The city that everyone thought was cheap is now Australia's second most expensive

Sydney remains one of the most expensive housing markets on the planet, but the bigger story from this year's Demographia International Housing Affordability Report may be what's happening further south.

Adelaide, long regarded as Australia's "affordable capital" has leapfrogged Melbourne and Brisbane to become the nation's second least affordable city, with housing costs rising far faster than local incomes.

According to the 2025 report, Sydney remains the world's second least affordable housing market, behind only Hong Kong.

The city's median house price is now 13.8 times the median household income, what Demographia bluntly calls "impossibly unaffordable."

Adelaide's multiple has climbed to 10.9, surpassing Melbourne's 9.7 and Brisbane's 9.3. Perth, despite rapid price growth in recent years, remains the most affordable of Australia's five major capitals at 8.3 times income.

Ray White chief economist Nerida Conisbee said Adelaide's affordability advantage had "completely evaporated" after years of strong growth.

"The report highlights a sharp turnaround for Adelaide. Just a few years ago, the city's housing market was among the most accessible in the country. But strong price growth has pushed affordability to record lows. Prices have risen by 9.1 per cent, outpacing both Melbourne and Sydney."

High wages have helped Perth remain relatively more affordable, but its ratio is still well above the international benchmark of 3.0, which Demographia defines as "affordable."

Australia's national median multiple now sits at 9.7, far worse than Canada (5.4), the UK (5.6), or the US (4.8). On this measure, Australian housing is less affordable than virtually any other high-income nation.

While Demographia attributes the problem to restrictive land-use policies, experts say Australia's housing challenges are more complex.

"While limits on urban expansion play a role, local resistance to higher density is likely a more pressing constraint as is the desire of Australians for large homes. At the same time, a sharp rise in construction costs since the pandemic has made new projects harder to deliver, compounding the affordability challenge."

The affordability squeeze shows no signs of easing.

Nationally, house prices are up 8.9 per cent over the past year and are on track to reach double-digit annual growth by December.

Economists warn that any future Reserve Bank rate cuts could reignite the market further, while first-home buyer grants and concessions continue to stoke demand at the entry level.

Meanwhile, new housing supply remains stubbornly below target, with little improvement over the past 12 months.