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Urban planning: itís a cultural problem

By Hugh Pavletich - posted Tuesday, 30 March 2010

Many Australians and New Zealanders are now aware that our cities need to deal with serious structural issues, but may not have a particularly clear understanding of the linkages of the major issues, and most importantly, the common cause.

First - our poor housing affordability performance is illustrated year after year by the Annual Demographia International Housing Affordability Surveys (PDF 1.85MB), where currently our major cities housing is approximately 5.7 times annual gross household income. House prices should not exceed 3 times annual household income, with mortgage debt loads not exceeding 2.5 times annual household income.

On the Welcome Page of my website Performance Urban Planning, I spell out in the clearest terms possible, the characteristics of a normal affordable housing market:


“For metropolitan areas to rate as ‘affordable’ and ensure that housing bubbles are not triggered, housing should not exceed 3 times gross annual household incomes. To allow this to occur, new starter housing of an acceptable quality to the purchasers, 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. The fringe is the only supply or inflation vent for an urban market. The critically important Development Ratios for the new fringe starter housing should be 17 - 23% serviced lot / section cost - the balance the actual housing construction. Ideally through a normal building cycle, the Median Multiple should move from a Floor Multiple of 2.3 through a Swing Multiple of 2.5 to a Ceiling Multiple of 2.7 - to ensure maximum stability and optimal medium and long term performance of the residential construction sector.”

One would think something as simple as this would be easily understood.

In rough terms, New Zealand housing is artificially inflated to the tune of in excess of $250 billion and Kiwi households are likely carrying $60 billion of excessive household debt. For Australia the figure is closer to $300 billion.

Most New Zealand households should not be taking on board mortgages exceeding $150,000. They have essentially been conned - or more likely conned themselves - in to the idea that mortgages of $250,000, $350,000-plus are good for them. In reality though, they are “mortgage slaves” and the only real beneficiaries of excessive mortgages is the banking community.

While I have had more than enough to say about economists in the past, thankfully increasing numbers of reputable ones internationally (PDF 200KB) are clearly articulating the serious structural issues that need to be dealt with.

Second, as the Auckland architect Kevin Clarke within his recent New Zealand Herald article, Govt can't escape leaky homes blame, explained so ably, “The leaky building epidemic did not happen by accident. It was primarily caused by government mismanagement over more than a decade.” John McCrone of The Press wrote at much the same time: “There’s a storm coming” of these issues as they relate to Christchurch, updated from his earlier article A rotten shame.


This problem involves near 90,000 homes nationally and anywhere from $11.3 billion to $20 billion or other figures north of it, you wish to pluck out of the sky at this stage.

It’s worth considering why we don’t have a “leaky boat” problem in New Zealand.

Third, New Zealand’s leading business website interest co nz provides an updated list of finance industry failures in New Zealand. By last count, there are 48 that have gone to the wall in the past few years, with $6.192 billion impaired, involving 187,519 deposits.

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About the Author

Hugh Pavletich is Managing Director of Pavletich Properties Ltd, a commercial property development and investment company, based in Christchurch, New Zealand. He initiated and co authors the Annual Demographia International Housing Affordability Survey and in 2004 was elected a fellow with the Urban Development Institute of Australia, for services to the property industry. He operates the website Performance Urban Planning.

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