Sunday, 23 March 2008

The truth about Australian housing

Complaints about Australian housing affordability in recent years have tended to suggest that Australia is experiencing a major crisis in affordable housing and that there is a need to free up large quantities of land for development. It is frequenly argued that Australia has the least affordable housing in the world and that we should eliminate zoning regulations and other laws that are argued to cause Australian housing to become unaffordable.

Whilst the cause of unaffordable housing in Australia is a complicated question, involving a combination of economic and political factors, those fearful of its consequences should realise that surveys of housing affordability are done remarkably badly. Demographia's surveys that list Sydney as the third most unaffordable city in the world do not cover a single non-English-speaking market. Evidence I have from correspondence with relatives and social scientists like Phillip Longman and Joel Kotkin tell me that in fact very many (possibly most) non-English-speaking housing markets are less affordable that Los Angeles or San Francisco. For example, I have been told that in Tokyo even an entry-level flat costs $1,500,000 and that in Prague only about one-eighth of the population can afford to own a home.

Even if we exclude the tremendous ecological externalities of living in Australia compared to any other market discussed by Demographia, we must think twice before we claim Australia has unaffordable housing.

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