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News Headlines to Jan 16 2008
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Ireland among six
rich countries in September 2007 where housing was classified as
unaffordable
The
2008 4th Edition Demographia International Housing Affordability
Survey rates the housing affordability situation of 227 urban
markets of the rich countries United Kingdom (28 markets),
Republic of Ireland (6), Canada (29), the United States of America
(129), Australia (28) and New Zealand (7).
This expands on the 159 urban markets assessed in the 2007 Survey.
The method employed in assessing housing affordability is the
“Median Multiple”, where for each individual market,
the median house price is divided by the
median annual household income. The internationally recognised
standard of “acceptable affordability” is that house prices
should not exceed three times annual household incomes.
The “Median Multiple” method is recommended by the
United Nations and
World Bank.
Demographia rates urban markets on the basis that those that are
three times annual household income or less are “affordable”; four
and less “moderately unaffordable”; five and less “seriously
unaffordable” and over five times household incomes “severely
unaffordable”.
Overall – New Zealand and Australian urban
markets have the worst housing affordability at 6.3 time’s
annual household earnings, followed by the United Kingdom at 5.5
time’s, Ireland 4.7, the United States 3.6 times and Canada 3.1
times annual household earnings.
When interest costs on mortgages are added –
New Zealanders are in the worst position. Based on local
interest rates, a 100% 30 year mortgage to illustrate a
consistent example – a New Zealand
household can expect 18.6 years of income to go towards house
cost and mortgage interest (excluding rates, taxes, maintenance
and other costs); Australians 17.9 years, the British 14.1
years: the Irish 9.6 years; the Americans 8.3 years and the
Canadians 7.9 years.
Within the affordable urban markets , when
house price and mortgage interest are combined, a household in
Atlanta can expect 6.6 years of annual income, Dallas Fort
Worth 5.8 times and Indianapolis just 5.2 times annual
household income.
"The situation is absurd, considering that
when a New Zealand or Australian household buy a house, they are
paying more for the actual house than their counterparts in
Atlanta, Houston, Dallas Fort Worth and Indianapolis are paying
for their houses and mortgage interest charges combined”
said Wendell Cox, co author of the Annual Demographia Survey –
adding “Little wonder the younger generation of New
Zealanders and Australians are referred to as the “lost
generation to homeownership”.
Cox’s colleague and co author of the Annual
Survey Hugh Pavletich said that the evidence with respect to the
causes of the housing affordability crisis that too many urban
markets have inflicted on themselves - is clear, overwhelming
and irrefutable.
“With urgency - they must allow affordable
housing to be built on their urban fringes – and stop playing
games with young people’s lives” said Pavletich.
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