We all know that property prices in Sydney have become crazy expensive, but according to a new study, Sydney
is now the world’s second most unaffordable city in the world for housing
And it’s not just Sydney that is seeing property prices soar, Australia
has also been ranked the third most expensive housing market in the world
Demographia has released its 13th Annual Demographia International Housing Affordability Survey for 2017
which rates middle-income housing affordability. This latest survey takes in prices from the third quarter of 2016, and found that Sydney was the second most unaffordable city in the world for housing. Melbourne wasn’t far behind, ranking in sixth in the unaffordable list.
The Demographia survey takes into account 94 major cities and 406 areas in major nations including Australia, Canada, China (Hong Kong), Ireland, Japan, New Zealand, Singapore, United Kingdom and United States and compares the average home prices to median income. If a house costs three times the median income or less are deemed ‘affordable’, whilst a house costing over five times the median income (5.1) is deemed ‘severely unaffordable’.
Unsurprisingly, Sydney housing came in at 12.2 times the median income (the same as last year), whilst Melbourne sat at 9.5 times. However, it’s little surprise as buyers in both cities are feeling the pressures of unaffordable housing and looking at new tactics and strategies to get a foothold on the property ladder.
The most expensive city to buy housing was Hong Kong with housing a whopping 18.1 times the median income. Besides Sydney and Melbourne, other Australian cities that also ranked as ‘severely unaffordable’ included Adelaide, Brisbane and Perth coming in at 6.6, 6.2 and 6.1 times the median income respectively. In fact, the report states that 33 of the 94 severely unaffordable markets are situated in Australia.
Top 10 most unaffordable cities for housing are:
- Hong Kong, China – 18.1
- Sydney, Australia – 12.2
- Vancouver, Canada – 11.8
- Auckland, New Zealand – 10.0
- San Jose, US – 9.6
- Melbourne, Australia – 9.5
- Honolulu, U.S. – 9.4
- Los Angeles, U.S. – 9.3
- San Francisco, U.S. – 9.2
- Bournemouth & Dorset, UK – 8.9
Looking on a national level, Australia is also ranked the third most expensive nation in the world coming in at 5.5. Hong Kong ranks first with 18.1, whilst New Zealand is the second most unaffordable at 5.9.
The median house price in Sydney now sits at a record $1,123,991 according to Domain.
So how can Australian property buyers get on the property ladder?
With Australia ranked as the third most expensive nation in the world for property, what can Australians do to get on the property ladder? Here are four strategies worth mulling over:
One strategy that younger Gen Y’s are using is the rentvestor approach, that is where you invest in a property, whilst continue to rent or live at home with the parents. This provides a far more affordable way to enter the property market, whilst still allow buyers to enjoy the lifestyle of renting. This is particularly true for Sydney and Melbourne property buyers. With property prices here some of the most expensive in the country, it makes sense to invest interstate such as in Brisbane which has more affordable opportunities to take advantage of.
2. Buy off the plan
Another smart way is to buy property off the plan. Off the plan apartments allows you to secure a property at today’s prices with just a 10% deposit. You then have at least one to two years or so for the property to reach settlement depending on the development size, giving you extra time to work out what you are doing, save a larger deposit and more importantly enjoy capital gains if you buy in an area that is expected to see good growth.
3. Buy with someone else
You can of course buy with someone else such as your partner, family member or friend to halve the costs. Buying a property on your own is extremely tough, but having someone else to help save up a deposit and share the property costs can help alleviate the risk and make owning a property more financially viable for you.
4. Ask your parents for help
Are your parents able to help? Whether they give you a sum of money as a gift for your deposit or go guarantor for you and use the equity in their home as your deposit, this can help you reach property ownership sooner. Ideally, you want to pay off your parents as quickly as possible to minimise their risk, but it gives you a stepping stone towards property ownership. Ideally buying off the plan will help this method as by the time settlement arrives, your property might have earned enough equity to release your parents from this agreement.
If you are struggling to get a foothold in the Sydney or Melbourne property market and want to learn more about how these strategies could get you to property ownership sooner, then get in touch with the iBuyNew team today to find out more.
Give us a call on 1300 123 463
and one of our expert Property Consultants will be keen to assist you further.
Published on 30th of January 2017 by Marty Stanowich