House prices in NZ and UK

September 13th, 2013 at 1:00 pm by David Farrar

James Weir at Stuff reports:

An upmarket, spacious McMansion in Austin, Texas, or a pokey one-bedroom flat in a Soviet-style apartment block in London.

The homes may cost the same as a median-priced home on the fringes of Wellington at about NZ$390,000, but what you get for your money is worlds apart.

And a report by “think tank” The New Zealand Initiative suggests a lack of supply and difficult planning processes are behind rapidly rising house prices in New Zealand and Britain.

Britain was a “housing quagmire” and a telling study of what not to do in housing policy, the report says.

More specifically:

Britain suffered from a strong lobby group of Nimbys (not in my back yard) led by the Campaign to Protect Rural England. Its housing market had many of the hallmarks of a Soviet planning system, the report says, with planners deciding where people could live.

The Town and Country Planning Act essentially nationalised the right of the British to develop and vested the right in the state.

That made it difficult to develop in Britain, especially in new “greenfields” sites which, as in New Zealand, meant a lack of housing supply.

“A new housing market scarcely exists in Britain,” with most of the cards left in the hands of people who already own the land and a wall of regulations set up by councils and planners that favour those who control the green spaces.

The British Planning Act was similar to New Zealand’s Resource Management Act, the New Zealand Initiative report says.

But is there a model that works to get affordable housing:

But in other places, such as Texas, houses are cheap and prices steady, which has been a factor in that state’s economic success. …

One of the report’s authors, Luke Malpass, said Texas was a good example for New Zealand to consider, especially in the way it funded infrastructure for new housing.

The state has statutory taxing authorities and the residents are the voters – essentially mini-local governments which could raise debt to pay for new infrastructure, with a maximum tax level for a defined set of services.

“It encourages master planning and mixed use,” Malpass said.

Without such a system Houston, for example, would not have been able to grow as fast as it had, because the city itself would not have had the money to pay for expansion.

That sounds a good model. The city itself should not have to pay for the infrastructure of new subdivisions – that should be borne by the new residents.

Average Texas house prices are typically about three times the average income, about half the relative levels in New Zealand.

And hundreds of thousands of people move to Texas from other states, because they can get a decent affordable family home there.

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32 Responses to “House prices in NZ and UK”

  1. wikiriwhis business (3,883 comments) says:

    The Overseas Investment Office and the Government have agreed to North American interests buying more than 27,000 hectares of New Zealand land. What a betrayal to New Zealanders – they have no thought for this country and are leaving nothing for future generations.

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  2. David Farrar (1,856 comments) says:

    Wow 27,000 hectares out of 26.8 million hectares. That’s a massive 0.1%!

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  3. Harriet (4,524 comments) says:

    “……And hundreds of thousands of people move to Texas from other states, because they can get a decent affordable family home there……”

    And tens of thousands of poor people from south east asia and the Pacific move to NZ because they can get decent WFF benefits, public housing, free healthcare, infact – an entire lifestyle on the kiwi taxpayer.

    “…….Thankfully for the country, the pork fest finishes on Sunday, so no more damage can be promised!…..”

    Yeah….right.

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  4. decanker (222 comments) says:

    DPF: “Wow 27,000 hectares out of 26.8 million hectares. That’s a massive 0.1%!”

    Wow that’s a meaningful statistic!

    And how do petrol prices compare between Texas and NZ DPF?

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  5. hj (6,370 comments) says:

    Hugh Pavletich stated on interest.co.nz that Christchurch should be a thriving city of 500,000. His sidekick Phil Best stated that NZ could and should have 40 million people; they are property developers

    Here’s what Ed Glaesrer says about Houston:
    “But Glaeser notes that there are problems with Houston’s sprawl: It takes a large amount of energy to make the area’s humid, hot climate comfortable, and the city is built around the use of cars.
    “Houston is among the five worst American metropolitan areas, in terms of its carbon emissions,” he says.
    And he acknowledges that for people who are concerned with environmental issues, Houston presents a picture that is beyond dismaying.
    “I think horrendous wouldn’t be too strong a word,”
    Glaeser says.”
    http://www.npr.org/templates/story/story.php?storyId=112896915

    although NZ Initiative don’t believe in climate change.

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  6. hj (6,370 comments) says:

    I process satellite-generated data on terrain elevation and presence of water bodies
    to precisely estimate the amount of developable land in US metro areas. The data shows
    that residential development is effectively curtailed by the presence of steep-sloped
    terrain. I also find that most areas in which housing supply is regarded as inelastic are
    severely land-constrained by their geography. Econometrically, supply elasticities can
    be well-characterized as functions of both physical and regulatory constraints, which
    in turn are endogenous to prices and demographic growth. Geography is a key factor
    in the contemporaneous urban development of the United States.
    http://real.wharton.upenn.edu/~saiz/GEOGRAPHIC%20DETERMINANTS.pdf
    http://realestateresearch.frbatlanta.org/rer/2010/06/explaining-local-supply-elasticities-quantifying-the-importance-of-space-limitations-in-housing-pric.html

    and Wendell Cox would say that wouldn’t he… he’s Wendell Cox!

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  7. mikemikemikemike (312 comments) says:

    “The state has statutory taxing authorities and the residents are the voters – essentially mini-local governments which could raise debt to pay for new infrastructure, with a maximum tax level for a defined set of services.”- are you saying we should ditch the super city model and go back to local authorities?

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  8. hj (6,370 comments) says:

    In greater Los Angeles, we are using more than 60 percent of our land for our automobiles (roads, parking lots, landscaped buffers, traffic islands, etc.). According to Christopher Alexander’s book Pattern Language, the ideal percentage of land given over to automobiles in a city with balanced transit options (that also include cars) is 19 to 20 percent of the land area.
    Examples for this can be found in those areas of Boston, Brooklyn, or Philadelphia that were built before the automobile. In these areas, four out of every five acres generate tax revenue to improve the shared infrastructure on that one remaining acre. In LA, on the other hand, only two out of every five acres create revenue. Those two acres that actually generate revenue need to support the remaining three. No wonder we can’t even keep up with our potholes.
    This structural imbalance was not felt while we were sprawling, because new growth generates new money, once. It is a well-known secret that many communities survived mostly through collecting development fees for new growth to maintain the previous one, and that worked for a while. But then we got stuck in traffic, and stopped sprawling, and observed our communities going into financial distress.
    http://archpaper.com/news/articles.asp?id=6826

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  9. hj (6,370 comments) says:

    Another tricky statistic:
    What proportion of Britain do you reckon is built on? By that I mean covered by buildings, roads, car parks, railways, paths and so on – what people might call “concreted over”. Go on – have a guess.
    … 2.27%.
    http://www.bbc.co.uk/news/uk-18623096

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  10. smttc (692 comments) says:

    hj hijacks another thread.

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  11. gazzmaniac (2,317 comments) says:

    mikemikemike – bloody good idea, the new local bodies could be small enough to compete with each other too.
    A far better option than DPF’s regional parliament wet dream.

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  12. flipper (3,575 comments) says:

    hj…
    Take your Soviet/post WW2 UK planning ideas and put your self them into isolation on Little Barrier.

    All of our housing/land development problems, can be traced directly to the application of the fatally flawed RMA, which in turn can be traced back to the UK town planning school which dominates in NZ.

    So, hj, while I am tempted to tell you to fuck off, I have a suggestion. Luke Malpass is departing The New Zealand Initiative for Sydney. Why not apply for his now vacant position? Not much chance you would get the appointment. TNZI will be looking for someone with brains, capable of challenging, and keeping honest, institutions like Treasury and the Reserve Bank.

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  13. Colville (2,083 comments) says:

    Utterly meaningless to compare expansion of a city in Texas with Auckland.
    The outskirts of Auckland are taken up by multi million dollar “lifestyle” blocks that cannot be easily agregated by a developer to gain ecconomic scale , farm land in Texas only a few minutes drive from city centers is only a few thousand dollars an acre and availible in huge blocks..

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  14. emmess (1,373 comments) says:

    Utterly meaningless to compare expansion of a city in Texas with Auckland.

    Why?
    Thirty years ago, the ratio of house prices to incomes in Auckland was roughly the same.

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  15. BlairM (2,288 comments) says:

    Here we go again. Every time this blog has something on housing affordability the usual gang of idiots come out and say how ridiculous it is to compare Texas with NZ etc. etc., and that it’s not fair because Texas has x number of natural advantages that NZ could never possibly dream of. Well, not really. I actually live in Texas, and will shortly be buying a home with my fiancee. We expect to have plenty of change from $200k for a nice four bedroom here in San Antonio. It’s not an excess of land – Texas has three times the population of NZ per square mile. The real difference is that in Texas, you can develop land and there are no laws or bureaucracy to stop you. Fools like hj may think this is a terrible thing and that it makes for ugly cities, but this completely ignores that people actually want and choose to live in them.

    The issue is really simple – why shouldn’t people be able to afford their own home and live where they want to live? Why are town planners living off their fat salaries in their nice mansions trying to stop the great unwashed from being property owners?!

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  16. hj (6,370 comments) says:

    NZ the way the developers want it
    http://blog.chron.com/primeproperty/2013/04/ashby-update-demo-starts-monday/#comments

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  17. hj (6,370 comments) says:

    “For many Texans, the current Californian economic woes make proof that their small government, free enterprise spirit and urban laissez-faire tradition is right. However, this overlooks some basic facts: housing markets were always cheaper in the South than on the Pacific Coast. There are no major geographical constraints for development in the Houston’s plains at the difference of San Francisco bay for instance. Texan households purchasing power is much lower than Californian’s. In 1999, the median household income in Houston stood only 75% of the national average versus 104% in San Francisco. Sprawl is an unintended consequence of the combination of population growth, and urban laissez-faire (Lewyn, 2005).
    //
    The city is totally oil-dependent and energy-hungry, including the pervasive
    use of air-conditioning required by the excessively hot climate. With its carbon
    dioxide-intensive economy, Houston’s prosperity is borrowed to the futures
    generations. It has an overgrown ecological footprint. Like most Americans,
    Houstonians are accustomed to pick free meals on the environment for more than
    one century now, and they will probably not change their way of life for the next
    few decades.

    http://www.bulletinofgeography.umk.pl/12_2009/08_zaninetti.pdf‎

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  18. hj (6,370 comments) says:

    What does BlairM think about global warming? Hmm?

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  19. Bob R (1,340 comments) says:

    ***Thirty years ago, the ratio of house prices to incomes in Auckland was roughly the same.***

    @ emmess,

    Yes, and prices have shot up in response to a large influx of immigration. More people in the same space invariably will drive up prices, no?

    ; “80 percent net population growth over last twenty years from offshore”.

    http://www.treasury.govt.nz%2Fdownloads%2Fpdfs%2Fmi-jarrett-comm.pdf

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  20. hj (6,370 comments) says:

    “By taking the Cultural Turn, the National Party also corrupted its founding liberal philosophy. Its liberal ideals of the free individual who is responsible for the good of the public sphere is corrupted by the distortion of liberalism into ‘neoliberalism’. In losing the idea of the ‘public’ for the ‘private’, the National Party has lost one of the twin poles of its philosophy – the common public sphere for which we all are responsible. No wonder the philosophical remnants of that party exist only in habits of pragmatism.”
    http://www.fabians.org.nz/index.php?option=com_content&view=article&id=200:democracy-diversity&catid=41&Itemid=79
    How true! How true!

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  21. unaha-closp (1,115 comments) says:

    Yes, and prices have shot up in response to a large influx of immigration. More people in the same space invariably will drive up prices, no?

    You can either stop people coming or have more space.

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  22. unaha-closp (1,115 comments) says:

    The outskirts of Auckland are taken up by multi million dollar “lifestyle” blocks that cannot be easily agregated by a developer to gain ecconomic scale , farm land in Texas only a few minutes drive from city centers is only a few thousand dollars an acre and availible in huge blocks..

    If all the non-conservation land Auckland supacity was freed up to be developed those multi-million dollar lifestyle blocks would become multi-thousand dollar lifestyle blocks very quickly.

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  23. Fentex (867 comments) says:

    The city itself should not have to pay for the infrastructure of new subdivisions – that should be borne by the new residents.

    Isn’t this a request for the user pays model which New Zealand has adopted and which draws ire as making developing land expensive precisely because the developers are required to pay the cost of infrastructure?

    That doesn’t mean lack of supply isn’t a cause of increased cost due to demand, but as an argument for a way of reducing cost it collides with current complaints of the expense of funding infrastructure as a cause of increased prices.

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  24. TM (98 comments) says:

    How can you compare London house prices (pop 8 mil) with Austin (pop 0.8 mil)? Birmingham would be a better comparision (1 mil) where the average price is 150,000 pounds which would get a semi-detached (not terraced) house. I have also seen people comparing Auckland prices with London which is a bit crazy.

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  25. BlairM (2,288 comments) says:

    What does BlairM think about global warming? Hmm?

    THAT’s your rebuttal? Seriously?! ROTFL!!!

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  26. mikenmild (10,766 comments) says:

    I thought his rebuttal was the previous comment from the Bulletin of Geography.

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  27. Mark (1,366 comments) says:

    “And a report by “think tank” The New Zealand Initiative suggests a lack of supply and difficult planning processes are behind rapidly rising house prices in New Zealand and Britain”.

    Fucking Genii. Constrained supply leads to increasing prices, who woulda thunk that.

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  28. flipper (3,575 comments) says:

    BlairM says:
    *** …The issue is really simple – why shouldn’t people be able to afford their own home and live where they want to live? Why are town planners living off their fat salaries in their nice mansions trying to stop the great unwashed from being property owners?! ” ***

    Game set and match to Mr Blair M over Mr hj, 6-0,6-0,6-0

    Time to go to Little Barrier hj, and take your cruddy Marxist RMA/Town Planning rules with you. May be you could elect Blakely and his team as your Mayor and Council..

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  29. quinnjin (24 comments) says:

    David Farrar (1,772) Says:
    September 13th, 2013 at 1:13 pm
    Wow 27,000 hectares out of 26.8 million hectares. That’s a massive 0.1%!

    That’s actually quite a lot when you consider the amount of land that is actually habitable and or useful, versus the size of NZ. Thats a thousandth of TOTAL land mass… in a country of 4.5 million. As usual Farrars comment is disingenuous and misleading. I might take more of these arguments seriously if it weren’t for the fact that so many right whingers are such a bunch of deluded, dishonest, fundamentalist idealogue vandals who believe in free market fairies, invisible hands, worship B grade novelists, hate smart people (academics) and lack a fundamental understanding of real world economics let alone ecological dynamics.

    Still keep pumping out the plebian propaganda, I guess with enough saturation it has it’s effect on the intellectually enfeebled among us, and thanks to those damn socialist ideals like equal rights and democracy, even morons get a vote! And vote they will, to disenfranchise themselves and allow the wealthy corporate interests to further leech our assets, vandalise the economy, and turn us all into slaves in service to their righteous greed and delusional sense of entitlement.

    Keep up the “good” work scumbags. I hope you all get cancer. Have a nice day ; )

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  30. quinnjin (24 comments) says:

    And when I say “real world economics”, I’m talking about the real drivers of the cost of housing, which are of course rife speculation, and the availability of cheap, fake, digitally created “money”.
    There are not many homeless people in NZ who don’t have a house to live in, with the exception of a few in Christchurch perhaps, everyone has a house to live in, so obviously supply DOES NOT greatly outstrip demand. They’re all just paying absorbent rents to property speculators and can’t afford to buy their own places.
    There you go, an elaborate but stupid argument demolished with a little bit of logic, some basic economics, and a healthy dose of reality, things you guys are obviously not too used to around here I see.

    Did you like that? How I tore your ridiculous delusional ideology a new one? Awesome ay…. Nice work me.

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  31. quinnjin (24 comments) says:

    *exorbitant… damned spell check, any way I’m right and you’re all full of sh*t and need to use your damn brains and stop being blinded by ideology. It’s ironic that the right seem to resemble more and more the group think drones of the totalitarian state they claim to despise… Stalin era state capitalist Russia. ( not actually socialist, at all sorry to disappoint you…) They gave lip service to socialism the way western plutocracies give lip service to “democracy”.

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  32. quinnjin (24 comments) says:

    http://www.positivemoney.org

    Do some research.

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