent of an urban
He said that there is a truism, well understood by responsible
developers and real estate financiers internationally: "If you get the land
price wrong -- everything else is wrong."
Due to unnecessary politically inflated land costs, housing
markets are "very wrong" in Hong Kong, Australia, New Zealand, the United
Kingdom, Ireland and some parts of Canada and the United States.