NZ houses among least affordable
Monday January 22, 2007
By Anne Gibson nz herald
New Zealanders are paying some of the world's highest house prices compared to our incomes and Auckland ranks alongside London as one of the world's most expensive housing markets.
The third Demographia International Housing Affordability Survey released today showed it takes Aucklanders 6.9 years of full annual earnings of $57,500 to afford the $395,000 median house price.
Auckland ranked 21st out of 159 cities surveyed, with the least affordable city being Los Angeles.
Christchurch ranked 31st out of 159, with its residents taking six years of $48,400 annual earnings to afford the $291,000 median.
Wellington fared better in place 47 with its residents taking 5.4 years (earning $61,400 annually) to afford the $331,000 median.
A survey author blamed tight land supply for New Zealand's housing squeeze, saying excessive land use regulation had strangled subdivision expansion and artificially pushed up prices.
In the past year, New Zealand house prices rose about 10 per cent, significantly more than the rise in people's incomes.
Most analysts expect Reserve Bank Governor Alan Bollard to hold the official cash rate at 7.25 per cent on Thursday - and give homeowners a breather from higher mortgage rates - after lower oil prices contributed to better than expected inflation figures.
Housing Minister Chris Carter told the Affordable Housing Forum in Wellington late last year that the Government had identified three new ways of solving the crisis - new uses of planning rules, special sector partnerships and Government-led development projects on surplus Crown land.
"People of my generation are deeply disturbed by the enormous difficulties our children face in getting into the housing market, and housing affordability is an issue preoccupying hundreds of thousands of young households around the country.
"The problem with supply is not that we haven't been releasing land for development as those who want to gut the Resource Management Act are fond of claiming," he told the conference.
Hugh Pavletich, Christchurch-based co-author of the survey with Wendell Cox in the United States, criticised councils for ring-fencing cities which he said was strangling the supply of land crucial for development.
"Houses should not cost any more than three years' annual incomes," he said, calling for more rural land to be freed up.
"Less than 1.4 per cent of our land is urbanised, so there's no shortage of land for housing."
The survey found Australians had the world's most pervasive housing affordability crisis, taking 6.6 years of full earnings to afford a house. New Zealand come in close behind, taking a median six years, followed by Ireland and Britain.
Canadians have the world's most affordable houses, taking only 3.2 years of full earnings to afford a median-priced place. Americans score close behind, taking just 3.7 years of earnings to buy a house.
The survey found many people living in North America were much better off than New Zealanders. Their housing markets are the world's more affordable.
Darren Gibbs, chief economist of Deutsche Bank in Auckland, said low incomes were one of the reasons for NZ's poor ranking in the survey.
"We have high house prices compared to low incomes and our incomes are low because we're not a productive country."
How many years to buy a home?
Number of years' income to buy house:
* Australia 6.6 years.
* New Zealand 6 years.
* Ireland 5.7 years.
* Britain 5.5 years.
* United States 3.7 years.
* Canada 3.2 years.
Source: Demographia International Housing Affordability Survey