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Demographia 9th International Affordable Housing Survey (2013)

Demographia 9th International Affordable Housing Survey (2013)

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Published by Ben Ross

The 2013 - 9th Demographia International Housing Affordable Survey How affordable is your city? Auckland slips from 6.3 to 6.7

The 2013 - 9th Demographia International Housing Affordable Survey How affordable is your city? Auckland slips from 6.3 to 6.7

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Published by: Ben Ross on Jan 21, 2013
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9
th
 AnnualDemographiaInternational Housing  Affordability Survey:2013
Ratings for Metropolitan Markets
 usraa
anaa
na ong ong 
reanNew Zealand
United Kingdom
United States
With Introduction by Hon. Bill English Deputy Prime Minister of New Zealand 
(Data for 3
rd
Quarter 2012)
 
 
9
th
Annual DemographiaInternational Housing Affordability Survey 
INTRODUCTIONBy Hon. Bill English,Deputy Prime Minister of New Zealand
ousing affordability is an important focus for the New Zealand Government . Last year’s New 
Zealand Productivity Commission report on housing affordability, relying in part onDemographia affordability data, showed a substantial worsening in housing affordability inNew Zealand in the last thirty years. In 1980, the ratio of the median house cost to median income was around 2. By 1990 it was around 3 and today Demographiashows the median house in New Zealand costs 5.3 times medianincome.In its response to the Productivity Commission, the Government
agreed with the Commission’s analysis that supply side factorsexplain the deterioration in New Zealand’s housing affordability. The Government’s response to the Commission’s report
concentrated on land supply, infrastructure provision, costs anddelays due to regulatory processes, and improving constructionsector productivity.Housing affordability is complex in the detail
 – 
governmentsintervene in many ways
 – 
but is conceptually simple. It costs toomuch and takes too long to build a house in New Zealand. Land hasbeen made artificially scarce by regulation that locks up land for development. This regulation hasmade land supply unresponsive to demand. When demand shocks occur, as they did in the mid-2000s in New Zealand and around the world, much of that shock translates to higher prices ratherthan more houses. It simply takes too long to make new land available for development. We may be seeing the beginning of a repeat of the mid-2000s demand shock. As interest rates stay below historic norms, expectations are shifting that these rates are here to stay. As a result, demandfor real assets has increased, observed in booming equities markets in 2012. Demand for real estateis also increasing, with the median house price in Auckland recently exceeding the highs of 2007.Costs of other housing inputs contribute to
New Zealand’s affordability problem. Building materials
cost more in New Zealand than neighbouring Australia. The structure of infrastructure financing,and the timing levies are to be paid, raises the market price for housing. Appeals under the Resource
H
 
9th Annual Demographia International Housing Affordability Survey (2012: 3rd Quarter)
 
 
M
anagement Act, New Zealand’s land use regulation, can hold up developments and city planning 
for a decade or more in some cases. Time is money because development is risky.
New Zealand’s residential build volumes are small, and the construction sector is
highly fragmented.Only five firms in the country built more than 100 homes in 2011. The vast majority of buildersbuild only one house each year. New Zealand is a late adopter of prefabrication and use of standardised materials. In New Zealand, if a window is to be added into a house, it will usually bemeasured and built by hand. Construction industry productivity has stagnated in the past 30 years,and is now below where it was in 1978. Industry regulation favours single person operations. New Zealand has inadvertently created a cottage industry to supply one of our most important assetclasses.Low build rates produce downstream problems. Shortages are absorbed through household
composition and there is some evidence of overcrowding. New Zealand’s housi
ng stock is ageing and appears to be of relatively low quality, which has consequences for health and well-being. Thelarge boom and bust cycles of the New Zealand industry discourage fixed investment in employeesand systems, weakening productivity.From
the Government’s perspective, worsening housing affordability creates a number of problems.
Fiscal pressures increase because financial assistance for housing is tied to its market price. Homeownership provides financial security and a form of savings and lowers dependence on publicassistance later in life. Worsening affordability increases demands for direct intervention through rent controls and publichousing. We are aware of the results of these sorts of interventions overseas and must avoid them.New Zealand is not alone in its housing affordability problem and there seems to be increasing awareness around the world that the planning pendulum may have swung too far. Land useregulations and intrusive development rules have consequences. The Conservative government in
the UK has recently taken first tentative steps to, as David Cameron put it, “[get] the planners off our backs” by increasing permitted activities by residents.
1
New York is considering relaxing minimum size rules on apartments.
2
  This
Government’s strategy is to address the varied causes of housing affordability and avoiding ‘magic bullet’ solutions that paper over causes and create more problems downstream.
 In New Zealand an important political driver of urban controls is environmentalism, but thisconcern is misguided. Cities are environmentally friendly places if the alternative to city living ishigh-
footprint lifestyle in the country. New Zealand has seen a proliferation of ‘lifestyle blocks’
1
 
improvements.html (accessed 10 January 2013).
 
apartments_n_1660396.html(accessed 10 January 2013).
9th Annual Demographia International Housing Affordability Survey (2012: 3rd Quarter)

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