Zoning rules see NZ among least affordable places to buy a home

New Zealand cities remain among the least affordable in the world – and the culprit is mainly due to “green belt” policies by local authorities.

New Zealand ranks just behind Australia as one of the two most unaffordable countries among those measured by the sixth Annual Demographia International Housing Affordability Survey covering 272 urban markets in Australia, Canada, Ireland, New Zealand, the UK and the US.

The study uses annual household income as a measure.

The authors, Christchurch-based Hugh Pavletich and US-based Wendell Cox, classify homes as affordable where households spend about three times their annual income to purchase a house with a mortgage not exceeding approximately 2.5 times their annual household income.

Moderately unaffordable homes are classed as four times and under; seriously unaffordable five times and under; and severely unaffordable 5.1 times and above.

On this measure, New Zealand has no affordable cities. On an overall national basis, New Zealand’s median multiple is 5.7 times (compared with about 3 in the early 1990s), while Australia is tops at 6.8 times and the UK 5.1 while the US is 2.9 overall.

At a city level, Tauranga is the most severely unaffordable market in New Zealand at 6.8 times (the highest international score is taken by Vancouver at 9.3 times followed by Sydney at 9.1 times).

Second in New Zealand is Auckland at 6.7 followed by Christchurch at 6.1, Wellington 5.8 and Dunedin 5.6.

The preface to this year’s Demographia Survey has been contributed by Dr Tony Recsei, president of the New South Wales, Australia, community organisation, Save Our Suburbs.

He is an environmental consultant, who debunks many of the “environmental myths” associated with urban housing markets – that higher density housing reduces pollution, is more efficient, and saves energy.

Dr Recsei says that national and local government policies are consigning a new generation of citizens to renting homes for their lifetimes.

• The issue will be further explored in this week’s print edition of The National Business Review, which will look at which councils are developing green belt policies that exacerbate the problem.

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This is an absolute disgrace. New Zealand is one of the most sparsely populated countries in the world and there is no excuse whatsoever for housing to be so unaffordable.

As the survey mentions, the inflated land prices that result from the idiotic "smart growth" policies cause pain for those with mortgages but also push the cost of renting up. People spend more money on accommodation (mostly going to foreign lenders) and have less disposable income to spend at local shops or invest to increase their wealth.

And funnily enough, the country so many Kiwis are migrating to, Australia, isn't quite the land of opportunity it's made out to be. Housing over there is even more unaffordable than New Zealand relative to incomes.

Maybe if National grows some Kahunas and gives the Green anti-development crowd a slap and allows someone to actually build some houses then prices might drop to a level so attractive that Aussies will be willing to take a 30% pay cut to cross the ditch.


I think this news item doesn't quite make sense in terms of the 'Green Belt' issue. Auckland is already hugely spread out with people living beyond the green belts in places like Kumeu, Piha or Hunua. Prices out in those regions are not as advantageous as you might expect, even being so far out. And commuter times to these regions are not outrageous by global standards.
Also, you can see greater green belts in many countries around the world with lower housing costs, higher populations and/or lesser land areas.
'Environmental Myths' aside, I feel that tax inequality and residential investment strategies have both served to inflate New Zealand's housing values well beyond reasonable levels and I don't think that the recent recession deflated them far enough.
Already I'm seeing the same investment 'experts' attempting to lure people into the residential investment market through system-selling - and with the stated 'shortage' of residential stock on the market has already begun re-inflating prices. Sorry that the same people who were fleeced by BlueChip and others are n ow seeking the 'safe' investment option of residential property.
This cost of land (both residential and commercial) is crippling New Zealand and will continue to do so until there is a real and significant collapse. Retailers are being charged extraordinary high rentals for only marginal foot traffic and household spending is stagnated as a result of high mortgages and rents.
A change in tax law is needed. Green belt destruction is a lesser need.


These dopey policies are responsible for hugely damaging economic and social costs being inflicted upon NZ. They have contributed to serious speculative behavior and our massive oversea debt

Unaffordable housing is a major impediment to family formation. Those at the bottom of the social heap are totally screwed I have no doubt the much of economic deprivation and possibly a degree of the crime we see is this country is a result of the ludicrous cost of housing in this country.

Furthermore even young people with good incomes wanting a house are forced to committing to large proportions of their incomes to paying for overpriced housing. It amazes me when you look at large portions of the housing stock which are old, poorly built freezing dumps the price of which has been bid through the roof. Little wonder we have such poor savings and investment records.

This nonsense should be remedied ASP as part of a package to effectively help lower the cost of living in this country and set the country on a path of economic recovery. Its all part of becoming internationally competitive again and stop allowing the economically illiterate green faction dictate utopian ideals. This not The Netherlands.


This is the same story peddled every year by these authors. Perhaps the truth is that tax advantages to property investors offsetting other income sources has made housing unaffordable to those who can't do this?


Yes, it is the same story because it is the same situation, same problem, and no indication that the glaringly obvious solution will be taken any time soon.

It is hard to think of a more important issue to the welfare of the people of New Zealand. Let's see, if median house prices are 6 times annual income, instead of 3 times, and the interest rate is 5% p.a., this is a cost of 15% of the median household's income for 1 single issue. Is there any other single issue or problem or fault that is costing NZ households more than 15% of their income? That is about $150/week per household for one avoidable and pointless policy error (15% of $52k/year).

The authors deserve very serious attention, and they should keep pushing the same message until this yoke is lifted from our sholders.


I'm looking forward to this issue being further explored.
I am always confused how when I visit places such as the UK, a country that crams in so many times our population; seems blessed with parks and green space gobsmackingly beautiful and in utter abundance (yet accessible). Only a few minutes drive it seems from any centre I am in country. What is being done differently? Is it possible that hand in hand with this topic our inner cities are too hamstrung by rma / nimbys?


We have only been in New Zealand for a while and love it, moved my family over from the UK and its great. Its changed so much though since I married my English wife out here 20 years ago. We are a proffesional couple with 40 years of experience between us and saw an opportunity to show our family something different.

We have sold our house in England but unfortunately do not intend to buy one in New Zealand. We can not justify the standard of the properties and size of the plots (sections) verse the pricing. Many of the rentals are in such poor condition with little to no aparent legislation over fire alarms, smoke detectors adequate heating etc And many of the overseas investors are allowed to get away with this behaviour and introduce sub-standards maybe acceptable in other countries. Sooner or later the market needs to collapse and I do not want to find myself with negative equity.

I guess some of this has also been driven greedy estate agents (who describe every property as "Once In A Liftime Opportunity") and school zoning but mostly poor governance just looking for quick cash from overseas.. I don't anticipate much change from what I see and hear - this leaves us with a dilema - where to invest and should we stay or should we go??


every yr these same development coys peddle this propaganda,salivating at the prospect of carving up the waitakere ranges as an easy way to maximize their profit

more easier/profitable to carve up our beautiful waitakere ranges,than put up houses and apartments in existing urban areas

as someone who specializes in sections,be assurred that there are still plenty of vacant sections out there

already our publicly owned parklands -what we allegidly pay rates for- are being greedily swooped on/converted into housing by development coys,yet they dont have to pay even one red cent for the ownership or use of it...talk about privatisation!

maybe we should all just resign ourselves to live in concrete jungles,just so that these development coys can turn a HIGHER profit consuming our precious parklands into endless sprawling suburbia

we need to protect our special areas from these greedy vultures that peddle this crap every single yr,spurred from a vested interest,no doubt


these 'authors' decline to mention that its NOT ON THE PRICE but on the wage-house price ratio that this outcome arises

so when these authors declared last yr that nz housing was THE MOST EXPENSIVE IN THE WORLD,it was a mischievious lie,and a false statement

a lot of the house prices in the overseas cities used as comparatives are far higher than nz,so in reality,its the NZ WAGES THAT RANK POORLY,COMPARITIVELY

they forget to mention that the employment contracts act helped to decimate nz wages,so that we now earn far less than our aussie neighbours who refused to implement similar legislation,and also earn less than the wages in the other overseas comparitives[wage-housing study],therefore it is primarily our nz diminished wages have lagged behind housing


I agree with anonymous-low wages are an obvious stifling economic trap. The neo's argue that low productivity is the cause. I argue that a skewed tax system and much offshore asset ownership are the issues.


many of you forget the greed factor that took over the market from the early 2000's. Existing property owners at that time only had to sit back and allow real estate agents,investors,property spruikers,developers etc.etc, wind the market up to unrealistic levels.
All this speculation was fully supported by the banks who control the credit along with the news media who every day report the constant rise in property values -and run special "location,location" or "30 minute makeover" programmes on TV.
When you analyse the last 10yrs of the property market the understanding of several influences has driven prices beyond reality.


All I can say is that we tried moving back to NZ from the Boston area in the US. My wonderfully heated-no-draughts-3,500Sqft house on 2 acres of land with a tennis court, surrounded by miles of open green land either purchased by the town we live in, or bequeathed by owners when they passed on, 12 minutes drive from Harvard University off peak would cost us 3-4 times as much to buy in outer Auckland. And, the cost of living is lower here, and salaries just don't compare - and yes there are moral issues like unnaffordable healthcare, however just comparing cost & quality of housing, NZ loses badly.


Several comments have claimed that high house prices are not the problem in New Zealand but low wages are. If that were true then how do you explain Australia, which has much higher per-capita income than New Zealand, having even more unaffordable houses (median house price 6.8 times median household income v 5.7 for New Zealand)?

And as the report points out, the median multiple was about 3 in New Zealand until the early 90s. Now it's nearly 6. What's happened in that time, have our incomes halved? I doubt it. Spin it however you want but there is something that has changed since the early 1990s that has made New Zealand houses jump in price.


This House Price vs Income ratio is far more serious than most imagine. House prices may continue to rise at a rate above 7 or 8% compounded per annum, BUT, and it is a huge BUT, at some stage there will not be a bigger fool to buy your property.

Someone has to pay for the property, either RENT, or MORTGAGE, and everyone needs an economic return.

The changes that caused the rapid growth in house valuations are
-Tax breaks for property investors
-Use of depreciation to make rentals cash flow positive
-In efficient Councils transferring costs that would normally be covered by Rates to new sections. The cost at the margin affecting the value of the entire residential property sector.
-Bank funding ratios, banks allowed to borrow huge funds from offshore then pumped it into the property sector. We binged on debt.
-High density infill housing effectively doubled the price per m2 of land in some suburbs which had a flow on effect to surrounding land.
-1987 convinced many Kiwis that the Equity market is untrustworthy.

Changes will take time, but removal of depreciation allowance, higher interest rates (with interest paid to Kiwi deposit holders), removal of LAQC type companies, tax on some form of Fair or Deemed dividend basis for property (as with non NZ/AUS shares), changes to force Councils to cover costs of developments and reserve contributions from general rates will all have a positive effect. That being making housing more affordable over time, and all this assumes that we as Kiwis will continue to work effectively to improve productivity.

But make one point very clear, there is no way improved wage growth (much as we would all like it) will be able to make housing more affordable on its own. The right investement signals also have to be used by the Government to encourage the right investment behaviour.


Zoning restrictions are just a convenient excuse why we have expensive housing. Local authorities are trying to encourage smart growth/higher density living closer to the CBDs, because the cost of infrastructure and servicing it is beyond what developers and the existing communities can afford. And developers normally sidestep these costs, through fear means or fowl; & mostly the latter, which means higher rates for the balance of us.

Lets not forget, there is largely a duopoly/tripoly on providing infrastructural services/resources, and costs are correspondingly higher than they should be. These corporates are making huge profits out of the infrastructure development. There will however come a time when the costs to develop greenfield will be more than the first home buyer can afford to pay; & this is not that far away.

In addition, first home buyers are far too emotional with their purchasers. They lend; & the banks let them, way more than they can afford. These buyers forget a good portion of relationships dont last, or that babies do come along. They also start to high on the ladder. My first home purchased was second hand, needed modernisation and had an 80 step walk down access. It was a stepping stone, however a good portion of first home buyers are couples and would not settle for anything other than modern driveon and do nothing; and pay more in interest than rent.

What would assist in reducing housing affordability is increase the deposit required for first home buyers to say 25% of the purchase price. This would encourage discipline to save, and also when they are going through the buying process. Its been all too easy for people to enter the market, requiring low or no deposit. Dont count on this regulation creeping in under this government however, given they is an ex banker running the show.


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