Local Govt | National News Video | Parliament Headlines | Politics Headlines | Search

 


Housing affordability not so bad

Housing affordability not so bad

Demographia's latest survey of housing affordability paints a depressing picture for New Zealand. But is it as bad as Deographia make it out to be?

Demographia is an American organisation based in St. Louis, whose principal and sole owner is Wendell Cox Consultancy. Wendell Cox is a long time opponent of urban densities and uses Demographia to highlight his beliefs.

Demographia developed a "medium Multiple" system to gauge housing affordability, which divides the medium house price by the medium income. Demographia then determined that a house price greater than 3 times the medium household income was unaffordable.

Using this definition, only 14 (16%) of the 85 areas around the world that Demographia researches are affordable, making 84% unaffordable. Of the unaffordable areas, 34% are moderately unaffordable and 49% are either seriously or severely unaffordable.

The New Zealand multiple is 6, which according to Demographia is twice the affordable level.

Andrew King, Executive Officer of the NZ Property Investors’ Federation, points out that the Demographia definition has been criticised as being too simplistic and not taking into account the cost of borrowing and other housing costs.

“A commonly accepted guideline for housing affordability is a housing cost that does not exceed 30% of a household's gross income”, he says. “Using New Zealand's median household income of $70,616, the national median house price of $425,000, floating mortgage interest rate of 5.75% and making some assumptions on insurance, rates, repairs and other costs, then the annual cost of the NZ medium house is about 43% of the medium income.”

King agrees that this is still high, but it is not as unaffordable as the Demographia survey would suggest. Additionally, one of the main reasons for the high annual cost of housing is that we like big houses and bigger houses cost more. "If we want more affordable houses then we need to reconsider the size of our houses and think smaller" he says.

However there are many other aspects affecting the high cost of housing in New Zealand. These include the cost of materials and labour, a desire by homeowners for bespoke housing, increasing regulation and the size of council fees to build new houses. If New Zealand housing is to become truly more affordable, all these aspects need to be addressed.

“An aspect of housing affordability that has also been raised is the comparison between rental costs and the costs of owning your own home”, says King.”An NZPIF study of December statistics shows that it is currently $134pw cheaper to rent the average NZ home than it is to own it, including coming up with a 20% deposit of some $85,000. Rather than demonstrating that homes in NZ are too expensive, this study shows that rents are too cheap.”

Massey University’s Home Affordability Study also demonstrates that affordability isn't currently as bad as it is made out to be. The study’s affordability index level is currently at 20.3, exactly where it was in September 2003 before four years of high price rises. By the end of 2007, when NZ housing became increasingly unaffordable, the affordability index had reached 33.9.

“The reality,” says King “is that housing isn't really so unaffordable now, but with demand pressures and expected interest rate rises, affordability is likely to get worse before it gets better”.

ENDS

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On The Tokenism Of New Zealand's Role Against Islamic State

To date, the Opposition has continued to occupy itself with the marginalia of the issue. E.g. whether Key did or didn’t know whether Barack Obama would be present at the US briefing last week on IS, or whether New Zealand’s military involvement is or isn’t already a fait accompli.

It might be better to tackle the issue, head on. Our contribution against IS will be to send SAS forces to train the Iraqis? That’s like offering trainers to General Custer just as the 7th cavalry reached the Little Big Horn.
More>>

 

Parliament Today:

Scoop Business: Shell And Todd Caught Drilling Without Approval

Multi-national oil company Shell’s New Zealand arm and local energy giant Todd Energy have breached the new law governing New Zealand’s Exclusive Economic Zone, the Environmental Protection Authority says in an Oct. 10 document released by the Green Party. More>>

ALSO:

Labour: Tea Breaks 'Gone By Lunch Time'

“How cynical that on the eve of Labour weekend, the National government is pushing through legislation that takes away the statutory right to tea and meal breaks along with collective bargaining protections, and makes vulnerable workers jobs even less secure." More>>

ALSO:

Gordon Campbell: On Pharmac, Gough Whitlam And Sleater-Kinney

We’re not at the outset of these negotiations. The outset was six years ago, and negotiators were hoping to have some sort of ‘framework’ deal finished in time for the APEC meeting in a few weeks’ time. These ‘extreme’ positions are what we’ve reached near the intended end of the negotiations… More>>

ALSO:

PM Of Many Hats: October 22 — Parliament Today

Dr RUSSEL NORMAN (Co-Leader – Green) to the Prime Minister: How many times since November 2008 has he spoken with blogger Cameron Slater on the phone and how many times, if any, has he texted him?
Rt Hon JOHN KEY (Prime Minister): None in my capacity as Prime Minister. More>>

ALSO:

Aussie Investigation Dropped: Call On Minister McCully To Pursue The Case Of Balibo Five

West Papua Action is deeply concerned at the lack of any clear outcome from the Australian Federal Police inquiry into the 1975 deaths of the ‘Balibo Five’ including NZ journalist Gary Cunningham. More>>

ALSO:

'Feed The Kids' Bill: Metiria Turei To Lead Fight On Feeding Hungry Children

Green Party Co-leader Metiria Turei is urging all political parties to support the Feed the Kids Bill which she inherited today from Mana leader Hone Harawira. More>>

ALSO:

Parliament Today: State Opening Of Parliament

The House sat at 10.30am on Tuesday before MPs were summoned to hear the Speech from the Throne in the Legislative Council Chamber. More>>

ALSO:

Tertiary Education: Students Doing It Tough As Fees Rise Again

The Government is making it increasingly difficult for Kiwis to gain tertiary education as fees continue to rise and access to student support becomes even more restricted, Labour’s Tertiary Education spokesperson Chris Hipkins says. More>>

ALSO:

Housing, Iraq: PM Press Conference – 20 October 2014

Prime Minister John Key met with press today to discuss:
• Housing prices and redevelopment in Auckland
• Discussions with Tony Abbott on the governmental response to ISIS, and New Zealand’s election to the UN Security Council More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
Regional
Search Scoop  
 
 
Powered by Vodafone
NZ independent news