Monday, January 23, 2006

NZ Housing affordability "in crisis" says report

The 2006 report on worldwide housing affordability finds that "Housing affordability continues in crisis intensity in many markets. The most pervasive national crisis is in Australia, while the crisis is nearly as serious in Ireland, New Zealand and the UK." The major cause of housing unaffordability in these markets, says the report, is "land strangulation," and is contrasted with more affordable housing markets in some parts of North America in which land regulation is much more laissez faire.
Of the six countries and one hundred major urban property markets covered, 24 are affordable, 23 moderately unaffordable, 11 seriously unaffordable and 42 severely unaffordable.

All the major urban property markets of New Zealand are severely unaffordable, as is the major city of the Republic of Ireland, Dublin. Of the Australian urban markets, six are severely unaffordable, with two being seriously unaffordable. The United Kingdom has just one moderately unaffordable market, with the other eleven being severely unaffordable. Canada has three affordable, four moderately unaffordable, one seriously unaffordable with Vancouver being severely unaffordable. The huge and diverse United States has twenty one affordable markets, eighteen moderately unaffordable markets, eight seriously unaffordable and twenty severely unaffordable urban markets.

All the affordable markets are in North America, with three in Canada and twenty one in the United States. There are no affordable major urban property markets in the United Kingdom, Ireland, Australia and New Zealand....

The 2006 Demographia International Housing Affordability Survey illustrates how affordable most urban markets of the countries surveyed were five, ten and twenty years ago. Its findings suggest that the major cause of the loss of affordability within these markets is due to artificially strangled land supply.
So, how about a show of hands in ending the land strangulation effected by local councils under the RMA: Those for abolition of the RMA, replacing it with common law protections of property rights, hands up now. Any opposed?

[UPDATE: Oh look, some joker has issued a press release. And here's another, from the report's authors.]

Linked Report: 2nd Annual Demographia INternational Housing Affordability Survey (2006)
Housing Affordability Crisis in New Zealand - Hugh Pavletich

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5 Comments:

Anonymous Mark V. said...

Another reason for high house prices is that entry level houses are being snapped up by property investors, forcing new home buyers to buy houses at the next price level.

Also few people seem to be building low cost houses. The new houses being built in various sub-divisions around Wellington are significantly larger and therefore more expensinve than typical houses of 20 or more years ago.

There is obviously a demand for low cost housing, why don't you design a range of low cost easy to build houses?

1/23/2006 12:28:00 pm  
Blogger PC said...

Mark, I wonder what it is you think these property investors actually do with these entry-level houses you say they're snapping up? Exporting them to Mexico?

"Also few people seem to be building low cost houses." So what is it exactly that the investors are snapping up? There appears to be come confusion in your comment.

As the report conclusively shows, there is more housing affordability -- much, much, more! -- in cities where there is a relatively laissez faire attitude to land regulation (such as Houston for example, which enjoys no zoing restrictions) than there is in cities which impose a more authoritarian approach, which unfortunately describes most New Zealand cities.

"There is obviously a demand for low cost housing, why don't you design a range of low cost easy to build houses?" This is, in fact an interest of mine, but of equal interest is the true but non-intuitive idea that building swathes of lo-cost housing produces fewer and lesser-quality low-cost homes than does building lots and lots of more expensive, higher quality houses.

The reason, explaining which I began and never finished a blog a while back, is to do with a concept called 'churn.' Do a Google search on it and you'll see what I mean.

1/23/2006 01:00:00 pm  
Anonymous Mark said...

Hi

I get tired of the lefty "affordable" housing crap. They always leave out one half of the equation - the income! We have not driven up real living stds, and have wasted the last 6 years sitting on an economy which needed to be prepared for the next level. Actaul cost/demand is only one part. It is our low wage economy whihc is the real problem.

Although I do think someone with political balls should address the capital gains issue. Not having capital gains on 2nd/3rd properties distorts the capital market - and draws funds away from business investment.

Although maybe in NZ it should be on 3rd property - so we can own a bach!

1/23/2006 10:52:00 pm  
Anonymous Mark.V. said...

PC said
"Mark, I wonder what it is you think these property investors actually do with these entry-level houses you say they're snapping up? Exporting them to Mexico?"

No they rent them out.

PC said
"Also few people seem to be building low cost houses." So what is it exactly that the investors are snapping up? There appears to be come confusion in your comment."

The houses that investors are snapping up are the cheap existing houses that previously were advertised as suitable for first home buyers and are now advertised as ideal for investors.

As for unafordable housing, how is it we have a building boom if no one can afford to buy houses? First time house buyers seem find houses unaffordable, everyone seems able to afford them.

1/24/2006 08:02:00 am  
Blogger waymad said...

Added to the RMA and planning stuff is the Nanny State cost imposts in building itself:
- fenced off sites to protect...who? Let's say $5K per site
- full, certified scaffolding if you want to reach 2m or higher, let's say $7K
- leaky houses levy, even though yours has actual eaves - maybe $1K

And coming down the track:
- certification for every damn tradie, even to do a window (sigh) - a lucrative little future earner for those wise individuals who can pass off a major job as 'it's always been there' with a few secondhand naterials, careful antiquing, and paying off or screening out the nosy neighbours.
- earthquake protection for older multistorey buldings whether you need that or not.

The list goes on...but that's where a good 10% of new-building costs now go.

1/25/2006 09:22:00 am  

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