Christchurch bucks trend in Demographia housing affordability survey

New Zealand Initiative executive chairman Oliver Hartwich

Christchurch housing became more affordable in 2016, bucking the trend across New Zealand's housing markets tracked by the Demographia International Housing Affordability Survey.

Produced by Illinois-based Wendell Cox and Christchurch-based urban planner Hugh Pavletich, the Demographia report compares 92 housing markets in nine mainly English-speaking countries, using a "median multiple" approach that relates housing costs to household income. Markets ranked above 5.0 on that scale are judged "severely unaffordable."

Affordability across the eight markets tracked in New Zealand deteriorated, rising to 5.9 in the third quarter of 2016 from 5.2 a year earlier. Auckland, the country's only major market, was ranked a 10.0, up from 9.7 a year earlier, and making it the fourth least affordable market across the entire survey. Over the course of the year, the median house price in Auckland rose 9.7% to $830,800, outpacing a 7.1% rise in the median household income to $83,000.

However, Christchurch, the country's second biggest city which is in the tail-end of a major reconstruction effort after a series of earthquakes in 2010 and 2011, improved its affordability ranking to 5.9 from 6.1 a year earlier, with house prices falling 5.5% $435,300 while incomes rose 3.5% to $73,900.

The report said New Zealand's housing became severely unaffordable in Auckland, Christchurch and Wellington after urban containment policies were adopted in the 1990s, and noted New Zealand and Singapore as the only nations in the survey "with a serious public policy priority to restore and maintain middle-income housing affordability."

New Zealand policymakers have been grappling with the rapid appreciation in house prices over recent years, blaming councils for limiting land use and poor infrastructure planning. More recently, the Reserve Bank's prolonged period of extraordinarily low interest rates has stoked credit expansion, prompting governor Graeme Wheeler to impose lending restrictions to curb mortgage lending.

Globally, low inflation has allowed interest rates to stay lower for longer, and rapid population growth fuelled by record net migration has meant wages have been stagnant over the past 18 months with an expanding labour market.

The Demographia survey said lower incomes in part of New Zealand reduced affordability, with Napier-Hastings' ranking rising to 5.7 from 5.0 as house prices rose 14% to $340,500 against a 0.5% decline in household incomes to $59,300, while Palmerston North-Manawatu's ranking rose to 4.7 from 4.1, with house prices up 12% to $255,800 and incomes down 1.8% to $54,900.

In a foreword to the report, New Zealand Initiative executive director Oliver Hartwich said planning reform and liberalisation are one component to improving housing affordability but need to operate with a financial framework that encourages development.

"We need to tackle housing affordability urgently because the effects of unaffordable housing on society are becoming more visible by the day," Mr Hartwich said. "Policies that raise housing costs are always likely to hit those on low incomes the hardest."

New Zealand's second-least affordable market was Tauranga-Western Bay of Plenty, with a ranking of 9.7, up from 8.1 a year earlier, with prices up 20% to $591,900 and incomes up 1.3% to $61,200.

Hamilton-Waikato was the third least affordable market in New Zealand at 6.2, up from 5.1 a year earlier, with house prices rising 26% to $444,900 and incomes up 4.5% to $72,100.

Wellington affordability was ranked 5.8 compared to 5.2 a year earlier, with a 15% rise in the median house price to $463,700 and a 3% increase in incomes to $79,600. Dunedin affordability attracted a ranking of 5.4 from 5.2 a year earlier, with house prices increasing 10% to $322,000 and incomes rising 6.2% to $59,700.


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If you're a young Kiwi graduating university, why bother staying in NZ now? You've been completely abandoned for the rampant greed of those who precede you.

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Baby Boomers have ruined it for us:) Very difficult for those that don't have generational wealth to leverage against.

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The "Lowest mortgagee sales ever recorded" in Auckland and New Zealand proves there is no problem with affordability at all.

This demographia is just political nonsense.

New Zealand's housing is affordable.

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"...with house prices falling 5.5% $435,300..."

But Paul, you assured us that house prices ALWAYS go up! ALWAYS!

Can't wait til Auckland takes a downward hit. If you thought house prices were in the news too much these days, just wait until momentum goes the wrong way for overleveraged "investors" like Paul!

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No problem with million dollar plus pricing that's ten times the median incomes, with thirty year mortgages in a country with an historic average interest rate of 7%?

That's a ridiculous claim. It's nonsense looking solely at a point in time with a record low interest rate when people have to pay mortgages off over 30 years.

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Christchurch has advanced through the real estate cycle more than the rest of the country. They experienced (unsustainable) high prices through the lack of supply and high demand. With a number of speculators having entered the game of building, the temporary demand issue has been addressed. Whats puttng further pressure on prices is the increasing cost of funding.

The rest of NZ will follow shortly, and borrowing is only a short term solution. It reaches its limit, and banks are now putting the breaks on. The only now is question how long can the contempt media and politicians keep the illusion of the economy being in great shape going.

Over so called leaders and the media have effectively been prostitutes for the money lenders.

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