Quote:

 

The 2012 8th Annual Demographia International Housing Affordability Survey covers the 325 urban markets of the United States (211); United Kingdom (33); Canada (35); Australia (32); New Zealand (8); Ireland (5) and Hong Kong in China (1).

The Annual Demographia International Housing Affordability Survey’s rate housing affordability, based on the Median Multiple – that is, the median house price divided by the gross annual median household income of specific urban markets, for the 3rd Quarter of the previous year.

The “median multiple” is a robust measure - essential for the basic understanding of the structural health (or otherwise) of a specific urban market.

If housing prices exceeds 3.0 times annual household income (Median Multiple), it illustrates that there are serious political impediments that need to be addressed, to the normal supply of new housing on the fringes of the specific distressed urban markets.

The fringes of an urban market are the only effectively responsive supply or inflation vent.

If normal supply is not allowed due to political interference, artificial scarcity pricing ensues, causing housing bubbles to erupt – and then collapse – creating unnecessary social and economic hardship and disruption.

In future years, the Demographia International Housing Affordability Survey will be expanded to other countries and urban markets, as more robust data becomes available.

Normal healthy urban markets, where housing is at or below 3.0 times household incomes are rated “affordable”; 4.0 times and below “moderately unaffordable”; 5.0 times and below “seriously unaffordable” and above 5.0 “severely unaffordable”.

The Survey Schedules provide detail of specific urban markets gross annual median household income, median house prices – and from this, the important Median Multiples.

While Hong Kong is the most severely unaffordable housing at a staggering 12.6 Median Multiple (the highest ever recorded within the history of the Surveys) – Australia with its abundant land supply has the most pervasive housing affordability problem (5.6 MM); followed by New Zealand with a small population of just 4.4 million (5.2 MM); the United Kingdom (5.1 MM); Canada (3.5 MM); Ireland with its housing bubble collapsing (3.4 MM) while the United States overall is affordable (3.0 MM).

Large swathes of middle North America did not experience urban governance and planning failure and unnecessary housing bubbles through this past decade. They remained throughout, healthy and normal housing markets (other than some within the “rust belt”).

Normal healthy urban markets through the building cycle, should oscillate within the 2.0 to 3.0 Median Multiple range. Generally (unless there is serious over production of new stock, such as the open market of Atlanta), it indicates a distressed urban market experience severe economic adversity, if it falls below the 2.0 Median Multiple.

The Introduction to this year’s Survey is contributed by Robert (Bob) Bruegmann PhD, Professor Emeritus of Art History, Architecture and Urban Planning, University of Illinois at Chicago and author of the widely acclaimed Sprawl: A Compact History and numerous other works.

Nothing in the world today affects citizens more directly than the home in which they live. And when it comes to housing no piece of recent research opens more interesting avenues of investigation than the Demographia International Housing Affordability Survey.

Given the fundamental importance of housing in all societies, it is remarkable how little we know about the results of housing policies in various parts of the world. In my own field of architectural and urban history, for example, even if you were to ask some of the greatest experts to compare what an average house or apartment unit in any two given cities looked like at some date in the past or even the present, what it would cost to buy and to operate and what regulations would affect them it is very unlikely the individual would have more than rudimentary hunches.

Historians can tell you in great detail about the palaces, townhouses and country estates of the powerful and wealthy, then and now, and at some of the efforts at reform housing by the government or charitable organisations, but at least until recently, the lack of information about how and where ordinary individual’s live has been remarkable.

It was against this backdrop that the appearance, for 2005, of the first international housing affordability survey by Wendell Cox and Hugh Pavletich (a Christchurch, New Zealand based retired commercial property developer and former industry leader who runs the Performance Urban Planning website – Editor) was such a revelation. It provided some of the most reliable information ever compiled for those who wished to compare nations around the world with quite different housing policies. Cox and Pavletich had their own point of view. It is fair to say that both of them tend to favour market solutions to many of the most difficult questions about housing, and how it is allocated and regulated, but their compilation of data, like the data found on Cox’s demographia com website generally, can stand on its own as one of the most impressive and reliable collections of comparative urban statistics to be found anywhere.

Bruegmann continues - explaining how “Smart Growth” type policies triggering the recent housing bubbles, were the primary motivation by the authors in getting these Annual Survey’s underway and that growing numbers of people agree with the Survey findings. And too - that the often “well meaning” policies that created these problems, need to be reconsidered.

Florida leads the way.....

During 2011, following the collapse of its massive housing bubble where prices inflated to double the norm, Florida repealed it's "growth management" law . This has been an important initiative by Florida Governor Rick Scott . Florida has a population in excess of 19,000,000 . Florida’s population growth is now restored and it is currently the second highest of the States within the United States.

There is no mystery about affordable housing.....

Based on the international evidence, Demographia International Housing Affordability Survey co author Hugh Pavletich of Performance Urban Planning , provides the following definition of an affordable housing market –

For metropolitan areas to rate as “affordable” and ensure that housing bubbles are not triggered, housing prices should not exceed 3.0 times gross annual household incomes. To allow this to occur, new starter housing of an acceptable quality to the purchaser’s, with associated commercial and industrial development, must be allowed to be provided on the urban fringes at 2.5 times the gross annual median household income of that urban market (refer Demographia Housing Survey Schedules for guidance on specific urban markets).

The fringes are the only sufficiently responsive supply or inflation vent.

The critically important Development Ratio’s for new fringe starter housing, should be 17 – 23% serviced lot / section cost- the balance the actual housing construction.

Christchurch earthquakes – the costs of poor governance.....

Survey co author Hugh Pavletich resides in Christchurch, a small urban market with a population of approximately 370,000 people on the South Island of New Zealand. Since the first earthquake event September 4, 2010 (near some 17 months ago), Christchurch has experienced over 9,500 aftershocks.

As this year’s Survey illustrates, this small urban market is “severely unaffordable” at 6.3 Median Multiple (in contrast New Orleans where “Hurricane Katrina” struck August 2005, is 3.3 Median Multiple). Christchurch was already “on its knees” in development / construction terms at the time of the first earthquake event, due to a seriously dysfunctional Local Authority that in deliberately withholding fringe land supply, allowed a housing bubble to get underway in 2002.

Because Christchurch NZ land prices are artificially grossly inflated, the small urban market is still unable to get a recovery underway. Pavletich has written extensively on this serious issue – most recently Christchurch Earthquake Recovery: The Political Circus.

The “sorry situation” of Christchurch, clearly illustrates the huge and unnecessary risks and costs urban markets have to endure, when urban governance and planning fails and housing becomes severely unaffordable. Citizens have tired of the bureaucratic “top down” approach and a dysfunctional Local Authority, where there is now growing citizens concern being expressed.

Policymakers, researchers and media internationally, need to research the Christchurch situation, with urgency, to ensure other urban markets going forward, have the resilience, flexibility and affordable housing, so that they better cope with adversity.

Quote:

 

Prices drop but houses still up on global list

Chris Zappone
January 23, 2012



HOUSING affordability improved in Australia last year, according to an annual international ranking, but local real estate still remains some of the least affordable in the world.

Australia's national unaffordability ratio sank from 6.1 times in 2010 to the still ''severely unaffordable'' ratio of 5.6 times, helped by sinking home prices, according to analysis by a US research group.

''Australia exhibited the worst housing affordability of any national market outside Hong Kong,'' the eighth annual Demographia International Housing Affordability survey of 325 markets concluded. The unaffordability ratio is derived from dividing the median house price by the median household income.

Demographia considers a median multiple rating of three times or under to be ''affordable''.

Read more: http://www.smh.com.au/business/property/prices-drop-but-houses-still-up-on-global-list-20120122-1qc99.html#ixzz1kFP8hkuO

Quote:

 

Vancouver Is Second-Costliest Housing Market

By Hui-yong Yu - Jan 22, 2012 9:00 PM ET

Vancouver’s median home price of C$678,000 ($686,400) in the third quarter was 10.6 times its median pretax household income of C$63,800, making the city “severely unaffordable,” according to Demographia. Photographer: Brent Lewin/Bloomberg

Vancouver displaced Sydney as the least-affordable housing market after Hong Kong among large English-speaking cities, as home prices rose faster than incomes, a study of 325 metropolitan areas worldwide showed.

Vancouver’s median home price of C$678,000 ($686,400) in the third quarter was 10.6 times its median pretax household income of C$63,800, making the city “severely unaffordable,” Demographia said in a report today. A ratio of 3 or less is considered “affordable,” according to the public-policy firm’s survey of markets in Australia, New Zealand, Ireland, the U.K., the U.S., Canada and Hong Kong.

Sydney’s ratio of median home price to income was 9.2, while Hong Kong’s was 12.6, a record for the eight-year-old survey, surpassing the previous high of 11.5 for Los Angeles in 2007. Home prices in Hong Kong, Vancouver and Sydney haven’t plunged as they have elsewhere, such as in Ireland, now the second most-affordable country, after the U.S., the study said.

“Housing affordability generally improved in the surveyed nations, though the most unaffordable markets, Hong Kong and Vancouver, became even more unaffordable,” wrote Wendell Cox, principal of Belleville, Illinois-based Demographia, and Hugh Pavletich, managing director of Pavletich Properties Ltd., a commercial developer and investment company in Christchurch, New Zealand.

Policies limiting lots available for construction drove up land prices, putting homes out of reach for middle-class buyers and younger workers in cities such as Vancouver and Sydney, the researchers said. The median price of a detached house in metropolitan Vancouver reached a record C$900,000 in April 2011, according to the Real Estate Board of Greater Vancouver.
‘Massively Deteriorating’

“The causes of massively deteriorating housing affordability are not a mystery,” Cox and Pavletich said. “They inevitably result from more restrictive land-use regulations adopted by governments with insufficient attention to economic fundamentals.”

The study focuses on the home-affordability ratio, not absolute prices. It doesn’t take into account such influences as falling interest rates, an influx of foreign buyers or the attractions of climate and coastal location.

“There’s no question if you want to live in Manhattan or in a nice, close-in suburb, it’s going to cost you more,” Cox said in a telephone interview. “Demand doesn’t drive up prices. Demand drives up prices if there are constraints in supply, and the cause here is regulation.”
Bubble Bursting

Home prices in the eight capitals of Australia’s states and territories fell 3.7 percent in 2011 through November and were on pace for the biggest annual decline in at least 12 years on concerns that Europe’s debt crisis may damp the nation’s economic growth, according to figures released Dec. 30 by RP Data, a real estate researcher.

“The bubble is bursting in Australia,” said Pavletich, who operates PerformanceUrbanPlanning.org, a website on urban public-policy issues.

In New Zealand, Christchurch is “severely unaffordable,” with a ratio of 6.3, according to the study. The city is rebuilding after a series of earthquakes that started in 2010.

“There’s huge pressure on the government to open up land supply and get affordable new lots,” said Pavletich, who is an advocate for the effort.

From the end of World War II through the late 1980s, homes in the countries surveyed generally cost two to three times median income, according to Demographia. Today, only the U.S. is affordable by the study’s measure, with Ireland and Canada “moderately unaffordable,” at 3.3 and 3.5 times median income, respectively.

Read more: http://www.bloomberg.com/news/2012-01-22/vancouver-displaces-sydney-as-second-costliest-housing-market.html

Quote:

 

Sydney and Melbourne among the five least affordable cities in the world: Demographia

By Larry Schlesinger
Monday, 23 January 2012

Housing affordability has improved marginally in Australia over the past year, according to the Eighth Annual Demographia International Housing Affordability Survey, but still remains “severely unaffordable” due to restrictive land release policies on city fringes.

Australia's national unaffordability ratio declined from a median multiple of 6.1 (median house price compared to median household income) in 2010 to the still “severely unaffordable” ratio of 5.6 in 2011. The analysis was done by the self-titled “anti-urban research planning group” of 325 metropolitan markets in Australia, Canada, Hong Kong, Ireland, New Zealand, the UK and the US.

According to Demographia, to ensure housing bubbles are not triggered, housing prices should not exceed three times gross annual household incomes.

“To allow this to occur, new starter housing … must be allowed to be provided on the urban fringes at 2.5 times the gross annual median household income of that urban market,” it says.



Of the 32 Australian housing markets rated by Demographia, none rate as affordable (a median multiple of 3 or less) or moderately affordable (median multiple of 3.1 to 4).

Seven rate as seriously unaffordable (4.1 to 5) with 25 rating as severely unaffordable (more than 5.1).

The report is typically controversial, with local housing pundits claiming its measures of affordability are inaccurate.

However, Hugh Pavletich, who co-author’s the report with Wendell Cox, rejects the criticism and says the survey methodology is a measure recommended by the United Nations and World Bank Urban Indicators Programs and employed by Harvard University's joint centre for housing.

Sydney remains Australia’s most unaffordable housing market with a median multiple of 9.7. It has fallen below Vancouver and is now ranked the third most unaffordable major housing market in the world, with Melbourne ranking fourth. The list is topped by Hong Kong, with a “staggering” median multiple of 12.6.

Adelaide had a median multiple of 6.7, despite being the major market with the lowest demand in the nation. Brisbane (6) and Perth (5.7) are also well above the severely unaffordable threshold.

“Like Sydney, each of these markets has more restrictive land use regulation and has seen its housing affordability deteriorate markedly,” the report says.

“Housing affordability has improved substantially in Perth since 2006, when the median multiple was eight. However, Perth remains severely unaffordable.”

Each of Australia's major markets, with the exception of Sydney had housing affordability within the median multiple norm of 3 during the 1980s.

The five most unaffordable major housing markets (population of more than 1 million)

The seven most affordable markets are all regional locations, apart from one, the federal capital Canberra, which has a multiple median of 4.9.

The six other markets are Mildura and Shepparton in Victoria (4.2), Launceston in Tasmania (4.5), Bunbury in Western Australia at 4.6, Toowoomba in Queensland (4.7) and Albury-Wodonga on the NSW-Victoria border with a median multiple of 4.9.

Outside the major metropolitan areas, the most expensive markets are Coff's Harbour (NSW) at 8.4, the Gold Coast (Queensland) at 7.6, the Sunshine Coast (Queensland) at 7.5 and Geelong (Victoria) at 7.1.

The US-based organisation run by Wendell Cox, blames housing affordability problems in Australia, New Zealand, the UK and Ireland on restrictive land release policies

“Australia with its abundant land supply has the most pervasive housing affordability problem In recent decades, housing affordability has deteriorated materially across Australia, Ireland, New Zealand and the United Kingdom, virtually without regard to market size or demand,” says Demographia.

“The causes of massively deteriorating housing affordability are not a mystery. They inevitably result from more restrictive land use regulations adopted by governments with insufficient attention to economic fundamentals.

“This occurs even as virtually all governments profess housing affordability as an important public objective. Where land is rationed (by more restrictive land use regulation), house prices will rise. Thus, where house prices have increased substantially, they have been preceded by more restrictive land use regulation.”

All of the affordable major markets are in the US, while three of the moderately unaffordable markets are in Canada. One of the moderately unaffordable markets is in Ireland, with the other 16 in the United States.

The most affordable major market is Detroit, with a multiple of 1.6. Atlanta is the second most affordable, with a multiple of 1.9.

The most affordable major metropolitan markets outside the US is Dublin, with a multiple of 3.4, and Edmonton in Canada, with a multiple of 3.5.

Read more: http://www.propertyobserver.com.au/residential/sydney-and-melbourne-in-the-top-five-least-affordable-cities-in-the-world-demographia/2012012353110

Shadow

23 Jan 2012, 03:33 PM

Demographia debunked here... http://australianpropertyforum.com/topic/8368369

b_b

23 Jan 2012, 03:42 PM

Shadow,

I have not read the latest Survey - have they addressed any of your issues in the latest publication?

Shadow

23 Jan 2012, 03:49 PM

No... for example...

They claim Sydney median gross household income is $69K (the true figure is much higher)

They claim Sydney median dwelling price is $638K (the true figure is much lower)

So as usual they are massively overstating the price/income ratios in Australia.

Still, the bears on Macrobusiness and similar sites will lap it up without questioning the figures.

The same issues that existed in all previous Demographia surveys are still there. Basically, Demographia invents ridiculously low income figures for each Australian city (their income figures don't match any official source). Then they take the median freestanding house price for each Australian city (omitting units and townhouses) to come up with an inflated median dwelling price. Divide one by the other and you have a hugely inflated price/income ratio.

Shadow

23 Jan 2012, 03:49 PM

No... for example...

They claim Sydney median gross household income is $69K (the true figure is much higher)

They claim Sydney median dwelling price is $638K (the true figure is much lower)

So as usual they are massively overstating the price/income ratios in Australia.

Still, the bears on Macrobusiness and similar sites will lap it up without questioning the figures.

The same issues that existed in all previous Demographia surveys are still there. Basically, Demographia invents ridiculously low income figures for each Australian city (their income figures don't match any official source). Then they take the median freestanding house price for each Australian city (omitting units and townhouses) to come up with an inflated median dwelling price. Divide one by the other and you have a hugely inflated price/income ratio.

Shadow

23 Jan 2012, 03:49 PM

b_b

23 Jan 2012, 03:42 PM

Shadow,

I have not read the latest Survey - have they addressed any of your issues in the latest publication?

No... for example...

They claim Sydney median gross household income is $69K (the true figure is much higher)

They claim Sydney median dwelling price is $638K (the true figure is much lower)

So as usual they are massively overstating the price/income ratios in Australia.

Still, the bears on Macrobusiness and similar sites will lap it up without questioning the figures.

The same issues that existed in all previous Demographia surveys are still there. Basically, Demographia invents ridiculously low income figures for each Australian city (their income figures don't match any official source). Then they take the median freestanding house price for each Australian city (omitting units and townhouses) to come up with an inflated median dwelling price. Divide one by the other and you have a hugely inflated price/income ratio.

Aussiehouseprices

23 Jan 2012, 04:12 PM

Shadow, do you have any idea where they are getting the median income from?

Quote:

 

Also, they refer to house prices, not dwelling price, so is it maybe it's OK that they exclude units and town houses? Are they consistent across countries?

Aussiehouseprices

23 Jan 2012, 04:12 PM

Shadow, do you have any idea where they are getting the median income from?

Also, they refer to house prices, not dwelling price, so is it maybe it's OK that they exclude units and town houses? Are they consistent across countries?

Any idea why they would want to skew the figures? They seem to have some vested interest - but I can't work out what it is.

hoofarted

23 Jan 2012, 04:43 PM

Yawn. You are like a stuck record. Why do you care so much?