Here's something to think about. Let's get this thread back on topic.

Auckland market pips Big Apple
http://www.stuff.co.nz/3942865a13.html

The real cost of new homes in Auckland and Christchurch is higher than in New York, Dublin and London, even though a recent report into the steep costs of property around the world says otherwise.

The third annual Demographia International Housing Affordability Survey ranked Auckland's housing market only marginally behind cities like Los Angeles, Hawaii, central London, and New York, using figures which compared the median house price in locations around the world with median household income in those areas.

But when costly local mortgage lending rates are taken into account, the true cost of New Zealand homes is revealed.

Calculations show home-buyers in Auckland on a median income buying a median house on a 95% mortgage fixed for two years over 30 years would expect to pay 62% of their incomes on mortgage repayments each month.

That compares to 52% in New York, 57% in Vancouver, 46.5% in greater London and 33% in Ireland.

And the New Zealand situation could worsen. Reserve Bank governor Alan Bollard decided not to raise interest rates last week, but he threatened to do so later in the year if the housing market did not ease.

And it's not just Auckland - new home-buyers in Christchurch on the median income would now be paying 54% of their income out on mortgage repayments.

Wellingtonians, who are on average better educated and better paid than Aucklanders or Cantabrians, would fork out 49% of monthly income on the mortgage for a median home.

Hugh Pavletich, a Christchurch property developer and one of the authors of the Demographia survey, said the report probably understated the costliness of New Zealand homes because of the differences in the cost of borrowing here and overseas.

"Economists have been irresponsible in telling people that interest rates are low. In real terms they are anything but," he said.

Jeff Matthews, of financial planning firm Spicers Wealth Management, said the figures showed how stretched house prices had become as speculators buying multiple homes had driven the market skywards.

He said "hot" property areas like Gisborne had seen prices pushed up by speculators from other cities chasing higher yields than they could get in the already popular Auckland, Wellington and Christchurch markets.

Based on such figures, Matthews said New Zealand's property market looked overcooked and ready for a correction or stagnancy while wages caught up.

Many investors, however, remain convinced house prices do nothing but rise.

Matthews said that if a 7% annual house price growth was to continue, by 2026 the average house would be worth more than $1 million on household incomes of around $60,000, which was a highly implausible outcome.

But should buyers not in the market wait and gamble on prices to drop?

"It is a dangerous strategy," Matthews said, "and one people were advocating two years, ago. And look what happened."

Matthews recently sold his Remuera home and is renting while his new home is built. The yield on the house he is renting is probably 3% or less, but the proceeds of his house sale are gathering more than 7% interest.

Things might be bad on this side of the Tasman, but they are even worse in Australia. Sydney-siders looking to get into the market would expect to pay 70% of median household income in mortgage payments when buying the median home on a 95% mortgage.