Auckland comes in at 6th least affordable city internationally in Demographia’s 13th international survey of housing affordability in 9 countries, out today.
New Zealand markets with median multiple (last year in brackets), median price, median household income and their rankings – international affordability, major market ranking (Auckland only) and NZ ranking:
Auckland: 10.0 (9.7), $830,800, $83,000, rankings 401, 89, 8
Christchurch: 5.9 (6.1), $435,300, $73,900, 350, 5
Dunedin: 5.4 (5.2), $322,000, $59,700, 323, 2
Hamilton-Waikato: 6.2 (5.1), $444,900, $72,100, 356, 6
Napier-Hastings: 5.7 (5.0), $340,500, $59,300, 342, 3
Palmerston North-Manawatu: 4.7 (4.1), $255,800, $54,900, 275, 1
Tauranga-Western Bay of Plenty: 9.7 (8.1), $591,900, $61,200, 398, 7
Wellington: 5.8 (5.2), $463,700, $79,600, 348, 4
Median market: 5.9 (5.2)
The survey, by Wendell Cox of Demographia in the US and Hugh Pavletich of Performance Urban Planning in Christchurch, is based on data at September.
Auckland’s median multiple (median house price divided by median household income) of 10.0 put it behind Hong Kong on 18.2, Sydney 12.2, Vancouver 11.8, Santa Cruz, California 11.6, and Santa Barbara, California, 11.3. Melbourne was 10th on 9.5.
The authors said Auckland’s housing affordability had deteriorated from a median multiple of 5.9 in the first survey in 2004. Auckland was the 4th least affordable among the 92 major housing markets, following only Hong Kong, Sydney & Vancouver, and has been severely unaffordable in all 13 Demographia surveys.
Demographia has rated all of Australia’s 5 major housing markets as severely unaffordable in every one of its surveys, and did so again: “Overall, Australia’s 54 housing markets have a severely unaffordable median multiple of 5.5. 4 housing markets are affordable, 3 are moderately unaffordable, 14 are seriously unaffordable and 33 are severely unaffordable.”
Last year’s survey covered 367 metropolitan markets in 9 countries (Australia, Canada, China – Hong Kong, Ireland, Japan, New Zealand, Singapore, the UK & the US), and introduced the qualification of “middle-income housing affordability”. This year’s survey covers 406 metropolitan housing markets in the same countries, including 92 major markets of 1 million-plus population & 5 megacities.
The authors explained the qualification: “Middle-income housing affordability is different from low-income affordable housing, which often relies on public subsidies. Even so, low-income housing costs and the demand for social housing are generally driven up by the failure to maintain middle-income housing affordability.”
Demographia rates a median multiple of 3.0 & under as affordable, 3.1-4 moderately unaffordable, 4.1-5 seriously unaffordable, 5.1 up severely unaffordable. This median multiple is derived from median house price divided by median household income.
The Demographia survey doesn’t adjust the median multiples to reflect differences in house types, housing characteristics & lot size. For example, the average size of housing, particularly new housing, is abnormally small by New World standards in the UK & Hong Kong.
The authors wrote that, “in many housing markets, house prices have skyrocketed compared to household incomes. The most severe house price increases have been limited to housing markets where urban containment policy (or its equivalent) have been implemented.
“Generally, urban containment policy draws a development limit around the urban area and seriously limits or even prohibits greenfield development of housing tracts on the urban fringe. Consistent with the basics of economics, this is associated with higher land prices and, in consequence higher house prices….
“In effect, governments implementing urban containment policy choose pursuit of a particular urban form at the expense of a better standard of living and less poverty.”
The authors commented on what constitutes “best cities” & “most liveable cities”, international comparisons frequently made, with Auckland often one of the prime contenders.
The authors said these surveys were aimed at the high end of the market and virtually never evaluated housing affordability. “Yet, the media often mischaracterises the findings as relevant to the majority of households. In fact, a city cannot be liveable, nor can it be a best city, to households that cannot afford to live there. Households need adequate housing.”
They compared Dallas-Fort Worth, where housing affordability was far better than in Toronto, which was rated as the “best city” by the Economist: “In addition to better housing affordability, traffic congestion was better and incomes were higher. This is despite the fact that Toronto employs the most favoured urban strategies, which Dallas-Fort Worth does not.
“Another comparison shows that Kansas City has better middle-income outcomes than all of the Economist’s top 10 (for which data was available) in housing affordability & traffic congestion, and higher incomes than all but 3.”
While “excessive housing regulation has been identified as having significantly reduced economic growth in the US and inequality internationally,” the Demographia authors commented: “It has complicated the inflation-controlling role of central reserve banks.”
To keep housing affordable “requires avoiding urban planning policies associated with artificially raising house prices, specifically urban containment. Failing that, housing affordability is likely to worsen further.”
22 January 2016: Updated: The urban boundary case, and hard versus soft edge
13 January 2016: Auckland home values rise 22.5% in year, but only 0.2% in December
11 January 2016: Urban boundary & zones under the spotlight
8 November 2015: Twyford talks ideas which unitary plan & council funding review likely to resolve
2 October 2015: Council economist lists potential housing price solutions
30 September 2015: English sets out his housing rationale
11 May 2015: Australian affordability report a 40-recommendation failure
6 May 2015: Hobsonville Pt affordable brackets raised $50-65,000
23 January 2015: Building cost research a onesided analysis
19 January 2015: Auckland worsens on Demographia’s affordability rating
Attribution: Demographia survey.