Focus must be on fringe land supply

MEDIA RELEASE

DEMOGRAPHIA www.demographia.com

22 January 2007

“Housing Affordability: Focus must be on fringe land supply” – Demographia

The 2008 4th Edition Demographia International Housing Affordability Survey released ( Media Release ) yesterday, found that of the 227 urban markets surveyed - housing in New Zealand and Australia is the most expensive in the Anglo world. Of the urban markets surveyed, New Zealanders and Australians can expect to pay 6.3 times their annual earnings to house themselves. For the British, 5.5 times, the Irish 4.7, the Americans 3.6 and the Canadians 3.1 times annual household earnings.

To rate as “affordable” – an urban market must achieve an affordability level at or below 3 times annual household earnings, as is currently the case in 59 North American urban markets (refer Table 5, Page 11, Demographia Survey). Most urban markets of North America, Australia and New Zealand were affordable or near affordable in earlier decades.

“The international evidence is now abundantly clear that strangling fringe urban land supply is the core problem” said Hugh Pavletich, co author of the Annual Demographia Surveys, adding “The only issue now is in how best to deal with this artificially created political problem, on a phased basis over a realistic time frame”.

The fringes act as a “supply vent” or “inflation vent” of an urban market – and if land supply is restricted – the prices are inflated, which in turn ripples through to the rest of the urban market.

To achieve “affordability”, urban markets must be able to supply acceptable starter housing on the fringes at 2.5 times the median income of particular markets – as illustrated within the recent Demographia Sydney & Dallas Fort Worth Fringe Starter Housing Cost Comparison Study . where on the fringes of Dallas Fort Worth, new starter homes of 200 square metres on 500 square metre lots is being supplied at $US140,000, some $US30,000 for the lot and $US110,000 for the actual house construction.

For Australia and New Zealand to restore housing affordability, new fringe starter homes must be supplied at these figures over a reasonable and realistic period of time.

“The evidence is staring us in the face –but sadly - some are still in a state of denial” said Mr Pavletich, adding “It’s about time they put up real figures to prove us wrong, instead of persisting in talking romantic drivel. The issue is too serious for that nonsense”.

For further information contact –

Hugh Pavletich Co author – Annual Demographia International Housing Affordability Survey www.demographia.com Christchurch New Zealand Tel +64 3 343 9944

Background Information –

(1) Editorial: Housing solution lies in tax - 22 Jan 2008 - Opinion, Editorial and reader comments from New Zealand and around the World - nzherald (2) Prime Minister takes issue with house-cost findings - 22 Jan 2008 - Residential property news - NZ Herald (3) Scoop: Labour should hang head in shame over housing – Mr Phil Heatley, New Zealand National Party Housing Spokesman. (4) Scoop: New Zealand Lifestyle Block Mythology . A useful guide in gauging whether we have sufficient land in New Zealand. It is extremely important to clearly understand “fact” from “fiction” on this issue. (5) Hugh Pavletich will be releasing a paper “Getting Performance Planning in Place” by the end of February. This will build on his recent Open Letter to New Zealand Housing Minister . (6) Note to Media: Use of the Tables and Graphs (and any other information for that matter) contained within the Demographia Survey – with attribution - is encouraged.

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