Auckland's housing affordability has worsened, with the city climbing from the world's ninth most expensive city to fifth in a year.

The annual Demographia survey, released today, compares prices to incomes in 367 cities. Auckland is one of the worst in the world due to extremely high house prices coupled with moderate wages.

With a median price of $748,700, and a $77,500 median income, Auckland has a house price-wage multiple of of 9.7. Any more than 3 is classified as unaffordable by the report's authors.

Prime Minister John Key defended the housing situation in Auckland, telling Radio New Zealand the data the survey was based on could be old.


"At the very back end of 2015 [prices] started coming off, I think, certainly not rising as rapidly," he told RNZ.

"In part, it does reflect the fact that Auckland is a very attractive place to live."

Key said growing demand, strong confidence about Auckland, low interest rates and low inflation all contributed to the high prices.

"There's no question you need more supply, there's no question we're pushing things through as fast as we can."

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Report authors Hugh Pavletich, a Christchurch-based former property developer, and American Wendell Cox argue that a shortage of land drives up prices.

Don Brash, former Reserve Bank governor, said housing affordability was "[overwhelmingly] a function of just one thing: the extent to which governments place artificial restrictions on the supply of residential land".

Kim Campbell, Employers and Manufacturers Association chief executive, worries how essential workers would be able to afford to live in Auckland, with its tightly constrained geographic limits.


Mr Campbell recommended more land be freed up for building.

Teachers, nurses, firefighters, bus drivers, police officers and other key workers often could not afford to buy in Auckland, leaving the city with a grim future when it needed the next generation of key workers, he said.

House price/household income comparison (ranked from cheapest to most expensive in the world)

Property Council chief executive Connal Townsend expressed disquiet at Demographia's findings.

"The crisis is getting worse and worse. It's all about lack of supply of land which in Auckland is more than 50 per cent of the cost of a new house. ... The solution is to free up more land and free up the constraints which prevent more density."

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Steve Evans, Fletcher Building's housing chief operating officer, says a shared ownership model could be the solution.

Banks, pension funds, businesses or social services could help by owning a share of a new house, perhaps 40 per cent, he said. That would mean a $750,000 Auckland house would only require about $450,000 from the first-time buyer, demanding deposits as low as $20,000 to $50,000.

Over perhaps a decade, the first-home buyer would buy the other party out and get 100 per cent ownership.

Key worker housing schemes in London offer new homes to rent at 80 per cent or less of the typical market value and they are generally in high demand.

10-year trend for Auckland house prices vs wages

Phil Twyford, Labour housing spokesman, said that under National's policies, Auckland's housing crisis had spiralled out of control.

"They have priced young Aucklanders out of home ownership for the foreseeable future. If the Government was serious about the housing crisis it would reform the planning rules that stop the city growing up and out ... They should crack down on property speculation. And they should embark on a massive government-backed building programme to deliver huge numbers of affordable homes for first-home buyers."

NZ First leader Winston Peters said the Government was doing nothing about migration, which was contributing to housing demand. "National continues to hold the door wide open to the world, without a thought for the consequences for ordinary New Zealanders trying to buy their first home or rent a house."

Nick Smith, Minister of Building and Housing and Construction, was unavailable to comment.

Q&A: Jim Quinn, Auckland Council strategy chief
The Auckland Council strategy chief talks about the Demographia report and Auckland housing:

What is your reaction to the Demographia report showing worsening of Auckland's situation?

As an international city that is a strong economic force in New Zealand, Auckland is a thriving city and continues to be a popular place to live for both New Zealanders and migrants. Housing supply and affordability are ongoing challenges for many cities worldwide. The affordability of houses is influenced by many factors including a growing population, land supply, the cost of building materials and the allocation of infrastructure. There is no one quick fix and council is working hard in the areas we can influence.

Has the council done enough with the Housing Accord?

The Housing Accord has a target of consenting 39,000 new homes by the end of September 2016. The council exceeded the 2-year combined Housing Accord target of 22,000 new sections created and dwellings issued with building consents by 1806, and created 106 Special Housing Areas in the process where fast-track consenting can take place.

What success has there been with that accord?

In the last two years alone, through the Housing Accord and Special Housing Areas Act, the council has released around 1700ha that would not have been able to be built on for several years without SHAs. Developers are active in the SHAs and homes will be delivered faster because of them. It's also important that people understand council doesn't build houses. What it does do is enable them to be built. During this earthworks season, which began on October 1, Auckland Council expects to see around 1000ha in SHAs undergoing work in preparation for the building of new homes.

Obviously, that's not working fast enough, so what other solutions are there?

The council has a number of positive initiatives under way to help steer housing affordability in the right direction. The target aims to peg back the median house price to five times the median household income. Some of the areas identified that will help us reach 'Five by 2030' include:

• Refreshing the Auckland Plan to include 'Five by 2030' as a housing affordability target
• The Future Urban Land Supply Strategy, which makes ready 11,000ha of greenfield land available for residential development
• The establishment of Panuku Development Auckland to boost residential and commercial development of council-owned land.

We're also focusing on areas where we can reduce costs and risks to developers, improve building productivity, infrastructure and increase the supply of cheaper attached dwellings.

Read the full Demographia report here: