City rebuild queried; house prices too high
MICHAEL DALY
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Christchurch Earthquake 2011
A day for Christchurch to remember
Difficulties in rebuilding Christchurch are an example of failed urban governance and planning, a new survey shows.
The eighth annual Demographia International Housing Affordability Survey looks at housing affordability in 325 urban markets in the United States, Britain, Canada, Australia, Ireland, Hong Kong and New Zealand.
A market is considered unaffordable where the median house price exceeds three times the gross annual median household income.
New Zealand had a figure, known as the median multiple, of 5.4. Auckland had 6.4, Christchurch 6.3, Tauranga-Western Bay of Plenty 5.9, Dunedin 5.2, Wellington 5.1, Palmerston North 4.1, Napier-Hastings 4.8 and Hamilton 4.8.
The survey supports more relaxed land-use planning rules than those prevailing in many of the cities it covers.
Co-author and Christchurch resident Hugh Pavletich said that for metropolitan areas to rate as affordable and ensure housing bubbles were not triggered, housing prices should not exceed three times gross annual household incomes.
For that to happen, new starter housing of an acceptable quality to buyers, with associated commercial and industrial development, must be allowed on the urban fringe at 2.5 times the gross annual median household income of that market.
Pavletich believes the Christchurch earthquakes will before long lead to "profound" changes in urban governance and planning in this country and elsewhere.
The 2012 survey said recovery in Christchurch had been delayed because authorities had failed to release affordable fringe land.
A statement accompanying the survey said the "sorry situation" of Christchurch clearly illustrated the huge and unnecessary risks and costs urban markets had to endure, when urban governance and planning failed and housing became severely unaffordable.
Christchurch had already been "on its knees" in development and construction terms at the time of the first quake in September 2010 because of a seriously dysfunctional local authority that, in deliberately withholding fringe-land supply, allowed a housing bubble to start in 2002.
The survey compared the 6.3 median multiple in Christchurch to the 3.3 in New Orleans, which was badly damaged by Hurricane Katrina in 2005.
New Orleans had been better positioned for recovery by its less draconian land use regulations, the survey said.
Discussing Auckland, the survey said that with nearly a third of this country's population, the city accounted for a far larger share of the national population than the largest metropolitan areas in most high-income nations.
As a result, New Zealand's competitiveness depended on the performance of its largest city, Auckland, more than was the case in other nations.
Auckland was particularly at risk because of the establishment of the super-city, which the survey said was the only single local government with sole general purpose jurisdiction over a metropolitan area of more than a million people in the high-income West or Japan.
"The proclivity of planners at the predecessor Auckland Regional Council and now the super-city has been strongly in favour of more restrictive land use regulation," the survey said.
"Because of its size relative to the nation and the lack of competition from jurisdictions within reasonable commuting distance, this is a particular risk for New Zealand."
In the introduction to the 2012 survey, Robert Bruegmann, author of Sprawl: A Compact History, said nothing affected citizens more directly than the home in which they lived.
The conclusion of Pavletich and co-author Wendell Cox that land-use policies in places such as coastal California, Britain and Australia had dramatically driven up the cost of housing, while less intrusive policies in places such as Houston had kept prices down, had been controversial, Bruegmann said.
"But I think it is fair to say that a growing number of people who have looked at the figures have tended to agree that a good many well-meaning policies involving housing may be pushing up prices to such an extent that the negative side-effects are more harmful than the problems the policies were intended to correct,'' he said.
"These observers have also noted that measures that restrict land supply, slow growth in the immediate area where the policies are in place and push up housing prices can be very attractive to individuals who already own their own homes," said Bruegmann, who is professor emeritus of art history, architecture and urban planning at the University of Illinois in Chicago.
- © Fairfax NZ News
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Number 13 is 100% on the money!
I know of 5 houseowners who were zoned red. They were living in the Eastern Suberbs and have admitted that they have been paid out a lot more for their homes and land than if they had of put them on the market and sold before the Sept quake. Hence they have purchased much newer, bigger homes in up market areas. I am not one of them, but sure feel a bit envious. So whats all the fuss? Maybe those ones thinking they are not getting a fair deal should think again.
This article was really interesting I worked out that my madly overpriced house in London is in the same zone of over valuation as Auckland and Christchurch. I know that people from my adopted part of the world that migrate to New Zealand and Australia complain bitterly about the crazy prices they have to pay for houses, which to Europeans seem like oversized garden sheds. They can't get used to the thin barely insulated walls,the flimsy roofs and the single glazed windows. All that lovely condensation running down the windows in your "mild" winters. My suggestion think the unthinkable and move to Invercargill or even better Tuatapere or Hokitika where the old economic laws almost still apply. Frankly all you need is fast broadband to live in modest comfort and civilisation. Beats living in some boring edge suburb with a mall and a car park.
To the Flynn Hatchers (#8) of the world:
Of course, an already established homeowner, buying and selling at roughly the same time, in any market (bubbular, unaffordable or otherwise) will be able to swap horses and carry on.
However, and this is the crucial point, 'unaffordability' relates to the ability to climb onto the Housing Horse in the first place. Median multiples of 6+ simply mean that a substantial number of would-be first home buyers are locked out of the housing market.
Full stop.
Arguing from one's own relatively provileged position is not a good look in these times...
Consider a worker on Chch's average household income of mid-40K. How are they to afford a house-and-land package at a minimum of, say, $300k? They'd need a deposit of 10-15% for starters ($30-45K - a year's disposable after-tax income), and will be faced with a mortgage of say $260K, on which the interest alone is over $15K at say 6%.
And the Demographia methodology is that used by the UN for housing comparisons.
But hey, if you really can blithely assert that the UN methodolgy is wrong, and that Chch is a wunnerful affordable housing market for those starting out, it's your call.
Out of my nine good mates i grew up with i am the only one left in New Zealand 8 of them have moved to Australia and 6 have bought houses,I have no intention of buying a house here as the bank will own me for at least 30 years and before you say it my partner and i both work but cannot afford to buy, not only are the low wages and high house prices forcing my generation away (i'm 34) but the younger generation openly admit that home ownership is a dream.So for all you baby boomers who bought for bugger all then think your house is valued at half a million my one question is who will buy them.Oh and who is gonna pay for your pension you have already indebted the next generation(no i'm not an occupy hippie i've worked since i was 16 but i think it might be time to move if your not willing to share the wealth)
Lou #2 have you looked at canterbury quake live lately they have fault lines marked in. Given that rangiora to Amberley are riddle with fault lines I think you should re-eveluate your idea.
@flynn#8 Who's this "we" you're talking about?
Not quite that simple. there are large fault lines directly offshore up this way, including one off Kaiapoi capable of a mag 7 (or so they keep telling us). Nowhere in canterbury is at less seismic risk than where the CBD is now. the map on canterbury quake live shows just how many faults are out there. NZ is a seismic country
To David S #4 - sorry, but I don't see CERA any better than the CCC. Roger Sutton was hired because he was such a great communicator. Go on the CERA Facebook pages and see exactly what he is NOT saying. People are still waiting for land decisions, insurers are not paying out, the EQC still have a lot of claims to settle and haven't worked out how they plan on remediating land they have made green. I disagree - CERA is also a mess and Mr Sutton may very well be a nice guy, but he is doing little (certainly not using those super powers he supposedly has).
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What it means to live in Christchurch
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NO RECOVERY UNTIL AFFORDABLE HOUSING IS SUPPLIED
To be clear, housing in Christchurch pretty much flat lined at $150,000 median house price through the 1990's through to 2002, when the bubble erupted. In 5 years through to 2007 it inflated out to about $330,000 median house price.
Go check out the excellent graph on the Councils Quick Facts website. It says it all.
Then the bubble started to fizz and by the time of the September 2010 earthquake, Christchurch was on its knees in development / construction terms. The industry people prior to this event were deeply concerned with the planning mess created by the Christchurch City Council.
On a population basis now - some 17 months later - Selwyn is getting in 5 times more new housing, Waimakaririri 6 times, than the highly dysfunctional Christchurch Coty Council area.
Christchurch is being hollowed out, as people and businesses are leaving to adjoining Counties and elsewhere within New Zealand and Australia.
With urgency, Christchurch needs -
(1) a fresh mid term Council election
(2) a replacement Council Chief Executive
(3) to abolish the central bureaucratised Council structure and replace it with a One City - Many Communities model. Get the local back in to Local Government.
Christchurch cannot start on the path of recovery, until these basic changes are put in place.
It is well past time Local Government Minister Smith and Recovery Minister Brownlee woke up - and articulated these issues clearly and effectively in the public arena. We certainly dont need any more "secret meetings" Dr Smith and PR spin from the likes of romantics such as Parker and Button rabbiting on about "leaks" when the issue is "suppression" of information