Monday, 20 January 2014

NZ housing now more unaffordable than everywhere but Hong Kong [updated]

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Every year since 2005, the Demographia organisation has been measuring housing affordability across the cities of the English-speaking world. As the planning virus continues with no abatement, the results have been increasingly horrific – especially for New Zealand house-buyers.

This year, with even more cities included, is no exception, with New Zealand’s major urban markets more unaffordable as a whole than any place measured outside Hong Kong.

Do you hear me, planners? More unaffordable than any place outside Hong Kong …

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MEDIA RELEASE
Monday 20 January 2014

10th ANNUAL DEMOGRAPHIA INTERNATIONAL HOUSING AFFORDABILITY SURVEY

Super City ... with price tag that matches – New Zealand Herald INTERACTIVE MAP

The 2014 10th Annual Edition …

The 2014 10th Annual Demographia International Housing Affordability Survey covers the expanded 360 urban markets of Australia, Canada,  Hong Kong,  Ireland, Japan, New Zealand, Singapore, United Kingdom and the United States.

The Annual Demographia International Housing Affordability Survey rates housing affordability , based on the Median Multiple – that is, the median house price divided by the gross annual median  household income of specific urban markets, for the 3rd Quarter of the previous year.

The “median multiple” is a robust measure – essential for the basic understanding of the structural health (or otherwise) of a specific urban markets.

If housing exceeds 3.0 times annual household incomes (requiring mortgage loads of about 2.5 times), it illustrates that there are serious political impediments that need to be addressed, with respect to land supply and infrastructure planning, provisioning and financing.

The fringes of an urban market are the only effective and sufficiently responsive supply and inflation “vents.”

Normal healthy urban markets, where housing is at or below 3.0 times annual household incomes are rated “affordable”; 4.0 times and below “moderately unaffordable”; 5.0 times and below “seriously unaffordable” and above 5.0 “severely unaffordable.

The results for all 360 urban markets covered within this year’s Survey are as follows …

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The results of the 85 major urban markets (with populations in excess of 1,000,000) of the geographics covered  are as follows …

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The Survey Schedules provide detailed specific gross annual household incomes, median house prices – and from that the Median Multiples.

Alain Bertaud, researcher and former Principal Planner – World Bank contributes the introduction …

The Introduction to this year’s Survey is Alain Bertaud, Research Scholar, Stern School of Business, New York University and former Principal Urban Planner – World Bank. Mr Bertaud has vast grounded experience internationally within the urban planning field.

Alain Bertaud makes it clear within this year’s Survey, why urban planning needs to change, asking …

“Are planners in the worst performing cities paying any attention?”

“And are they drawing any conclusions on how to improve the situation?”

Or do local governments conclude that the best way to increase the supply of affordable housing is to impose new regulations that will mandate developers to build housing units at prices, standards, and in locations selected by the government?”

“The last approach, under the name of inclusionary zoning is unfortunately the most common response, as recently seen, for instance, in New York and Mexico City.”

“Urban planners have been inventing all sorts of abstractly worded objectives to justify their plans for our future cities – smart growth, liveability, sustainability, are among the most recent fads.”

“There is nothing wrong, of course, for a city to try to be smart, liveable, or sustainable.”

“But for some reasons these vague and benign sounding objectives usually become a proxy for imposing planning regulations that severely limit the supply of buildable land and the number of housing units built, resulting in ever higher housing prices.”

“In the name of smart growth or sustainability, planners decide that densities should be lower in some places and higher in others.”

“Population densities are not a design parameter whose value depends on the whim of planners but are consumption indicators which are set by markets.”

“Even the Communist Party of China recently recognised that resource allocation is best achieved through markets; why can’t urban planners in so-called market economies reach the same conclusions and let markets decide how much land and floor space households and firms will consume in different locations?”

“It is time for planners to abandon abstract objectives and to focus their efforts on two measurable outcomes that have always mattered since the growth of large cities during the 19th century’s industrial revolution: workers’ spatial mobility and housing affordability.”

“As a city develops, nothing is more important than maintaining mobility and housing affordability.”

“Mobility takes two forms: first, the ability to travel in less than an hour from one part of a city to another; and second, the ability to trade dwellings easily with low transactions costs.”

“Housing mobility allows households to move to the location that best maximize their welfare.”

“Affordability is the ability for any urban household to be able to rent a dwelling for less than a 25% of its monthly income, or to buy one for less than about three time its yearly income.”

“The mobility and affordability objectives are tightly related.”

“A residential location that only allows access to only a small segment of the job market in less than an hour commuting time has not much value to households, even if it is theoretically affordable.”

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UPDATE 1:  “Among all 360 markets in the principal analysis, there were 95 affordable markets,” none of which were in New Zealand …

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The key correlation … ?

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1 comment:

  1. Part of our problem seems to be the headlong rush to Auckland. Outside Auckland the problems appear far less accute. My wife works in IT and can't see why the fixation with being based there when IT supposedly allows great flexibility about location for call centres and business hubs doing procesing work that can be physically remote from clients. Is it just CEO ego that dictates Auckland?

    Hong Kong doesn't have the luxury of space but I remain amazed how it functions so well. Maybe that's simply a function of population density. The flip side is that the taxi driver that drove me to the airport time before last hated the compression in HK and longed to escape to Australia for a bit of space.

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