New Zealand homes less affordable than in Australia
Prices in Auckland jump 8 per cent, as tight land supply and government levies inflate prices
New Zealand homes became less affordable than Australia in 2012 as constrained land supply and government levies, combined with low borrowing costs, pushed prices higher, according to a survey.
The median home price in New Zealand's major urban centres rose to 6.7 times gross annual median household income from 6.4 times a year earlier, according to the ninth annual report by American consulting company Demographia. House prices in New Zealand jumped 6.7 per cent in 2012, with 74,000 houses sold, the most since 2007, according to the Real Estate Institute of New Zealand.
The survey examined housing prices in Australia, Canada, Hong Kong, Ireland, New Zealand, the UK and the US. A reading of 5.1 or more is considered "severely unaffordable", while below 3 is seen as affordable.
"It costs too much and takes too long to build a house in New Zealand," Bill English, the country's finance minister and deputy prime minister, said in an introductory letter accompanying the survey. "Land has been made artificially scare by regulation that locks up land for development."
The structure of infrastructure financing, government levies and higher building material costs than Australia had also raised home prices, English said.
The Reserve Bank of New Zealand has kept the nation's benchmark interest rate at a record-low 2.5 per cent since March 2011 to help revive growth after earthquakes devastated the country's third-biggest city, Christchurch, and the surrounding Canterbury region. The central bank's governor, Graeme Wheeler, said in December he would monitor the housing market and was prepared to raise rates if property price rises fanned spending and borrowing.
Auckland - where home prices surged 7.7 per cent in 2012 from 2011, according to broker Barfoot & Thompson - was the nation's most unaffordable market, with homes costing 6.7 times the median income, the Demographia survey showed.
"Overwhelming economic evidence indicates that urban containment policies, especially land rationing mechanisms, raise the price of housing relative to income," Wendell Cox, principal at Demographia, and Hugh Pavletich, wrote in the report. "Urban containment has been associated with up to nearly 87 per cent of house price increases."
Hong Kong remained the most expensive housing market among those surveyed, with homes costing 13.5 times income, up from 12.6 a year ago. Australian homes became more affordable, at 6.5 times income compared with 6.7 times 12 months earlier.
In Australia, a 0.4 per cent decline in home prices in the nation's biggest cities in 2012 contributed to the increase in affordability. Prices of detached houses in the nation fell 0.5 per cent during the year, while apartment values rose 0.5 per cent, Brisbane-based researcher RP Data said.
"Rising incomes and flat or declining house prices improved the median multiples in Australia's major markets," Cox and Pavletich said. "However, each of the five major markets continues to be severely unaffordable, reflecting vastly overpriced housing."
Vancouver was the most expensive major city after Hong Kong, with the median home price at 9.5 times income, followed by Sydney, with a median multiple of 8.3.
The US had the 32 most affordable major metropolitan housing markets, led by Detroit, Atlanta and Cincinnati.