World Housing Affordability Varies Greatly
January 28, 2013
The 9th Annual Demographia Housing Affordability Survey for New Geography rates housing markets based on the median multiple, which is median house price divided by pre-tax median household income. Affordable housing markets have a median multiple of 3.0, while severely unaffordable housing markets have a median multiple of 5.1 or over, says Wendell Cox, an adjunct scholar with the National Center for Policy Analysis and principal of Demographia, a public policy firm located in St. Louis.
- Hong Kong, Vancouver, Sydney, San Jose, San Francisco and London were the least affordable housing markets of the 337 metropolitan markets analyzed in the study. Each had a median multiple close to 8.0 or above.
- Detroit, Atlanta, Cincinnati, Rochester and St. Louis were the most affordable housing markets in the study. Each had a median multiple close to 2.0.
Of all the nations in the world, the United States has the most affordable or moderately unaffordable markets. The United States had an overall median multiple of 3.2, compared with 5.1 for the United Kingdom, 3.6 for Ireland, 13.5 for Hong Kong and 4.7 for Canada.
- Overall trends in the nine years the study has been conducted by the Performance Urban Planning organization indicate that housing affordability has risen most in the United States and Ireland.
- Australia and New Zealand have the most unaffordable major markets that have not shown any sign of improvement. Every major market has been severely unaffordable in every single year.
Empirical evidence suggests that urban containment policies, particularly urban growth boundaries, raise the price of housing relative to income. Cox notes that urban planning results in reduced standards of living, increasing poverty rates and lower discretionary income.
Cox says that urban policy needs to be reset. To make housing more affordable, cities and nations need to shift away from designing urban areas and instead let free market principles allocate land efficiently. With major demographic shifts underway in most nations, access to affordable housing will play a large role in the duration and quality of life of each nation's people.
Source: Wendell Cox, "Demographic and Economic Challenges: The 9th Annual Demographia International Housing Affordability Survey," New Geography, January 21, 2013.
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