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 Fallout From The Barclay Tape

This is hardly a case of cleaning out your desk and being turfed out onto the pavement.

As others have pointed out, the disgraced Clutha-Southland MP will remain on the public payroll for three months until the election, and for three months afterwards. More>>

 

Ombudsman: Canterbury Schools Reorganisation Mishandled

An investigation into the Canterbury schools reorganisation after the February 2011 earthquakes has found significant gaps and flaws in the Ministry’s engagement and communications with schools and communities. More>>

ALSO:

Law Commission: Contempt Report "Protects Right To Fair Trial"

The proposed Act limits what news media representatives and bloggers can report on court proceedings, but it also makes clearer than the current law where the line is between contempt and freedom of expression. More>>

ALSO:

Gordon Campbell: On Our Refugee Intake (And Uber’s Woes)

On figures released this week, there are currently 65.6 million people worldwide who have been displaced from their homes by war, famine or other external causes… More>>

ALSO:

IGIS Report: GCSB Support For Groser WTO Bid Not Illegal

“The inquiry has found that the GCSB did not act unlawfully or improperly in providing assistance to the New Zealand government campaign”, Ms Gwyn said. More>>

ALSO:

PM's Press Conference: Pike And Houses

There were questions on Pike River mine re-entry after new video from inside the drift was released over the weekend. English maintained a human effort would not be feasible irrespective of any future coalition demands from NZ First. He said the government would continue to work with families on non-manned re-entry. More>>

ALSO:

Flogging A Dead Horse: NZ First Seeks New s59 Referendum

10 years on from the so called “anti-smacking” law - NZ First calls for a binding referendum. NZ First MP Tracey Martin told TVNZ’s Q+A programme that the law change has had a “chilling effect” on NZ parents including herself. More>>

ALSO:

Always Interesting: Internet Party Has New Leader

The Internet Party has a new leader: Suzie Dawson... She currently resides in Moscow, Russia, where she has applied for temporary asylum due to severe persecution she reports being subjected to by those whose corruption she worked to expose.More>>

 
 
 
 

Opening The Election Supporters

 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

Featured InfoPages

Opening the Election
 
 
 
  • PublicAddress
  • Pundit
  • Kiwiblog