Affordability – April 2018

Australian Market Update:

Property prices in many state capitals now rank among some of the world’s priciest, with Australia’s five biggest cities named as ‘severely unaffordable’, according to Demographia, an international housing affordability think tank. In its 2017 annual report, the group ranked Sydney the world’s second least affordable city, with house prices almost 13 times higher than the median household income.

Sydney came in only behind Hong Kong, where property prices are about 20 times higher than median household income. Melbourne ranked fifth (9.9 times household income), Adelaide ranked 16^th (6.6), Brisbane ranked 18^th(6.3) and Perth also made the top 25, coming in at number 21 (5.9). Also in the list of top 10 least affordable housing markets were Vancouver, San Jose, Los Angeles, Honolulu, San Francisco, Auckland and London.

Australian housing experts have varying opinions on the extent of the situation. CoreLogic’s research director Tim Lawless disagreed with Demographia’s findings on just how expensive Australian property prices had become.

He believes Sydney dwelling prices are nine times more than median household income, Melbourne’s are 7.5 times higher and other Australian capitals are slightly lower than Demographia’s data reported.

“Regardless of the difference in readings, affordability is pretty tough in Australia, particularly Sydney,” Mr Lawless said. However, he contends that Demographia’s measurement formula skews the message unreasonably.

“The big difference in results is because Demographia uses ‘house’ price figures while CoreLogic uses ‘dwelling’ prices.” In other words, CoreLogic compares household income to the price of apartments and houses, whereas Demographia compares incomes with just house prices.

Many, however, suggest that apartments and duplexes offer pricing alternatives to standalone houses, so buyers may well have more alternatives closer to amenities, rather than being forced to move well out from city hubs in search of an affordable standalone home. Such options are also seen as taking stress of commuting channels, most of which are severely constricted in the major centres.

 

New Zealand Market Update:

In New Zealand,a trend which commenced part-way through 2017, sees the real estate market remaining sluggish with only moderate listings and fewer active buyers resulting in extended days on market for many homes but delivering real opportunities for well presented, carefully priced properties. Major recent focus has been around the Government’s  endeavours to deliver affordable housing.

This past month it was announced that 3000-4000 low cost homes are going to be built on 29ha of land at Mt Albert, sold to the crown by Auckland tertiary institute Unitec. They will be a mix of public housing, open market houses and homes purpose-built for first time buyers. Housing and Urban Development Minister Phil Twyford says it’s an opportunity to build a whole new community around Unitec and help address Auckland’s housing crisis.

The project is the first phase of the Government’s KiwiBuild programme which will deliver 100,000 affordable houses over ten years, half of which will be in Auckland.

Twyford said the Government was working with the Iwi of the NgāMana Whenua o Tāmaki Makaurau to ensure the development was consistent with their Treaty settlement. Read more about Labor’s KiwiBuild programme here.

Another innovation is the current debate in parliament over the Government’s move to enact a law change to remove the ability of property managers and landlords to charge tenants a letting fee. This, the Minister of Housing believes, will remove barriers to those with restricted savings and or income from being able to contest rental properties best suited to them. Many from the real estate industry and investor groups contend such fees are reasonable and part of the ongoing rental business model.

Irrespective, it seems likely the law will be quickly emplaced.