Sydney and Melbourne among world’s most unaffordable markets: report

The nine countries surveyed were Australia, Canada, China, Ireland, Japan, New Zealand, Singapore, the UK and the US.

Historically, the median multiple has been remarkably similar in Australia, Canada, Ireland, New Zealand, the UK and the US, with median house prices from 2.0 to 3.0 times median household incomes, according to the report.

However, in recent decades, house prices have been decoupled from this relationship in markets such as Sydney, Vancouver, San Francisco, London and Auckland, it added.

“Without exception, these markets have severe land use restrictions (typically ‘urban containment’ policies) that have been associated with higher land prices and in consequence higher house prices (as basic economics would indicate, other things being equal),” it said.

The report found all of Australia's five major metropolitan areas were severely unaffordable.

“This is in significant contrast to broad housing affordability that existed before implementation of urban containment (urban consolidation) policies,” it said.

“Before urban consolidation was adopted, each of Australia's major markets had housing that was affordable.”

Among Australia’s five major metropolitan area markets the overall median multiple was 6.5.

The least affordable market was Sydney, with a median multiple of 9.8, a substantial increase from last year's 9.0.

“This makes Sydney the third least affordable out of the 86 major markets rated in this survey,” the report found.

Housing affordability also deteriorated in Melbourne, rising to a median multiple of 8.7 in 2014 from 8.3 in 2013.

Melbourne ranked sixth least affordable of the 86 major markets.

Housing affordability deteriorated slightly in Adelaide (from 6.3 to 6.4), Perth (from 6.0 to 6.1) and Brisbane (from 5.8 to 6.0).

[Related: Exploding the myth of housing affordability]