Sydney named third worst city in the world for housing affordability

author-avatar By on February 25, 2021
Sydney named third worst city in the world for housing affordability

Sydney has come in third for most unaffordable housing globally, behind Hong Kong and Vancouver.

The 2021 Demographia International Housing Affordability report studied the rates of middle-income housing affordability in 92 major housing markets in eight nations. 

Australia's major housing markets, Sydney, Melbourne, Brisbane, Perth, and Adelaide, were all rated as severely unaffordable, the third worst national market in the report. 

Melbourne was rated the sixth most unaffordable city in the world for housing affordability, behind Auckland and Toronto but ahead of San Francisco, London, and Honolulu. 


Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval

VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 27, 2021. View disclaimer.

Report author Wendell Cox said COVID had accelerated the trend of worsening affordability in major markets. 

"In this year of the global pandemic and lockdowns, it is not surprising that housing affordability — given the large influx of new buyers, particularly in suburban and outlying areas — has continued to deteriorate," Mr Cox said.

"As a result many low-income and middle-income households who already have suffered the worst consequences from housing inflation will see their standards of living further decline." 

Last year, regional housing values tripled the growth of their capital city counterparts, according to CoreLogic, which Mr Cox said may help to bring down prices in unaffordable markets. 

"The affordability issue is particularly critical due to the strong increase in remote working (telework) during the pandemic which is accelerating the movement to more affordable places," he said. 

"It will likely also help flatten or even reduce prices in the highest cost housing markets as other households seek less costly housing elsewhere."

See also: Here's why Australian property prices didn't crash in 2020

Middle-class extinction? 

The report found the deterioration in housing affordability represented an existential threat to the middle-income household.

"Higher housing costs relative to incomes are strongly correlated with higher overall costs of living and thus lower standards of living," it found. 

"In the United States more than 85% of cost of living differences between metropolitan areas are reflected in housing cost differences.

"Similarly, Bloomberg reports that nearly all of London’s higher cost of living relative to the rest of the nation is associated with higher housing costs."

In a separate report, the Organisation for Economic Co-operation and Development (OECD) found “housing has been the main driver of rising middle-class expenditure,” with the largest increases in the costs of owning a home rather than renting. 

“…the cost of essential parts of the middle-class lifestyle have increased faster than inflation; house prices have been growing three times faster than household median income over the last two decades," the OECD said. 

The pandemic has only served to worsen conditions, with the report finding house prices had escalated, even though incomes had dropped among middle-income households. 

"This is in large measure a result of substituting telework for physical commuting, which gave households the flexibility to seek new housing with more space, indoors and outdoors. This rapidly developing demand shock drove house prices up." 

Working from home "a ray of hope?" 

Despite driving up housing costs, many households were shielded in part from the fallout from COVID thanks to the working-from-home (WFH) shift. 

The report noted that internet was now more important than a train line, in a shift that happened in days which in normal circumstances could've taken decades. 

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Mr Cox said greater remote working could begin to remove housing as a source of inequality. 

"This could reduce housing demand in the least affordable areas, providing relief at every price point, including for many middle-income households whose living standards have declined as house prices have raced ahead of incomes," he said.

"It provides the global middle class a ray of hope." 

See also: 30 Australian locations tipped to become working from home hotspots


Photo by Fidel Fernando on Unsplash 

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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