No quick fix for affordability issue

The annual Demographia International Housing Affordability Survey has rated Auckland as the fourth least affordable city in the world - equal with Melbourne and San Jose.

Auckland has moved up the rankings from its 9th place last year due to its rapid rise in prices and moderate growth in income.

According to the report, Auckland’s median house price is $748,700 and its median household income is $77,500.

This gives the city a house price-wage multiple of 9.7. Scores higher than 3 are considered to be unaffordable.

The Demographia report comes hot on the heels of Fitch Ratings’ Global Housing & Mortgage Ratings Outlook for 2016.

That report found New Zealand’s house prices to be the most expensive in the world compared to incomes.

The Demogaphia report lays the blame for Auckland’s situation squarely on severe land use restrictions, while the Fitch Report said Auckland’s supply issues were being exacerbated by lagging construction.

Following the release of both reports there has been a flurry of critique on Auckland’s various planning and regulatory issues. 

However, prime minister John Key told media this morning that Auckland’s Demographia ranking reflected strong demand for Auckland due to its attractiveness as a place to live.

He also said the government was doing all it could to deal with Auckland’s supply issues.

Auckland Council has said it has a range of initiatives underway to try and deal with the city’s affordability issue as well as its undersupply issue.

But Property Institute chief executive Ashley Church said there is “no quick fix” for the problem, which has developed over decades.

“The solution is to slow the rate of house price inflation while seeing a gradual increase in the median wage – and that will take time.”

To achieve this, a suite of measures and policies will be required, he said.

These could include a significant increase in the land available for development, a commitment to targeted intensification in central parts of the city, and further development of “metropolitan suburbs” to encourage a spread of development.

“But such policies would need to survive successive governments and would require a high degree of consensus between the major political parties and the Auckland Council,” he said.

“Knee-jerk responses and sloganeering about ‘bringing prices down’ aren’t the answer and actually risk making the problem worse.”

Meanwhile, Auckland’s affordability might be bad, but there are several major international cities where it is worse.

According to the Demographia report, the three least affordable cities in the world are Hong Kong, Sydney and Vancouver (in that order).