Articles by Matthew Gilligan
I was recently asked whether there was an upper limit to the ratio between property price and household income, which in Auckland currently sits at about 10 to 1. In other words, the average property price is worth 10 times the average annual income.
Also known as the median multiple, this is an internationally recognised measure of housing affordability and is calculated by dividing house price by income. A median multiple of 3 or less is considered affordable, and at 10, Auckland is now the fourth least affordable city in the world. Will a limit eventually be reached due to the inability of people to pay, after which house prices would only rise at the rate of inflation (as would wages)?This is a great question. However, affordability assumes people owning the houses are carrying debt and servicing interest. Many are not – they use cash and are just plain wealthy. High median multiple cities like London, New York and San Francisco tend to see declining owner-occupier rates. And liberal investors say 'that can't continue'. But they confuse social agenda with economics and capitalism. Harsh as it may sound, poor people do not have a right or entitlement to own a home and it's always been that way. (I don't make the rules; I just observe them. And note, I'm not saying they don't deserve to live in a decent home, I'm just talking about ownership.)
Hello Matthew, I am just wishing you the best of success with your excellent book Property 101. It is very rare that I come across a book on real estate that is in the league of other financial securties writer's. Thank you for taking the time and more importantly writing about real estate in a easy to read manner. I am still learning after 30 years in real estate. I am also a true contrarian like yourself and have learned this art from my favourite contrarian, Jim Rodgers (Former Quantum Fund). I have been preaching this to our Investor net work and corporate clients for some time, but most find it very hard to-do. Thanks again! Kind Regards, - Chris Kerr - The New Kids On The Block Pty Limited - October 2015
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