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Housing Affordability: How Does the US compare to Canada, China, Australia, Japan, Ireland, UK

IMG Auteur
Publié le 23 janvier 2015
916 mots - Temps de lecture : 2 - 3 minutes
( 1 vote, 5/5 ) , 1 commentaire
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SUIVRE : Canada Hong Kong
Rubrique : Opinions et Analyses

Congratulations to Hugh Pavletich and Wendell Cox (co-authors) of the 11th Annual Demographia International Housing Affordability Survey 2015, for another excellent job.

The survey shows ...

"For the second year in a row, the United States had the most affordable housing among major metropolitan markets, with a moderately affordable Median Multiple of 3.6. Canada (4.3) Ireland (4.3), Japan (4.4), the United Kingdom (4.7) , and Singapore (5.0) had seriously unaffordable housing.

Three national markets were severely unaffordable, with Median Multiples of 5.1 or above. These included China (Hong Kong), with a Median Multiple of 17.0, New Zealand, at 8.2 and Australia at 6.4."

Housing Affordability - Major Markets



click on chart for sharper image

The problem with the above chart is Hong Kong is so far off the scale, that everything else looks OK in comparison.

So, don't be fooled by such distortions. My suggestion to the authors: Perhaps a logarithmic chart would help.

The following table will put things in better perspective.

Housing Affordability Rating Categories



Anything over 4.1 is "seriously unaffordable" or worse. From a metro-area perspective things look even worse.

Housing Affordability by Nation



Given that anything over 5.1 is "severely unaffordable" it's no blue ribbon to be 10 points better than Hong Kong.

Demographia does not cover China proper. However, The Economist does. The Economist China Index of Housing Affordability, which covers 40 cities of China shows the overall housing affordability multiple was 8.6.

Affordibility by Major Metro Area

"Hong Kong's Median Multiple of 17.0 was the highest recorded (least affordable) in the 11 years of the Demographia International Housing Affordability Survey. Again, Vancouver was second only to Hong Kong, with a Median Multiple of 10.6. Housing affordability in Sydney deteriorated to a Median Multiple of 9.8, which was followed by San Francisco and San Jose (each 9.2). Melbourne had a Median Multiple of 8.7 and London (Greater London Authority) 8.5. Three other markets had Median Multiples of 8.0 or above, including San Diego (8.3), Auckland (8.2) and Los Angeles (8.0)."

Methodology

The Demographia International Housing Affordability Survey uses the “Median Multiple”  (median house price divided by gross annual median household income) to assess housing affordability. The Median Multiple (a house price to income ratio) is widely used for evaluating urban markets, and h as been recommended by the World Bank and the United Nations and is used by the Joint Center for Housing Studies, Harvard University.

The "Median Multiple" measure may be the best way, but it's far from perfect as I am sure the authors would admit. A simple chart on major metro area affordability may explain.

 Affordable Major Metro Markets



Major Metro Questions

  1. Do you want to live in Detroit?
  2. Send your kids to Detroit schools?
  3. Are the houses that make up the median price survey livable at all?

At the other end of the extreme, crack-shacks in Vancouver can sell for $1,000,000. For an amusing test, please see Crack Shack or Mansion Game

Inquiring minds may also wish to investigate Vancouver B.C. vs. Donegal Ireland Real Estate: What Will $890,000 Buy?

Ten Least Affordable Major Metro Areas



All Markets



Although I once visited Ireland and took many outstanding images on the trip, years ago, I know little about Limerick to comment. In contrast, I do know a bit about Rockford, Illinois. It's about 90 minutes way.

Rockford is an economically depressed area in serious trouble. In fact, I have reason to believe the city is headed for bankruptcy. As facts come in, I will post on them.

So, the same questions I posed about Detroit, I ask about Rockford. The only difference is no one has heard much about Rockford ... yet.

Spotlight on Canada

Do any Canadians readers care to comment about this:

"Canada's most affordable market again was Moncton (NB), with a Median Multiple of 2.2. Both Saint John (NB ) and Fredericton (NB) had Median Multiple s of 2.5. Other affordable markets included Windsor (ON), at 2.8 and Charlottetown (PEI), at 2.9."

Given that Windsor and Detroit share a border crossing, I believe I know the answer, but if  I get some choice comments, I will post them.

While on the subject, here's an interesting bar bet question: If you are in Detroit, headed due south, what is the first country you hit?

Here's the key to the answer: "Windsor is located directly south of the city of Detroit."

Canada High End



Land-Use Chicken Egg



The Demographia authors point out "no major metropolitan market without urban containment policy has ever been rated with severely unaffordable housing in 11 years."

I have to ask: Which came first, containment or lack of land? Is there more usable land around LA or San Antonio? Is Detroit affordable because it has no land use restrictions or are there no land use restrictions in Detroit because no one wants to live there?

In my view it is overly simplistic to place to place the majority of the blame on land use restrictions, even if restrictions are a major problem in some areas.

Much More To See

There's much more in the 59-page report. Give it a look. Just don't expect perfection, especially in regards to affordability of places where nearly everyone wants out but lacks the means to escape.

That aside, compiling data for all the major metro areas in the world is not an easy task. All in all, Hugh Pavletich and Wendell Cox did an outstanding job, once again. Their work is much appreciated.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Données et statistiques pour les pays mentionnés : Canada | Hong Kong | Tous
Cours de l'or et de l'argent pour les pays mentionnés : Canada | Hong Kong | Tous
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Mish, As a Canadian follower of your excellent commentary I will answer in regard to the Canadian Real Estate bubble which crested in 2013-2014 and is now starting to deflate as evidenced by the BOC's emergency rate cut to shore up the Big 5's balance sheets and to help cover a spike in NPL's (mostly oil related but the fallout into the mortgage market is inevitable) let me say this. I am aware of the extreme overvaluations in markets like Vancouver, Calgary, Toronto and Ottawa even though my hometown is Winnipeg (the largest urban centre between Calgary and Toronto-roughly 3400 kilometres). Although not represented in your article it is in no way immune to the same loonie (pardon the pun) metrics of larger Canadian centres. Having lived in the city off and on for nearly 40 years and having bought and sold multiple properties let me say I am astounded at what has transpired in the last 40 years. I keep a pretty close eye on the market, even more so given the last decade's explosion.

I purchased my first property for $18,000 (1979) with a 25% down conventional mortgage, it is still standing and has had upgrades but that is mostly maintenance and it recently (2014) sold for a staggering $215,000, a 1194% increase in just under 35 years. It is in a decent neighbourhood, close to amenities, etc… pretty average really but I I mean really, almost 1200%. Bubble much... not if listening to the Real Estate association and assorted 'book' talkers I guess.

Now if wages had accelerated at that level then whats the noise all about, unfortunately they have not. To give an example, my annual salary in 1979 was a little over $14,500 so using the same metric I should be earning a bit more than $173,000, let me assure you I am not.

If housing was the only debt issue then a deflating market which would slowly (or quickly) put 1,000's of property owners under water could possibly be contained but this is unlikely to be slow or contained. The cracks are already starting to appear, for the first time in many years supply is far outstripping demand, average time on the market is expanding, bid versus ask is widening and more importantly, credit worthy buyers are fast drying up.

Economically Winnipeg and Manitoba have not just flatlined but are in the first phase of a major recession, we have a socialist government that has put a stranglehold on business, new startups are non-existent, established businesses are contracting in manufacturing, service and retail. In the last month our city has seen Target implode, Sony Stores exit, Carbelas drop 50%, hotel expansions cancelled and mining, forestry are at multi year lows. The only expansion that is happening are taxpayer funded capital intensive projects. The fact is most of the economic activist in the last 3 years are almost entirely funded on the back of borrowed future taxes. I will not even touch the absolutely egregious mismanagement of these projects that have gone over budget by 100's of millions of dollars.

So as a Winnipegger I ask, with job losses mounting, economic activity contracting, wages and income declining while all forms of taxation, utilities and mandatory fees (licensing, permits, etc,,) increasing at 2 and 3 times the rate of inflation exactly how is a collapse not coming.

I may and hopefully am wrong but we may be on the leading edge of a disaster the likes of which this generation has ever seen.
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Mish, As a Canadian follower of your excellent commentary I will answer in regard to the Canadian Real Estate bubble which crested in 2013-2014 and is now starting to deflate as evidenced by the BOC's emergency rate cut to shore up the Big 5's balance sh  Lire la suite
Thautikus - 23/01/2015 à 14:04 GMT
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