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
