Affordability of housing study ‘too simplistic’
AN INTERNATIONAL survey that classed housing in New Zealand’s main centres as ‘‘severely unaffordable’’ has been criticised by a property investor group as being ‘‘too simplistic’’.
The 10th annual Demographia International Housing Affordability Survey classified Auckland, Christchurch, Tauranga-Western Bay of Plenty, Wellington and Dunedin as ‘‘severely unaffordable’’.
The survey uses a median multiple to determine the affordability rating of houses that is calculated by dividing a region’s median house price by the median income. Regions with house prices more than three times the median regional income are deemed unaffordable.
Overall, New Zealand had a median multiple of 5.5, or nearly twice the affordable price level, Demographia said.
But New Zealand Property Investors Federation executive officer Andrew King said the survey was too simplistic.
A more accurate measure of housing affordability could be derived by comparing the average annual cost of owning a home with the national median income, he said.
King said that a commonly accepted guideline for housing affordability was a housing cost that did not exceed 30 per cent of a household’s gross income.
Using the national median house price of $425,000, less a 20 per cent deposit, and assuming a mortgage interest rate of 5.75 per cent, King calculated the average cost of owning a house at $30,390 a year, including $4700 a year for insurance, rates, maintenance and other expenses.