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Sydney is the world’s third-hardest city to buy a home and four other Australian state capitals are among the 25 dearest, new data shows.

Only Hong and Vancouver are less affordable for home borrowers on mid-range salaries before tax, Demographia’s International Housing Affordability Survey has revealed.

The findings were released a day after Treasurer Josh Frydenberg signalled a crackdown on home lending rules to stop the real estate market from overheating and turning into a bubble.

In August, the mid-point price of houses and apartments in Sydney stood at $1.039million, a level more than 11 times Australia’s average full-time salary of $90,329.

The Australian Prudential Regulation Authority considers a debt-to-income ratio of six to be risky and on Wednesday, the government’s Council of Financial Regulators announced it was considering toughening lending rules. 

Sydney property prices have surged at a annual pace of 20.9 per cent but house values soared by an even more dramatic 26 per cent to an even more unaffordable $1.293million, CoreLogic data showed. 

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Sydney is the third-hardest city in the world to afford a home and four other Australian state capitals are among the 25 dearest, new data shows

Sydney is the third-hardest city in the world to afford a home and four other Australian state capitals are among the 25 dearest, new data shows

 Sydney is the third-hardest city in the world to afford a home and four other Australian state capitals are among the 25 dearest, new data shows

Only Hong and Vancouver are less affordable for home borrowers on mid-range salaries, Demographia's International Housing Affordability Survey has revealed. The findings were released a day after Treasurer Josh Frydenberg signalled a crackdown on home lending rules to stop the real estate market from overheating and turning into a bubble

Only Hong and Vancouver are less affordable for home borrowers on mid-range salaries, Demographia's International Housing Affordability Survey has revealed. The findings were released a day after Treasurer Josh Frydenberg signalled a crackdown on home lending rules to stop the real estate market from overheating and turning into a bubble

 Only Hong and Vancouver are less affordable for home borrowers on mid-range salaries, Demographia’s International Housing Affordability Survey has revealed. The findings were released a day after Treasurer Josh Frydenberg signalled a crackdown on home lending rules to stop the real estate market from overheating and turning into a bubble

Australia’s least affordable capital cities

SYDNEY: Third least affordable with a debt-to-income ratio of 11.8

MELBOURNE: Sixth least affordable with a debt-to-income ratio of 9.7

ADELAIDE: Thirteenth least affordable with a debt-to-income ratio of 7.7

BRISBANE: Eighteenth least affordable with a debt-to-income ratio of 6.6

PERTH: Twenty-third least affordable with a debt-to-income ratio of 6 

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Hong Kong had the highest price-to-income ratio of 20.7, compared with Vancouver’s 13, Sydney’s 11.8, and Auckland at 10, closely followed by Toronto on 9.9 and Melbourne at 9.7, where the median house price is $954,496.

Three of the next four were in California – San Francisco and San Jose where prices are forced sky-high by well-paid tech workers, then Honolulu in Hawaii and Los Angeles.

Cities with a price-to-income ratio of more than 5.1 are considered to be ‘severely unaffordable’ by the Demographia Housing Affordability Ratings.

Australia’s biggest cities had affordability levels worse than that, as wages this year grew by just 1.7 per cent.

Adelaide was the world’s 13th least affordable city with a debt-to-income ratio of 7.7.

Brisbane was 18th on the unaffordability list with an equivalent ratio of 6.6 with Perth the 23rd least attainable with a debt-to-income ratio of six. 

The rating for the median of all metropolitan areas of Australia is 7.7, with combined capital city prices at $751,014 in August.

Australia’s median property price last month surged by 18.4 per cent, the fastest annual pace since July 1989, taking median values in both capital cities and regional areas to $666,514.

With a 20 per cent deposit factored in, an Australian earning the average, full-time -salary of $90,329 would almost have a debt-to-income ratio of six paying off a typical home.

Hong Kong (pictured) had the highest debt-to-income ratio of 20.7, compared with Vancouver's 13.0, Sydney's 11.8

Hong Kong (pictured) had the highest debt-to-income ratio of 20.7, compared with Vancouver's 13.0, Sydney's 11.8

 Hong Kong (pictured) had the highest debt-to-income ratio of 20.7, compared with Vancouver’s 13.0, Sydney’s 11.8

The International Monetary Fund last week warned of financial stability risks if Australia didn’t tighten loan rules on either debt-to-income ratios or loan-to-valuation ratio based on a minimum mortgage deposit.

The Washington-based group raised concerns a day after Commonwealth Bank chief executive Matt Comyn told a parliamentary hearing he was worried about unsustainable debt levels.

‘If you were to ask that question slightly differently in terms of increasing housing debt and increasing housing prices, I would say we are increasingly concerned,’ he told the House of Representatives Economics Committee.

The Demographia report assessed housing affordability in 92 major cities in eight nations during the third quarter of 2020.  

The Covid-19 pandemic has worsened Australian housing affordability, particularly in more upmarket suburbs and regional areas as record-low interest rates encouraged professionals who could work from home to move for lifestyle reasons.

The Reserve Bank of Australia last year cut the cash rate to a record-low of 0.1 per cent and the banks are offering fixed mortgage rates of 2 per cent. 

Housing affordability has dropped significantly in the past few decades, with Australian, Canadian, Ireland, New Zealand, US and British price-to-income ratios at three or less until the late 1980s and 1990s. 

By 2019, the national median multiples had shot up to four in the US and Canada, nearly six in Australia, and seven in New Zealand. 

Melbourne, with a debt-to-income ratio of 9.7 was the world's sixth dearest market for workers on a mid-point salary

Melbourne, with a debt-to-income ratio of 9.7 was the world's sixth dearest market for workers on a mid-point salary

 Melbourne, with a debt-to-income ratio of 9.7 was the world’s sixth dearest market for workers on a mid-point salary

Cities with a median multiple of 5.1 and over are considered to be 'severely unaffordable'. At number four, Auckland (pictured) sits way above that at 10

Cities with a median multiple of 5.1 and over are considered to be 'severely unaffordable'. At number four, Auckland (pictured) sits way above that at 10

Cities with a median multiple of 5.1 and over are considered to be ‘severely unaffordable’. At number four, Auckland (pictured) sits way above that at 10

Source: Daily Mail

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