NZ homes among world's most costly

An international housing affordability study has found Auckland more pricey than Dublin, Washington DC and Melbourne - and the city is getting even more expensive.

Auckland ranks as one of the world's most costly cities, according to the Demographia International Housing Affordability Survey out yesterday. Auckland house prices are outstripped only by major international cities in the United States, Britain and Australia. Wellington and Christchurch were also ranked "severely unaffordable", based on a comparison of median house prices with household incomes.

It takes Aucklanders the equivalent of 6.6 years' full wage or salary to pay off a house, compared with those in Dublin (6 years), Washington (6.3) and Melbourne (6.4).

Cheapest out of 99 countries is Rochester and Buffalo in the US where it takes 2.2 years, Winnipeg in Canada and Indianapolis (2.4 years), and Pittsburgh and Omaha (2.5).

Out of 99 cities, Auckland ranked as 15th most unaffordable (last year 16th), Christchurch 29th and Wellington 39th.

Hugh Pavletich, a Christchurch-based author of the survey, poured scorn on the Reserve Bank's attempts to cool the market, saying it was now clear they had failed and it was time for a rethink.

With Governor Dr Allan Bollard about to review the official cash rate on Thursday, Mr Pavletich said he should give up now and acknowledge defeat.

"He's wasting his time. The land supply in New Zealand has been stuffed up," he said, referring to section supply around cities.

He wants territorial authorities who have ring-fenced cities such as Auckland and Christchurch to abolish the zoning barriers and free up large tracts of land for development.

Auckland Regional Council regional development manager Noel Reardon said Mr Pavletich had confused land and house prices. Auckland was growing fast and house construction was running at record levels.

"Auckland is one of the fastest growing cities in the Western world, with a high level of new house building not constrained by prices," Mr Reardon said. Affordability was not putting a brake on this but the ARC was concerned about housing affordability and factors which are influencing it, he said.

ASB Bank chief economist Anthony Byett said our high international ranking was influenced by relatively low incomes, the structure of property laws widely criticised by resource management expert Owen McShane, pressure for land to remain zoned rural because so much was fertile and the force of foreign buyer interest.

National average house prices have risen 83 per cent since 2001 but wages and house prices would be more closely aligned soon, he predicted.

"Some of this unaffordability will be corrected when house prices stabilise for a year or two and incomes continue to increase," Mr Byett predicted.

Darren Gibbs, chief economist at Deutsche Bank, said even faced with higher interest rates, New Zealanders were not demonstrating that they found housing unaffordable.

Robin Clements, economist at UBS New Zealand, agreed with Mr Pavletich and called for councils to relax zoning restrictions and free up more land around major cities.

Number of years' full income to buy a house:
Los Angeles 11.2
San Diego 10.8
Honolulu 10.6
Sydney 8.5
New York 7.9
London 6.9
Bristol 6.8
Auckland 6.6
Christchurch 5.9
Wellington 5.2
Pittsburgh 2.4
Buffalo 2.2

Reading the numbers:
The survey rates the affordability of 100 major urban property markets in six nations. The authors identify the median household income and the median house price of individual urban areas and express the affordability by the number of years of median household income it would take to purchase the median priced house.

This is termed the "median multiple". Using this approach gives Auckland a figure of 6.6 years. Los Angeles rates an astronomical 11.2. Authors of the Demographia International survey say the approach provides standardised comparisons of affordability, within nations and internationally.

They argue that well-governed urban markets should have a median multiple of three or less - anything more they say is unaffordable or out of reach of most home buyers.