Hong Kong’s residential property market has been ranked as the world’s least affordable in an annual survey.
The Median Multiple of 19.0 was the highest recorded (least affordable) in the 12 years of the Demographia International Housing Affordability Survey.
The survey rates middle-income housing affordability using the “Median Multiple.” The Median Multiple is widely used for evaluating urban markets, and has been recommended by the World Bank and the United Nations, and is used by the Joint Center for Housing Studies, Harvard University.
The Median Multiple and other similar price-to-income multiples (housing affordability multiples) are used to compare housing affordability between markets by the Organisation for Economic Cooperation and Development, the International Monetary Fund, The Economist and other organisations.
More elaborate indicators, which mix housing affordability and mortgage affordability can mask the structural elements of house pricing are often not well understood outside the financial sector. Moreover, they provide only a “snapshot,” because interest rates can vary over the term of a mortgage; however the price paid for the house does not. If house prices double or triple relative to incomes, as has occurred in many severely unaffordable markets, mortgage payments become much higher.
Historically, the Median Multiple has been remarkably similar in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States, with median house prices from 2.0 to 3.0 times median household incomes. However, in recent decades, house prices have been decoupled from this relationship in a number of markets, such as Vancouver, Sydney, San Francisco, London, Auckland and others.
Sydney was named as the second least affordable major market, with a Median Multiple of 12.2. Sydney’s increase of 2.4 points from its 9.8 Median Multiple in 2014 is the largest year-to-year deterioration ever indicated in the 12 years of the survey.
Vancouver was the third least affordable major market with a Median Multiple of 10.8. Auckland, Melbourne and San Jose all had Median Multiples of 9.7, and they were followed by San Francisco at 9.4, and London (Greater London Authority), at 8.5. Two other markets had Median Multiples of 8.0 or above, including San Diego and Los Angeles, both at 8.1.
The Demographia list of the least affordable metropolitan areas is largely echoed by UBS, the international financial services company headquartered in Switzerland.
The five metropolitan areas ranked as most vulnerable to risk from a real estate bubble in the UBS Global Real Estate Bubble Index are each among the eight least unaffordable markets in the Demographia survey (London, Hong Kong, Sydney, Vancouver and San Francisco).
Overall, among the 367 markets, there were 89 affordable markets, 75 in the United States, nine in Canada, three in Ireland and two in Australia. There were 112 moderately unaffordable markets, 90 in the United States, 14 in Canada, four in Australia, two in the United Kingdom and one each in Japan and Ireland. There were 74 seriously unaffordable markets and 92 severely unaffordable markets.
Australia had 33 severely unaffordable markets, followed by the United States with 29 and the United Kingdom with 17. New Zealand and Canada each had six severely unaffordable markets, while China’s one market (Hong Kong) was also severely unaffordable.
http://www.demographia.com/dhi.pdf
