New Zealand house prices have been identified as highly
unaffordable in an international study, with Auckland's
market only slightly better than London but less affordable
than those in Los Angeles and New York.
The eighth annual Demographia International Housing
Affordability Survey, co-authored by Wendell Cox in the US
and Hugh Pavletich here, showed New Zealand had no affordable
markets, and Auckland was the worst.
It noted that it has been only 20 years since most markets in
New Zealand were within reach according to the study's
criteria, with average prices equivalent to less than three
times the average annual income.
Housing should not cost more than three times annual income
to be ranked affordable, Demographia says. Housing costing
more than fives times the annual average income was
considered severely unaffordable.
The average Auckland house is valued at 6.4 times the city's
annual average household income, only marginally less
affordable than the greater London area.
Los Angeles house prices average US$324,800 ($403,000) - 5.7
times the average household income for the city.
New York prices average US$389,600 - 6.2 times the average
household income in the city.
Hong Kong's median prices are HK$3.1 million compared with
HK$249,000 annual incomes - more than 12 times the average
income.
The most affordable area in the study was Saginaw, Missouri,
with median house prices of $56,200 and average incomes of
US$42,400 - a 1.3 grade. Auckland has been unaffordable since
the inception of the study eight years ago, but the rating
has been creeping steadily upwards. In 2005, the same study
rated it at 5.9. Back then Los Angeles was at 10. It has been
hit hard by the toxic-mortgage crisis.
In the report, Mr Pavletich blamed restrictive land policies
in Auckland for pushing up values compared with incomes,
rather than other factors such as low wages.
"The economic evidence indicates that this trend is strongly
related to the implementation of more restrictive land use
regulations, especially measures that create scarcity in land
for housing thus driving up prices,'' the study said.
"Hong Kong, Vancouver and Sydney continue to be the most
unaffordable major markets. Vancouver has displaced Sydney as
the second most unaffordable market. Hong Kong ranked as the
least affordable,'' said Demographia, which cited the
Government's Productivity Commission housing affordability
report, released in December, to back up its arguments.
Dr Bob Bruegmann, professor emeritus of art history,
architecture and urban planning at the University of Illinois
at Chicago, introduced the study saying the rise of smart
growth policies to tighten land supply had a big effect
particularly in Australia "where the recent rise in prices
has been particularly sharp and, given the vast extent of the
country, the urban containment policies are particularly
contentious''.
The study was dedicated to "younger generations who have the
right to expect they will live as well or better than their
parents but may not in large part due to the higher cost of
housing''.
A full copy of Demographia's study is at nzherald.co.nz
- Anne Gibson of The New Zealand Herald
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