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

 

PARLIAMENT TODAY:

Arming Police: Frontline Police To Routinely Carry Tasers

"In making the decision, the Police executive has considered almost five years worth of 'use of force' data… It consistently shows that the Taser is one of the least injury-causing tactical options available when compared with other options, with a subject injury rate of just over one per cent for all deployments." More>>

ALSO:

Gordon Campbell: On D-Day For Dairy At The TPP

While New Zealand may feel flattered at being called “the Saudi Arabia of milk” it would be more accurate to regard us as the suicide bombers of free trade. More>>

ALSO:

Leaked Letter: Severe Restrictions on State Owned Enterprises

Even an SOE that exists to fulfil a public function neglected by the market or which is a natural monopoly would nevertheless be forced to act "on the basis of commercial considerations" and would be prohibited from discriminating in favour of local businesses in purchases and sales. Foreign companies would be given standing to sue SOEs in domestic courts for perceived departures from the strictures of the TPP... More>>

ALSO:

"Gutted" Safety Bill: Time To Listen To Workplace Victims’ Families

Labour has listened to the families of whose loved ones have been killed at work and calls on other political parties to back its proposals to make workplaces safer and prevent unnecessary deaths on the job. More>>

ALSO:

Regulators: Govt To ‘Crowd-Source’ Regulatory Advice

A wide-ranging set of reforms is to be implemented to shake up the way New Zealand government agencies develop, write and implement regulations. More>>

ALSO:

Board Appointments: Some Minister Appoint Less The 3 In 10 Women

“It’s 2015 not 1915: Ministers who appoint less than 3 in 10 women to their boards must do better, they have no excuse but to do better,” said Dr Blue. More>>

Gordon Campbell: On The 1990s Retro Proposals For Our Health System

As we learned yesterday, the reviews propose that the democratically elected representation on DHBs should be reduced, such that community wishes will be able to be over-ridden by political appointees. In today’s revelations, the reviews also propose a return to the destructive competitive health model of the 1990s. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
 
Regional
Search Scoop  
 
 
Powered by Vodafone
NZ independent news