Solving affordability in Auckland: A slew of suggestions
The rising housing market has been fantastic for property investors over the past few years, but the high prices have unfortunately pushed many home buyers into the cold. In fact, a new report from Demographia has placed Auckland as one of the most unaffordable property markets in the world.
Using an income-to-mortgage ratio, Auckland has been given an affordability ranking of 9.7 – meaning that housing costs, on average, 9.7 times the median household income. Only Vancouver, Sydney and Hong Kong were ranked as less affordable.
This release has fanned the flame of debate regarding what to do about Auckland housing.
Demographia themselves have linked the restrictive land use regulations as being a major factor in many unaffordable cities, with Auckland among them. In fact, they reported that "severely unaffordable housing has occurred only in major metropolitan areas that have more restrictive land use policy".
Member for Epsom David Seymour agrees. In response to this new report, he suggested a removal of the Rural Urban Boundary for Auckland (RUB). This restriction was put in place by the Auckland Council in order to control urban expansion and plan for the future, but Mr Seymour and Demographia suggest that all it has done is artificially raise property prices.
A controlled descent
Areas such as Tauranga and Hamilton were far more affordable than Auckland by a significant degree.
The Property Institute of New Zealand has a different take, however. Ashley Church, CEO of the Property Institute, told Stuff.co.nz that rapidly reducing the price of Auckland homes would damage both Auckland investors and the economy as a whole.
His suggestions to solve the crisis would be an increase in metropolitan development, increasing wages to match property prices and perhaps more importantly, a cultural change in encouraging people to purchase first homes outside of Auckland. According to the interest.co.nz affordability report, areas such as Tauranga and Hamilton were far more affordable than Auckland by a significant degree.
What about investors?
With the current drive towards housing affordability, we may see a steadying of the Auckland market, enabling new investors and home-buyers into the area. Current investors may be disappointed in reduced gains, but Auckland is not the whole of New Zealand.
In fact, while Auckland was ranked very unaffordable, NZ housing as a whole ranked at only 5.2. As such, current investors worried about future reduction in growth might do well to find out how to unlock equity, speak to an Authorised Financial Adviser and diversify their portfolio with properties outside of Auckland.
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