House prices in six Australian capital cities are “undervalued”, according to analysis based on the ability of owners to easily repay home loans.

Buyers’ agency InvestorKit analysed the ability to make repayments, considering the median price in each city, average wages and loan affordability on a 3.5% interest rate. It found only Sydney and Melbourne house prices exceeded the affordability threshold.

Head of research Arjun Paliwal says the Sydney property market is overvalued by 22%, which means that prices are that much higher than the average household can afford, while the Melbourne median house price is 2.8% above what the average household can afford.

Perth is the most undervalued city, with its median house price ($510,000) 63% cheaper than the maximum price a local household can afford. Darwin with a median house price of $550,000 61% below the affordability level, Adelaide 43%, Brisbane 30%, Hobart 18% and Canberra 6.6%.