By: Mike Martin
You might have heard some grumblings about housing affordability recently. It’s obviously true that we’ve come to the end of a period of significant rise in the value of our housing stock and for some the increased asset value is good, but for others it has meant that buying their own home has become a goal with a far longer timeframe, or it might be unattainable.
So, how do you measure affordability, and how do you compare it? Have a look at this study, which looks at housing affordability across North America, Australia, New Zealand and Hong Kong.
This study creates an affordability measure called the “median multiple”. They divide median house price by gross annual median household income for a variety of metropolitan areas (if you could spend all your gross household income on buying an average house, how many years would it take? – of course you can’t because you’ve got to eat, pay tax, rates etc).
Perhaps unsurprisingly, Hong Kong is the worst location with a median multiple of 11.4. The Aussies don’t fare too well, with Sydney (9.6) and Melbourne (9.0) appearing up the top of the list.
Auckland gets a 6.4 and Christchurch has 6.0 (please note that anything above a 5 is Severely Unaffordable).
The study indicates that one of the drivers of unaffordability is restrictive land use regulation. The recent move to define metropolitan urban limits to curtail urban sprawl, while driven by the desire to create more sustainable communities, has restricted supply to the housing market and this has driven up prices.
So, what’s the solution?
I think that first of all we need to decide if we think housing affordability is important and that decision lies at a city or even national level. Then it’s a matter of making more land available to the market by rezoning processes.
However, we do need to keep sustainability in mind so establishing more dormitory suburbs is perhaps not the way ahead. Instead we should build areas with a range of land uses so that people can live, work and play in their part of town without constant commuting.