The 2012 housing affordability survey covers the 325 urban markets of the United States (211); United Kingdom (33); Canada (35); Australia (32); New Zealand (8); Ireland (5) and Hong Kong in China (1).
The Annual Demographia International Housing Affordability Survey’s rate housing affordability, based on the Median Multiple – that is, the median house price divided by the gross annual median household income of specific urban markets, for the 3rd Quarter of the previous year.
The “median multiple” is a robust measure - essential for the basic understanding of the structural health (or otherwise) of a specific urban market.
If housing prices exceeds 3.0 times annual household income (Median Multiple), it illustrates that there are serious political impediments that need to be addressed, to the normal supply of new housing on the fringes of the specific distressed urban markets.
The fringes of an urban market are the only effectively responsive supply or inflation vent.
If normal supply is not allowed due to political interference, artificial scarcity pricing ensues, causing housing bubbles to erupt – and then collapse – creating unnecessary social and economic hardship and disruption.
In future years, the Demographia International Housing Affordability Survey will be expanded to other countries and urban markets, as more robust data becomes available.
Normal healthy urban markets, where housing is at or below 3.0 times household incomes are rated “affordable”; 4.0 times and below “moderately unaffordable”; 5.0 times and below “seriously unaffordable” and above 5.0 “severely unaffordable”.
While Hong Kong is the most severely unaffordable housing at a staggering 12.6 Median Multiple (the highest ever recorded within the history of the Surveys) – Australia with its abundant land supply has the most pervasive housing affordability problem (5.6 MM); followed by New Zealand with a small population of just 4.4 million (5.2 MM); the United Kingdom (5.1 MM); Canada (3.5 MM); Ireland with its housing bubble collapsing (3.4 MM) while the United States overall is affordable (3.0 MM).
Large swathes of middle North America did not experience urban governance and planning failure and unnecessary housing bubbles through this past decade. They remained throughout, healthy and normal housing markets (other than some within the “rust belt”).
Normal healthy urban markets through the building cycle, should oscillate within the 2.0 to 3.0 Median Multiple range. Generally (unless there is serious over production of new stock, such as the open market of Atlanta), it indicates a distressed urban market experience severe economic adversity, if it falls below the 2.0 Median Multiple.