As every real estate agent or real estate professional will tell you, the three most important things in the industry are: location, location, location.
Geography plays a huge role in choosing a place to live and in the changing prices of homes on the market. Proximity to amenities, schools, transportation, and office buildings can cause house prices in the city to become more expensive.
Housing affordability, which is the relationship between housing costs and household income, is a very prominent and pressing issue as living costs, especially in Canada, continue to rise and become unreachable for lower and middle income households who suffer the worst consequences.
Housing inflation can make it almost impossible for new buyers and low income households to enter the housing market. Major cities in Ontario- like Toronto, Ottawa, and Hamilton- have some of the most unaffordable housing in the country.
While the recent housing market boom and global pandemic have had an impact on housing prices all across North America, there are a few cities around the world that don't even need to experience a market boom for them to be unaffordable.
There are unaffordable housing markets all across the world, not just in Canada.
The Urban Reform Institute released a new report titled "Demographia International Housing Affordability" where it looks at the middle income housing affordability in 92 markets among eight countries, ranking them from affordable (3.0 and under) to severely unaffordable (5.1 and over).
A market's affordability is based on the median multiple, which is the median house price divided by the median household income.
The report has a section dedicated to looking at the effects that the COVID-19 pandemic and the large influx of remote working had on the housing affordability issue.
Some of the big cities that made the list for least affordable include San Francisco, San Jose, Los Angeles, Melbourne, London (Greater London Authority), and Honolulu, but none of these cracked the top 5.
Here are the five of the least affordable cities around the world.
The Urban Reform Institute's report had Toronto ranked at the fifth most unaffordable city in the world with a score of 9.9.
In 2021, the average price a home sold for in Canada's largest city was a whopping $1.1 million and the average annual household income was just over $100,000. However, with more money in salaries and wages come more expensive goods and services. Fancy a coffee? You'll likely have to hand over at least $3.00 for a cup.
On the other side of the world is Auckland, scoring 10.0, making it the fourth most expensive city in the world. A home in Auckland costs an average of $1.14 million and the median household income is between $103-107,000. However, the average disposable income after tax payments and living costs are deducted is around $37,000.
Where the $1 million could get you a decently sized home in another, more affordable city, this could get you a quality apartment or detached single family home in the suburban and outlying areas in Auckland.
The least affordable city in Australia is Sydney with a score of 11.8 and a median housing price of $1.4 million. The average household income in Sydney is roughly $6,000 a month, but half of that would go to rent if you choose to rent over buy.
Like Toronto and other metropolitan areas, Sydney sees higher prices on goods and services, with individuals paying over $200 just for public transit.
The second Canadian city in the top 5 is Vancouver, British Columbia. Vancouver has a score of 13.0 and average house prices of $1.4 million. While the house prices may be the same as Sydney, the median income for Vancouver residents is just under $5,000 a month, making it severely unaffordable for buyers.
With supply shortages for a high demand, the housing market becomes extremely competitive and can easily cause housing prices to continue to increase while household incomes stay the same.
Finally, at the top of the list of the most expensive cities is Hong Kong, China. The city has a score of 20.7, over 7 points higher than Vancouver. The median house price in Hong Kong is $1.6 million, but the median income is only around $3,800/month, making it the least affordable housing market in the world.
Along with high housing prices comes a high cost of living in Hong Kong, with people paying around $3.00 for a litre of gas and $300/month in utilities alone.
On Urban's report, only four markets across the world had a score under 3.0. While the US has some of the most expensive cities, at the same time, the country is also home to the 4 most affordable housing markets in the world. The cities with the cheapest living costs are:
Other moderately affordable places outside the US include Edmonton, Glasgow, and Blackpool and Lancashire.
For Real Estate News and Market Updates & VIP Access to Exclusive Real Estate Investment Opportunities
Market saturation is when the supply of products or services outweighs the demand. Understand what market saturation means for your investment properties.
“Sign up for our daily newsletter to get the latest news, updates and offers delivered directly to your inbox.”
Designed to offer readers accurate, cutting-edge information to guide their investment decisions, each issue of Canadian Real Estate is filled with informative articles on a broad range of topics.
© 2021 Canadian Estate Wealth. All Rights Reserved by Merged Media