Housing affordability in Auckland and Tauranga is worse than affordability in Perth, the wider New York area and in Los Angeles, the 7th annual Demographia survey has found.
The survey of median house price to income multiples in 325 housing markets in Australia, Canada, New Zealand, Britain, Hong Kong and Ireland found Tauranga had a median house price to income multiple of 6.5, putting it at number 28 on the list of unaffordable markets.
Auckland was at number 32 with 6.4, which was above Perth on 6.3, San Diego on 6.2, the wider New York/New Jersey/Pennsylvania area on 6.1 and Los Angeles on 5.9.
The Demographia report, which was compiled by the New Zealand-based Hugh Pavletich and the US based Wendell Cox, found Hong Kong was the most unaffordable housing of the 325 urban markets surveyed, with housing at 11.4 times household income, followed by Sydney in Australia at 9.6 and Vancouver in Canada at 9.5 The survey included data up until the end of September last year.
Overall, Australia had the least affordable markets with a national median multiple of 6.1 times household incomes, followed by New Zealand at 5.3 times, the United Kingdom at 5.2, Ireland at 4.0, Canada at 3.4 and the United States at 3.0 times gross annual household income.
Atlanta most affordable
Pavletich and Cox pointed to Atlanta Georgia as the most affordable of the 82 major cities surveyed at 2.3 times income.
"Being an “open market”, Atlanta over produced market priced housing, but did not bubble," Demographia said, adding that affordable areas without price bubbles were those with multiples below 3.0.
New starter housing should be fostered at 2.5 times gross annual median household income with the land price being around 17-23% of the total price.
"The fringe is the only supply / inflation vent of an urban market," Pavletich said.
"There is a truism, well understood by responsible developers and real estate financiers internationally. If you get the land price wrong – everything else is wrong," he said.
"Due to unnecessary politically inflated land costs, housing markets are “very wrong” in Hong Kong, Australia, New Zealand, the United Kingdom, Ireland and some parts of Canada and the United States," he said.
Key rejects report
Prime Minister John Key queried the conclusions in the report in an interview on TVNZ's Breakfast programme (from 4 mins 50 secs on).
"Having spent a lot of time in New York, I struggle a little bit with that. I don't know how they worked that out. They got the median price in New York at US$389,000. From my experience in New York, you don't get an awful lot for US$389,000. You'd be a long, long way out," Key said when asked about the comparison with New York.
Key said two things drove housing affordability: interest rates and takehome pay. He said interest rates were near their historic lows and the government had improved take-home pay by cutting income taxes.
"Thirdly, we made some changes around the housing market which in the short term have dampened demand for housing. but long term are part of the reblancing of the economy away from consumption and very rapidly escalating housing prices through to an export led economy."
"I would argue within a couple of years we've made some progress, but these are long term imbalances and they take a long time to work their way through the economy."
Other affordability measures
Elsewhere, Interest.co.nz compiles its monthly home loan affordability report in association with Roost.
This report measures the portion of median takehome pay required to service an 80% mortgage on a median house, region by region and city by city.
It shows it now takes 56.8% of one median take-home pay to afford the mortgage on a median New Zealand house, which is improved from the 83.4% seen in March 2008 and improved from the 69.1% seen five years ago.
However, the Roost Home Loan affordability measure shows affordability still not back to the 40% levels seen in 2002.
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