Criteria used to describe New Zealand’s housing as unaffordable are too simplistic and do not take into account the cost of borrowing, the New Zealand Property Investors Federation says.
The Demographia survey compares housing costs in nine countries.
The latest update ranks Auckland as the eighth-most unaffordable of the 360 cities surveyed, using Statistics NZ, REINZ and census data.
It uses a “median multiple” approach that relates housing costs to household income. Markets ranked above 5 on that scale are “severely unaffordable".
The report found that Auckland’s median house price of $561,700 and median household income of $70,500 gave it a ranking of 8.
Tauranga scored a median multiple of 6.6, and Christchurch came in at 5.8.
The Property Council of New Zealand said it was a reminder that the Auckland Unitary Plan needed to encourage and facilitate development. Chief executive Connal Townsend said: “If the Plan does not adequately permit and encourage development, housing supply will not increase to the desired extent. New Zealand must address its issue of housing unaffordability.”
But NZPIF executive officer Andrew King said few of the areas that the survey covered were deemed affordable.
“A commonly accepted guideline for housing affordability is a housing cost that does not exceed 30% of a household's gross income”, he said.
“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 said that was still high, but not as unaffordable as the Demographia survey would suggest.
Adjusting buyer expectations would also make a difference, he said. "If we want more affordable houses then we need to reconsider the size of our houses and think smaller.”
Source: Landlords.co.nzcomments powered by Disqus