Recent improvements in home affordability have been driven by falling house prices in some regions.
The latest Massey University Home Affordability Report shows affordability has improved in seven out of 13 New Zealand regions in the most recent quarter. The report, which covers the period from June to August 2017, also shows an improvement in national affordability of 2.1 per cent for the quarter, driven mainly by falling house prices in Northland, Wellington and Central Otago Lakes.
“Median house prices in Central Otago Lakes dropped the most over the last quarter, declining by $35,000,” says report author Associate Professor Graham Squires from the School of Economics and Finance. “This was followed by Northland, where median prices dropped by $30,000, and Wellington, which experienced a $28,000 drop.”
National home affordability has decreased by 10.5 per cent over the past year and no region has improved in affordability over the 12-month period.
No improvements in affordability over the past year
Despite these improvements, national affordability has still decreased by 10.5 per cent over the past year and no region has improved in affordability over the 12-month period.
Auckland home affordability improved by 0.6 per cent over the June to August quarter, while Central Otago Lakes improved by 3.1 per cent. Despite this, Central Otago Lakes remains New Zealand’s least affordable region at 68 per cent less affordable than the rest of the country, followed by Auckland at 50 per cent less affordable.
“House price-to-wages ratios remain very high, and this continues to place considerable strain on first home buyers in Auckland and Central Otago Lakes,” Dr Squires says. “Median house prices are more than 14 times annual wages for the Central Otago Lakes region, and more than 13 times annual wages for the Auckland region.”
Report author Associate Professor Graham Squires.
Will house prices in other regions also fall?
Southland and Manawatū/Whanganui remain the country’s most affordable regions, although both have experienced declines in affordability over the quarterly and annual periods. The regions to experience the greatest improvement in affordability over the most recent quarter are Northland at 11.5 per cent, and Taranaki at 7.5 per cent.
“Borrowing costs have remained relatively low and wages static, so house prices continue to be the key determining factor in home affordability. We’ve seen some significant falls in house prices in some regions this quarter, so it will be interesting to see if this spreads to other regions in the coming quarter,” Dr Squires says.