Australian houses are less affordable than they have been in decades

In Australia, as in most places, waterfront property comes at a premium. But to see the full effects of high-cost Australian housing, look beyond trophy homes on Sydney Harbour and beach pads in Bondi. In cities across the country, tents and other makeshift shelters are springing up by the water. They are the dark side of a housing market that has held firm despite rising interest rates. For households of all incomes, the share of homes that are affordable is at its lowest in 30 years.

Australians are not alone. House prices are high relative to incomes across the rich world, and last year defied expectations by rebounding after only the briefest of blips. Rental markets are hot, too. Vacancies are at or near historic lows in many rich countries, while rents are climbing quickly. In previous decades, notes Peter Tulip, an economist, rising housing costs were offset by cheaper lending. Now mortgage rates have risen as well, meaning would-be buyers can afford to borrow less.