New Zealand has the least affordable houses in the world.

It scores worst in an international survey of the world's six most expensive housing markets, passing Australia for the first time.

Demographia, an international survey business run by Hugh Pavletich of Christchurch and Wendell Cox of the United States, today issued its fourth annual report, showing New Zealand has slipped drastically on an international scale.

The United States, Australia, Britain, Ireland, Canada and New Zealand were studied, and the results reveal NZ house hunters face the biggest gap between earnings and house prices.

Wages are so low and house prices are so high that it takes 18 years and six months of a household's entire annual income to pay for a home, Demographia found. That measure is based on median house prices compared to median wages.

Australia had been the least affordable country of the six, but New Zealand has overtaken it, partly because of high mortgage interest rates.

But in Aucklanders are no longer the worst-off New Zealanders. Tauranga is now the country's most expensive city compared to its wages, ranking 20th of 227 cities in the survey, followed by Auckland in 31st place and Christchurch in 34th.

"New Zealand has the highest-cost housing among the surveyed nations in relation to incomes. It also has the highest interest rates," the study said.

Houses in Los Angeles remained the world's most expensive, and California was the most expensive area.

The most affordable houses are in Canada's remote Thunder Bay, followed by Youngstown in Ohio and Fort Wayne in Indiana.

Demographia's authors say town planners should solve New Zealand's housing crisis by freeing more land on city fringes.

Mr Pavletich and Mr Cox cited former National leader Don Brash, who in an introduction to the study called for the abolition of urban limits.

"Despite all the evidence, governments continue to pretend they are powerless to make housing more affordable or, worse still, implement futile interventions which make the situation worse as the New Zealand Government is proposing," Dr Brash said.

He was referring to Housing Minister Maryan Street's Housing Affordability Bill, which would require developers to include cheap houses in new estates or to make compulsory gifts of money or land to councils.

The bill, introduced to Parliament last month, aims to stimulate the provision of affordable housing for first home buyers and low-income families.

But the Property Council and Master Builders Federation say the proposed law would push up the cost of houses. Other homebuyers would pay the price as developers put up the cost of mid- and upper-range homes to compensate for profits lost in building the cheaper homes for first-time buyers.

Real Estate Institute national president Murray Cleland said he was shocked to hear of New Zealand's ranking. First home buyers were being hardest hit.

He said tax rates were too high - "and that's an area that needs to be looked at" - but territorial authorities also had to take a good share of the blame.

Councils had restricted land supply unnecessarily at a time when people desperately needed more sections for building.

"You look at small provincial towns where the councils have freed up land - it's been swept up."

As well, exorbitant council fees and charges were making new housing developments unaffordable.

"A large part of this problem is the cost of getting building permits," Mr Cleland said.

Property Council national director Connal Townsend said yesterday he was not surprised by the Demographia survey and he criticised the Auckland Regional Council for its growth policy which restricted city limits.

No one wanted urban sprawl, he said, but "if people can't afford to live in the city, what's the point of the policy?"