Demographia International Housing Affordability Survey

Posted by: Peter Coy on February 12, 2008

Sydney house.jpg
Demographia, a research firm, has just released its fourth annual international housing affordability survey, and it’s worth a look. Especially since, unlike some similar surveys, it’s free on the Internet. Click here to see it.

The survey, which compares prices with local incomes, concludes that Los Angeles is the world’s most unaffordable market. California in generally is highly unaffordable, it says, along with Hawaii, the East Coast, Australia, the United Kingdom, New Zealand, and British Columbia. Pictured above is a nice house in Sydney, Australia, from the Sydney Morning Herald.

Canadian and U.S. cities top the list of more affordable areas. Among the bigger ones that Demographia considers affordable are Atlanta, Dallas, and Ottawa.

In an introduction to the survey, Donald Brash, former governor of the Reserve Bank of New Zealand, says that “the affordability of housing is overwhelmingly a function of just one thing, the extent to which governments place artificial restrictions on the supply of residential land.” Case in point for him is Australia, which is mostly empty yet still has high house prices because of restrictive zoning laws.

The report was written by Wendell Cox, a housing consultant in Belleville, Ill., and Hugh Pavlevitch of Pavlevitch Properties Ltd. in Christchurch, New Zealand.

By the way, Pavlevitch didn’t think much of my recent cover. Here’s what he wrote in a press release:

This follows hard on the heals of the recent “floundering effort” by US Businessweek in another irresponsible headline grabber Housing Meltdown - which missed the real market drivers completely ….

Reader Comments

Chris

February 12, 2008 4:26 PM

I agree that Businessweek completely missed the subprime crisis and housing bubble like 99% of the news media. The few token cautionary articles were lost amidst a general all is well reporting bias.

That aside, Donald Brash has obviously never heard of high-rises. When land is scarce or to save land for future generations, we can always build up. Our resistance to building up could be
softened if residential high-rises where better built and conceived. So the issue is not solely about building or not but also about how and what we build.

Eric Toya

February 13, 2008 1:43 PM

Peter,
Admittedly, I did not read the whole thing, but one thing stuck out to me. The author attempts to discredit the impact of increased demand resulting from liberal mortgage eligibility by stating that mortgage standards were just as liberal in Atlanta and Houston.

What he misses is the psychology. There was already higher demand in Los Angeles than Houston. What the liberal mortgages did was allow that demand to become actual buyers. Also, as prices rose quickly in LA, demand rose with it.

In the late 90s, tech stocks rose rapidly as a result of irrational demand. Not all stocks rose irrationally, despite low barriers to buy any stock.

Toronto Condo

January 10, 2009 2:29 AM

The housing affordability crisis is of recent origin, principally over the past five to 10 years.
Median Multiples of 4.0 or more were rare before the 1990s. Median Multiples of double the
affordability standard --- 6.0 and above were virtually unheard of. Yet, today, the Median
Multiple exceeds 8.0 in a number of markets and is more than 10 in some. In Australia there has
been a marked loss of affordability over the past 10 years. In the United States, two distinctively
different market classifications have developed. The most unaffordable markets have has a doubling
of house costs relative to incomes. Ten years ago these markets were nearly as affordable as today’s
more affordable markets, which have seen little loss in affordability.
Depth of the Problem: In the most stressed markets, housing can now consume years of income
compared to just 10 years ago. For example, in San Diego the median house price relative to
incomes has risen by the equivalent of 14 years of median gross income. In Perth, 11 more years of
gross income will be required. For households in England, the toll is seven years of gross income,
and six years in Dublin. These huge additional expenditures for housing will considerably reduce
purchasing power and are likely to lead to less economic growth and job creation. Further, there is
likely to be less home ownership, especially among lower income households, which in some of the
surveyed nations are disproportionately minority. There could be even greater consequences, given
the close connection between economic growth and social cohesion.see more in Toronto Condo

fake rolex

May 11, 2009 8:52 AM

The affordability of housing is overwhelmingly a function of just one thing, the extent to which governments place artificial restrictions on the supply of residential land.” Case in point for him is Australia, which is mostly empty yet still has high house prices because of restrictive zoning laws..fake rolex

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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