The International Housing Affordability report released on March 21 by public policy consultancy Demographia revealed that Hong Kong remained the world’s most unaffordable city for housing for the 12th consecutive year. The ranking is based on the median house price divided by the median household income, with Hong Kong’s house price to income level standing at 18.8 in 2022. However, the ratio of property prices to income fell from 23.2 in the previous year to 18.8, marking the sharpest improvement in the 19 years of the survey.
Demographia considers a property price to income ratio of 5.1 and above “Severely Unaffordable”. The second to fifth rankings are given to Sydney (13.3), Vancouver (12), Honolulu (11.8), and San Jose (11.5). The top three most affordable markets, with ratios of 3.1, 3.2, and 3.5, are Pittsburgh, Rochester, Cleveland, and St. Louis, respectively.
Hong Kong’s property prices fell by over 15% in 2022 due to the epidemic, rising interest rates, and the economic downturn. While this ended the previous 13 years’ rising trend, provisional figures from January 2023 showed a modest rebound of 0.6% month-on-month.
The survey analyzes housing affordability ratios in 94 major markets across eight countries using property prices and incomes as of the third quarter of 2022, with the median property price in a city divided by the median annual household income.
The report also highlights the declining affordability of the housing markets in the US and the UK over the past few decades. The US housing market recorded a median multiple of 3.6 in 2021, up from 2.3 in 1993, while the UK had a median multiple of 5.1, up from 3.6 in 1993. London has the highest median multiple at 8.5, indicating severely unaffordable housing. The report suggests that restrictive land-use policies and zoning regulations are major factors contributing to the decline in affordability in these countries.
The report further observes that government policies promoting home ownership, such as “Help to Buy” in the UK, may have contributed to higher housing prices and made affordability more difficult. It suggests that reforming land-use policies and increasing the supply of affordable housing may be necessary to address these challenges.