Auckland houses severely unaffordable for 10th year: survey   20 Jan 2014

Article - BusinessDesk

International survey ranks Auckland houses severely unaffordable for 10th year in a row

Jan. 20 (BusinessDesk) – Auckland house prices remained “severely unaffordable” for the 10th year in a row in the American survey, Demographia, which compares housing costs in nine mainly English-speaking countries.

Produced by Wendell Cox, an Illinois-based opponent of urban planning and proponent of private cars over public transport and Christchurch-based urban planner Hugh Pavletich, the Demographia report contends that restrictive urban planning is a principal cause of high housing prices relative to incomes.

“The central government of New Zealand has recognised the problem and is pursuing strategies to open up land supply and reduce housing costs,” says the newly published report on 2013 housing affordability trends, which ranks Auckland housing as the eighth most unaffordable of the 360 cities surveyed.

It uses Statistics New Zealand, Real Institute of New Zealand and census data for local house price data to conclude that only New Zealand and Australian major cities have the distinction of being rated severely unaffordable throughout the survey’s 10 year history.

Demographia ranks housing costs in the US, Canada, UK, Hong Kong, Singapore, Japan, Australia, Ireland and New Zealand and uses a “median multiple” approach that relates housing costs to household income. Markets ranked above 5.0 on that scale are judged “severely unaffordable.”

Auckland is ranked 8.0, making it the seventh least affordable of the 85 centres surveyed with populations of more than one million. Tauranga scored a median multiple of 6.6, with Christchurch at 5.8 the next most unaffordable centre. Wellington is ranked 5.5, the national median, with Dunedin at 4.8 and Manawatu/Palmerston North at 4.5 the only areas “seriously” rather than “severely” unaffordable.

By comparison, Sydney ranks 9.0, Melbourne 8.4, and Australia’s national median is 5.5. Among the most affordable cities are in the US; Pittsburgh (2.3), and Atlanta and Indianapolis at 2.7. Hong Kong topped the table, with a median multiple of 14.9.

“House prices have risen at much greater trajectories than household incomes in many markets,” the report’s commentary says. “This has invariably been associated with urban containment policy and is most evident in Australia, New Zealand and United Kingdom and some markets of Canada and the United States.

“All markets rated severely unaffordable have more restrictive land use (principally urban containment) policies, which means that no markets rated severely affordable have liberal land use policy. The same has been true over the entire decade of Demographia Surveys.

“Severely unaffordable markets are also more attractive to buyers seeking extraordinary returns on investment” and short term profits.

“This further raises prices in markets where urban fringe development is largely prohibited
by urban containment's land rationing policies,” the report’s authors say.

(BusinessDesk)

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