Housing boom continues unabated; Auckland seventh most expensive city in global survey

Hugh Pavletich, author of the annual Demographia affordability survey
Wendell Cox, ao-author of the annual Demographia affordability survey

Latest figures from the annual Demographia affordability survey underline the strength of the housing market.

They show the median New Zealand house price costs 5.3 times gross annual median household income compared with 5.2 last year.

A contributing factor is falling incomes nationally, as recorded by Statistics New Zealand, except in Christchurch.

Demographia rates housing affordability based on a median multiple –  median house price divided by the gross annual median household income.

Co-author Hugh Pavletich claims that if housing exceeds three times annual household incomes it presages a housing bubble requiring political intervention to free up supply of housing.

The position is worse for homeowners in Auckland where the median multiple is 8.0 compared with 6.7 last year.

That places Auckland as the seventh "least affordable" of the 85 centres surveyed with populations of more than one million. 

By comparison, Sydney ranks 9.0, Melbourne 8.4, and Australia's national median is 5.5. Among the most affordable cities are in the US; Pittsburgh (2.3), and Atlanta and Indianapolis at 2.7. Hong Kong topped the table, with a median multiple of 14.9.

The Christchurch multiple is 5.8 due to rising incomes there.

The figures may hearten some homeowners because higher values of homes may reduce the proportion of household debt.

But the figures represent greater hurdles for first home buyers.

 

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9 Comments & Questions

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The report is leftist rubbish. There are over 4000 houses available on Trademe in Auckland for sale under $500k and nearly 300 in Manukau alone under $300K. If there is an affordability problem there should be none at these price ranges at all.

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Do you understand the concept of an "median" house price ? That you are referring to the availability of houses at the lower end of the market does not alter the facts as stated in the article.

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I agree! A quick search of Seek found 100 jobs in Auckland paying $200k or more!

Clearly there is no issue with the housing market when these jobs are right in the range for an 'affordable income multiple'...why do any sort of analysis on a market that is clearly operating well when a quick internet search to produce spurious anecdotes will suffice!

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Do make a point of reading closely what Alain Bertaud says about planners within the Introduction to this years Survey.

He is very highly regarded internationally... across the political spectrum.

I am somewhat surprised what Mr Bertaud has said, hasn't been reported on. Property and planning people need to read it closely.

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The end is nigh!
Forget the foolish comments from real estate agents who trawl these boards (and other newspapers) arguing that prices will keep rising (you can generally spot them by the typos, bad grammar and poor maths on display).
Unexpectedly high inflation was reported today. RBNZ will be hiking interest rates tomorrow (well, between Jan and March). Property prices are in for a fall as a consequence.
NZ house owners, you have been warned...the bubble is about to deflate. And it's a good thing for NZ as a whole.

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Property prices in Auckland will keep going up as long as unrestricted immigration continues as they are still way cheaper than Hong Kong.

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The high house and land prices are purely Council inflicted in pursuit of their dream of "intensification" which is a social, economic and environmental disaster.

When we purchased our house 23 years ago, the buildings were worth the same as the land. Now the land is valued at more than five times the value of the buildings. This is plainly ridiculous.

If the Council could be persuaded to stop rationing land and let Auckland spread North south and west and so form satellite centres the city would be both affordable and liveable. Congestion and other transport problems would be much reduced and children would be free to play in their backyards.

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Bryan - you're right here and this has been a factor helping accelerate price growth. And you're right that allowing urban boundaries to expand is the right thing to do for Auckland's development (who in their right mind would prefer lifestyle blocks between Albany and Silverdale rather than growth in housing and jobs?).
But let's face it, the housing bubble in Auckland reflects asset bubbles elsewhere in the world (stocks, London houses etc) - fuelled by once in a lifetime lax credit conditions (low interest rates).This is all now unwinding as the global economy has nearly normalised.
And beware - once economic momentum starts, it accelerates quickly so I expect US tapering to be all done by end of 2014 and interest rates in the US to be rising soon after. NZ rates are already rising. This is never good for asset prices - forget notional "shortages". If people can't afford to finance a mortgage at higher interest rates, they can't afford to pay high prices. If this is economy wide (which it is) then prices have to fall for houses to sell. It's pretty simple maths.

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It is very pleasing to see the responsible Media Release by the Property Council.

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