LGNZ strikes back at home affordability survey

Local government authorities today hit back at an international survey claiming "excessive land use regulation" is taking home ownership out of the reach of ordinary New Zealanders.

Basil Morrison, president of Local Government New Zealand, said there were a number of factors making it more difficult to buy a home, including rising interest rates and a housing boom fuelled by strong economic growth.

"I believe one of the constraints at the moment is the rising interest costs, and the general pressure on our economic growth in the last five years," Mr Morrison told NZPA.

"I have seen literally tens of thousands of new homes being built from North Cape to Bluff in the last five years."

Mr Morrison said councils were acting in the interests of existing rate payers when asking new home owners to foot the lion's share of costs for new infrastructure like roads, sewers, schools and water supplies.

"Our communities across the country have told us very clearly that those costs should be met by the subdivider and ultimately the new house owner."

The housing affordability report, released yesterday by international consultancy Demographia, blamed the sharp rise in house prices on "excessive land use regulation that strangles housing markets".

The report, co-written by Christchurch commercial property developer and investor Hugh Pavletich and United States public policy consultant Wendell Cox, rated housing costs in Auckland, Wellington and Christchurch as "severely unaffordable".

Australia was the least affordable of the six nations surveyed, with all of its main cities, except Canberra and Darwin, attracting a "severely unaffordable" ranking.

In Britain all cities, with the exception of Glasgow, were deemed unaffordable, while in Canada, only Vancouver was seen as out of home buyers' reach.

The position was less clear cut in the US which, while having the metropolitan areas with the most unaffordable housing, also had 21 markets rated affordable.

The survey used data from September 2005, comparing the median household income in an area to the median house price. For a market to be rated affordable the median price had to be 3.0 or less times the median income.

Markets where the median multiple was between 3.1 and 4.0 were rated moderately unaffordable, those with a multiple between 4.1 and 5.0 seriously unaffordable and those above 5.1 severely unaffordable.

Auckland with a median multiple of 6.6 -- based on a median income of $57,800 and median price of $383,300 -- shared a spot for 15th most unaffordable of the 100 markets surveyed.

Christchurch with a 5.9 multiple -- income $46,500, price $275,000 -- was 29th, and Wellington with 5.2 -- income $57,400 and price $296,500 -- was 39th.

But Mr Morrison questioned the report's technique, saying comparing such disparate cities was pointless.

"If you want to buy a section and build a modest house in Queenstown, versus Matamata, or in Gore, or in Wellington, or in Remuera, or in Kerikeri, the cost of the same style of house will be a lot different," he said.

"It is very hard to say you can compare that with what might be happening in, for instance, Australia."

According to the Demographia report, the least affordable city was Los Angeles and Orange County with an 11.2 multiple, while the most affordable were Rochester and Buffalo, both in New York state, with 2.2 multiples.

Sydney was 7th with 8.5, just ahead of the New York metropolitan area with 7.9, London was 11th with 6.9, Vancouver -- at 6.6 was ranked 15th alongside Auckland and Hobart, while Dublin with a multiple of 6.0 was 26th.

The report predicted home ownership levels in New Zealand would decline to 63 per cent by 2011, from a peak of 74 per cent in 1991.

- NZPA