Thursday, 21 March 2013

No, Auckland is not the world’s most expensive city

Despite the horror stories on the news about Auckland’s insane and rapidly rising housing prices, and Nick Smith’s increasing pressure on Auckland’s mayor and council to fix this, Auckland is not the most expensive city in the world in which to buy a house.

The most expensive city in the world in which to buy a house—not even a house, just a shoebox—is Hong Kong*.  The median price for your shoebox in Hong Kong is HK$3,810,000, which with a median Hong Kong income of HK$282,000 makes that a multiple (what housing researchers call a “Median Multiple”) of 13.5.

In other words, it costs the fellow in Hong Kong 13.5 times the median HK income to buy his median HK shoebox.

Wow!

That doesn’t leave much left over for nightclubbing and champagne.

There are some good reasons for this sort of (let’s face it) way-out Hong Kong price tag: challenging topography, huge mainland demand, and a govt housing department responsible for most of the house building being just three of those reasons.

(But compare this multiple of 13.5 to, for example, Atlanta, Georgia, whose residents luxuriate in a Median Multiple of just 2.0! Just twice the median income to buy the median house, and lots of your salary left over to enjoy what’s considered one of America’s most liveable cities.)

So Auckland is not the most expensive city in the world. But with a Median Multiple of nearly 7, it’s way more expensive than Atlanta. It’s more expensive than Los Angeles.  More expensive even than Greater New York.  More expensive, in these terms, than Washington DC and Boston. More expensive (to quote just a few of the world’s great English-speaking cities) than Montreal, Seattle, Toronto, San Diego, Miami, Dublin, Chicago, Portland, Perth, Brisbane, Adelaide,  Edinburgh, Houston, Las Vegas …

In fact, the only great English-speaking cities that are more expensive in which to buy a house (as measured by the Median Multiple) are Greater London (but with a Median Multiple of 7.8, only just!), Melbourne (7.5), San Francisco(7.8), Sydney (8.3), Vancouver (9.5) and our old friend Hong Kong.  And those places house far more people than we do.

So we’re doing something wrong. Something very, very wrong.

Auckland is not the world’s most unaffordable city, but it’s damned close.

And until Mayor Len Brown and his council realise that one of the chief means by which a city is made one of the world’s most truly liveable cities is that it’s affordable to actually live there, we (and by “we” I mean Aucklanders, would-be Aucklanders, and everyone else in the country whose savings are going into lending the money for Aucklanders to buy these houses) are all going to continue suffering.

It’s too  late for excuses. Until Brown and his crowd take up the call to begin making Auckland one of the world’s most affordable cities, and to do everything necessary to make that possible, we’ll all lose.

* All the Median Multiples quoted here come from the2013 Demographia International Housing Affordability Survey. And the measures for “most liveable cities” come from the 2012 Mercer Quality of Living Worldwide City Rankings Survey.

7 comments:

  1. Price of houses is really just a reflection of land rent. HK is exteremely densely populated (with over 70% of it declared as green zones!) and hence the rent that can be collected from land is simply gigantic (that is why the government there finances itself to a degree from taxing this rent). Yet, renting an apartment (small, but comfortable) in big block of apartments is still not beyond the means of an avarage citizen. In fact, taxation on land rents in HK promotes a very efficient use of land and the construction of ever taller skyscrappers. Auckland on the other hand is relatively small city in the middle of absolute nowhere surrounded by meadows, oceans and hills. Due to the wrong tax policy, one can see here houses with gardens 3 minutes walking from the skytower! While buying a house might be cheaper than in hk, renting a reasonable apartment is equally or even more difficult with an average salary than in HK. Furthermore, Auckland has tremendously expensive (and unreliable) public transportation system, very expensive food, clothing, etc (due to lack of competition and taxation directed at labour). I've been to tens of countries and I've never seen a city more expensive (in relation to average salary) than Auckland

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  2. Atlanta Georgia, eh? So long as there's low demand for houses built in cesspools of violent crime, drug dealing, state welfarism, and illiteracy, and where everyone speaks Ebonics, then house prices in Atlanta should remain relatively sane.

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  3. No offence Anonymous but that is a pile of crap.
    Rents are massive here and the quality of apartment available low when compared even to Auckland.
    That is, most Aucklanders would sneer at the actual living standard here in terms of what you can rent. Even I will admit it is bloody ghastly, awkward dimensions in apartments, poor use of space and tiny kitchens and bathrooms. Often the bedroom can fit a small double bed and nothing else!

    I'm not here for the comfortable apartments. I rent one when back in Auckland for a week and get lost they are so large and luxurious,

    Rent however is like mortgage interest, tax deductible.

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  4. It's appalling that John Key regards putting the interests of voting NZ citizens ahead of foreign speculators as "racist". Even worse there was no opposition to this from anyone except Winston Peters.

    Labour MPs don't care about the property bubble because most of them are landlords. Surely all MPs should have their assets in blind trusts so there is no conflict of interest.

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  5. What is casuing Auckland to be so expensive like that? Why are the prices so high and what are Kiwis doing wrong?

    Amit

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  6. Blind greed... I was just in auckland, so expensive and all any one talks about is house prices. nz, full of nasty greedy people typing each other off and tourists too

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