Monday, January 21, 2013

Auckland is the world’s ninth-least affordable city in which to buy a house

The 2013 9th Annual Demographia International Housing Affordability Survey has just been released (here’s the link to download a PDF copy), showing all New Zealand’s major housing markets (and more than 60 percent
of all our housing) remain “severely unaffordable”—and this situation is getting worse, not better.

Auckland continues to ranks as the world’s ninth-least affordable city in which to buy a house.

The survey covers 337 urban markets of the United States (216); United Kingdom (33); Canada (35); Australia (39); New Zealand (8); Ireland (5) and Hong Kong (China). A supplemental analysis of Singapore is also incorporated within the Survey.

The Survey is based on the “Median Multiple” – where the median house price is divided by the gross annual median household income.  In affordable and normal housing markets, house prices do not exceed 3.0 times annual household incomes.  If they do exceed this standard, it indicates that there are political and regulatory impediments to the supply of new housing that need to be dealt with (further research required on dense high rise urban environments such as Singapore and Hong Kong, to ascertain the affordability ceiling).

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Houses in New Zealand are now nearly 80 percent more expensive than the historic affordability housing norm of 3.0, last experienced in the 1990s.

Auckland was the least affordable market, with a Median Multiple of 6.7. Along with Auckland, Christchurch
(6.6), Tauranga-Western Bay of Plenty (5.9), Wellington (5.4) and Dunedin (5.1) were severely unaffordable.

Three New Zealand markets were seriously unaffordable, Palmerston North (4.4), Napier-Hastings (4.5) and
Hamilton (4.7). New Zealand had no affordable markets and no moderately unaffordable markets (Table 10).

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There is no mystery about the supply of affordable new housing and a simple structural definition of an affordable housing market is provided within the Survey.  Detailed analysis and commentary is provided on each of the countries surveyed – with a focus on individual urban markets – their trends and political developments. Information on important international research is also provided.

The Introduction to this year’s Survey is contributed by the Deputy Prime Minister of New Zealand Bill English.  Mr English explains why the New Zealand Government is committed to restoring affordable housing in New Zealand – and is focused on the four structural impediments – being –

  • Land supply
  • Infrastructure
  • Process
  • Construction costs

A recent New Zealand Television One Colmar Brunton Poll found that 62% of all and 75% of young (18 – 35) New Zealanders are demanding the Government allow affordable housing be provided.

Unfortunately, what Little Bill English proposes by way of improving affordability is much too little, far too late, and unlikely to make any impact whatsoever. And I suspect the Demographia team know that…

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