New Zealand and Australia have the worst housing affordability

The 2008 Demographia Housing Affordability Survey rates the housing affordability situation of 227 urban markets of the United Kingdom (28 markets), Republic of Ireland (6), Canada (29), the United States of America (129), Australia (28) and New Zealand (7).

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 recognised standard of “acceptable affordability” is that house prices should not exceed three times annual household incomes.

Demographia used the basis that:
houses that are three times annual household income or less are “affordable”;
houses that are four and less “moderately unaffordable”;
houses that are five and less “seriously unaffordable”
houses that are over five times household incomes “severely unaffordable”.

Results
Overall, New Zealand and Australian urban markets have the worst housing affordability at 6.3 times annual household earnings, followed by the United Kingdom at 5.5 times, 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, and a 100% 30-year mortgage, 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). For Australians the figure is 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”.

Mr 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 Mr Pavletich.