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Affordability of Housing: Concepts, Measurement and Evidence
New Zealand Treasury Working Paper 06/03
Published March 2006
Authors: Mark Robinson, Grant M. Scobie and Brian Hallinan
There has recently been widespread public debate and media attention around housing affordability. This paper discusses the concept of affordability as it applies to housing, examines the approaches used to measure affordability, and then documents the aggregate evidence for New Zealand over the last twenty years. We largely use the Household Economic Survey conducted by Statistics New Zealand to obtain our data. We conclude that affordability is difficult to define and that there is no consensus as to the best way to measure it. Using a range of measures, we examine the trends over time. Our data reveals no long-term trend in affordability when considering all measures. Different measures show different movements over time. Affordability has appeared to move in cycles over the last twenty years.
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twp06-03.pdf (841 KB)
pp. 1–46
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Figure 1 – Proportion of total households spending more than a given percentage of net household income on housing costs
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Figure 2 – Proportion of low-income households spending more than a given percentage of net household income on housing costs
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Figure 3 – Proportion of households with equivalised residual household income below budget thresholds
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Figure 4 – Ratio of average rent to average income
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Figure 5 – Ratio of prospective mortgage payments to average net household income
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Figure 6 – AMP Home Affordability Index; ratio of prospective mortgage payments to average net household income
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Figure 7 – Ratio of prospective mortgage payments to income; LQ house price & 20th percentile gross individual income
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Figure 8 – Proportion of home-owning households spending more than a given percentage of net household income on housing costs
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Figure 9 – Proportion of home-owning low-income households spending more than a given percentage of net household income on housing costs
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Figure 10 – Ratio of median house prices to annual average income
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Figure 11 – Average house price to average gross individual income ratios, 2005, by Regional Council
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Figure 12 – Proportion of households spending more than 25% of disposable income on housing costs, by household type
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Figure 13 – Proportion of households spending more than 25% of their household disposable income on housing costs, by ethnicity
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Figure 14 – Median house price, average household income, interest rates
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Figure 15 – Average incomes and housing expenditure
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Figure 16 – Households spending more than some proportion of disposable income on housing costs, under different policy regimes
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Figure 17 – Low-income households spending more than some proportion of disposable income on housing costs, under different policy regimes
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Figure 18 – Ratio of prospective mortgage payments to average net household income, under different policy regimes
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Figure 19 – House prices, annual percentage change; New Zealand, UK, Australia
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Figure 20 – NZ ratio of average house price to average net household income; UK ratio of average house price to average gross individual income
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Figure 21 – ratio of prospective mortgage payments to income; indexed for UK
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Figure 22 – Northland TLAs
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Figure 23 – Auckland TLAs
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Figure 24 – Waikato TLAs
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Figure 25 – Bay of Plenty TLAs
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Figure 26 – Hawke’s Bay TLA
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Figure 27 – Taranaki TLAs
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Figure 28 – Manawatu-Wanganui TLAs
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Figure 29 – Wellington TLAs
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Figure 30 – Tasman/Nelson/Marlborough
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Figure 31 – West Coast TLAs
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Figure 32 – Canterbury TLAs
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Figure 33 – Otago TLAs
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Figure 34 – Southland TLAs
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Acknowledgements
Tony Booth, Matthew Bell, Arthur Grimes and Gareth Kiernan were very helpful with the provision and analysis of data. The authors are also indebted to colleagues at the Treasury for their assistance, in particular to Hauraki Greenland and Roger Hurnard who provided useful suggestions, and to Graham Parkin of Housing New Zealand who provided a constructive review.
Disclaimer
The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the author(s). They do not necessarily reflect the views of the New Zealand Treasury. The Treasury takes no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.
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