Australia’s biggest cities have some of the most unaffordable property in the world, with savers in Sydney and Melbourne facing some of the most difficult hurdles to buy a home.

Demographia’s 2023 housing affordability report shows five of Australia’s biggest housing markets were unaffordable in 2022, with only Hong Kong ranking lower than Sydney.

The analysis measures median property prices against median incomes and derives a ratio about how affordable houses are.

In other words, Sydney’s median house price is divided by its median before-tax income to reach a score of 13.3, while Hong Kong posted 18.8.

Melbourne was ranked the eighth least affordable market with a ratio score of 9.9, while Adelaide was among the 20 most unaffordable with a ratio score of 8.2.

The report analysed 94 housing markets around the world, with the most affordable market being Pittsburgh in the US, which had a ratio score of 3.1.

‘Severely unaffordable’

Australia performed particularly poorly against most other nations, with its five largest capital city property markets rated “severely unaffordable” because they had a ratio score of more than 5.1.

Perth scored 5.4 on affordability, while Brisbane posted a 7.4 rating, Demographia reported.

“Australian markets have a median multiple of 8.2, up from 6.9 in 2019,” they said.

“This is an increase of 1.3 years of median household income.

“All five of Australia’s major housing markets have been severely unaffordable since the early 2000s.”

Australia has steadily performed worse in the housing affordability stakes in recent years, with Adelaide in particular falling down the rankings after house prices rose.

Affordability set to worsen

And affordability is only likely to worsen in coming years across Australia as property prices begin to rebound, despite the highest interest rates in more than a decade.

The latest CoreLogic figures show national property prices rose in August, while major banks are predicting further gains of about 7 per cent in the next 18 months.

The cause has largely been put down to an ongoing imbalance between demand and supply, with rising population growth and too few affordable properties hitting the market.

But even despite Australia’s woes, Hong Kong remains more expensive than Sydney, owing largely to its incredibly small size.

However, the affordability score for the Chinese city has improved markedly in recent years, Demographia said.