Tuesday, January 25, 2011

Houses getting less and less affordable despite the bursting bubble

Despite New Zealand’s parlous economic conditions, New Zealand housing is no more affordable now than it was before the economic wheels started falling off. In fact, according to the latest annual Demographia International Housing Affordability Survey housing in New Zealand is still severely unaffordable.

Author Joel Kotkin notes that even after the bursting of the housing bubble, the ratio of incomes to housing prices in most cities (what the researchers call “the median multiple”) has shown a steady increase.

_Quote The survey gave New Zealand a median multiple of 5.3 for housing affordability, which is above the historic norm of three.
    All major [cities] in Australia and New Zealand, as well as Hong Kong, were judged to be severely unaffordable. Of the 325 [cities] the survey covered, 115 were affordable, 94 were moderately unaffordable, 42 were seriously unaffordable and 74 were severely unaffordable.
    All of the affordable [cities] are in the United States. The most affordable  is Atlanta, with a median house price of $US129,400 ($NZ170,485). Hong Kong was the least affordable major [city], with a median multiple of 11.4, Sydney second with a median multiple of 9.6 and Vancouver was 9.5.
    New Zealand's housing was [rated as] affordable in the early 1990s, with a median multiple of under three, the survey said.
    Auckland now has a median multiple of 6.4, with Christchurch on six and Wellington on 5.5, which is regarded as severely unaffordable. Tauranga-Western Bay of Plenty was again the least affordable market [in the country], with a median multiple of 6.5.

The reason some cities’ houses remain severely unaffordable while others do not (median house price of just $US129,400 in Atlanta!) remain the same, and may be described very simply: cities in which town planners have been given powers to seriously restrict house-building are generally the least affordable; those in which they have the least power are generally the most affordable.

In other words, the more “sustainable” a city is and the more power its “planners” have, the less affordable its housing.

Now you might have thought that Prime Minister John Boy might have been working since his election to turn around the dire situation in which even hard-working New Zealanders are finding it increasingly difficult to buy a house. But you’d be wrong. Instead, Smile and Wave’s local government minister Rodney Hide just spent the last two years working night and day not to remove power from the smug self-anointed vermin who have made life worse for would-be home-owners, but instead (as a model for councils across the country) to give Auckland’s town planners even more power to make the city even more severely unaffordable.

What a creep. What a disgrace. What a tragedy.

NB: You can download the detailed survey and related commentary at the Demographia website, from whence graphs and tables like these two below are sourced.

Unaffordable

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6 Comments:

Anonymous Mark.V. said...

Have you considered the possibility that some cities are affordable because they are not pleasant places to live? Manurewa in Auckland and Cannons Creek in Wellington are affordable but who would want to live there?

Town planners insist on the inclusion of parks trees and other ammenities which make cities more desirable. The more desirable a city is the less affordable it is, demand raises prices.

1/25/2011 01:34:00 pm  
Blogger PC said...

Mark V., Perhaps you have not considered the fact that housing prices for Manurewa in Auckland and Cannons Creek in Wellington are both reflected in the figures for their respective cities--which the survey indicates are unaffordable as a percentage of income in these places.

In fact, as the research itself suggests, it is not the inclusion of parks trees and other amenities that raise prices (since both affordable and unaffordable cities enjoy these boons) but the effect of serious supply constraints pushing up the price of land, constraints such as
** "restrictive land use regulations that have virtually prohibited new house construction on or beyond the urban fringe";
** "excessive infrastructure fees"; ** and what they call "other overly strict land use regulation."

In terms of desirability, the research also indicates that rather than the relative desirability of parks and trees pushing migration between cities, "all things being equal, households [are] drawn to less costly metropolitan areas and away from more costly metropolitan
areas, as they seek to enhance their overall standard of living."

Demand, in other words, is going in the opposite direction to that of you hypothesise.

1/25/2011 02:07:00 pm  
Blogger Berend de Boer said...

PC: Rodney Hide just spent the last two years working night and day not to remove power from the smug self-anointed vermin who have made life worse for would-be home-owners, but instead to give Auckland’s town planners even more power to make the city even more severely unaffordable.

Any backup for that wild claim?

1/25/2011 03:15:00 pm  
Blogger Owen McShane said...

I recommend Mar V and Berand read Joel Kotkins latest piece on New Geography at:

http://www.newgeography.com/content/002007-why-affordable-housing-still-matters

1/25/2011 03:33:00 pm  
Blogger PC said...

@Berend, you asked, "Any backup for that wild claim?"

Perhaps you've missed your hero's many speeches in which he boasted of having removing the prior impediments to Auckland's planners writing and enforcing their community plans, district plans and spatial plans--all of which are directly on point as having caused (in Auckland as they have elsewhere) severely unaffordable land and house prices.

PS: Happy New Year, by the way. ;^)

1/25/2011 04:04:00 pm  
Blogger peterquixote said...

thanks McShane for your lead.

http://www.newgeography.com/content/002007-why-affordable-housing-still-matters

Down here in Christchurch we are about to experience the political imperative of a massive concrete jungle for inner city slum dwellers care of a complete idiot called Bob Parker.
I am sick of it, I am coming up to your place get my room ready now please..

1/25/2011 07:40:00 pm  

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