Home affordability improves, but not in Auckland

BusinessDesk report by Hannah Lynch
Auckland is the only region in New Zealand where home affordability has declined over the past year, according to Massey University Real Estate Home Affordability Report.

The all districts national affordability index improved 4.9 percent in the 12 months ended Aug. 31 compared to 2.9 percent a year earlier. Auckland bucked the trend, recording a 0.4 percent decrease in affordability.

“House prices in Auckland are increasing faster than other regions due to the imbalance of new supply to meet demand from the increasing population,” director of Massey’s Real Estate Analysis unit, Bob Hargreaves. “In the short run, while interest rates stay low and builders aren’t building, houses prices will continue to rise in Auckland.”

Low interest rates are encouraging first home buyers to enter the market, which is putting pressure on the housing market, Hargreaves said.

Helping offset a $1,000 average increase in house prices was a $6.25 increase in the average weekly wage and a decrease in average monthly mortgage rates to 5.84 percent.

Affordability increased by 2.8 percent nationwide in the three months ended Aug. 31.

Regional quarterly improvements were led by the Manawatu/Wanganui region up 9.4 percent, followed by Hawkes Bay on 8.4 percent and Waikato increasing 4.9 percent.

Housing affordability deteriorated in the August quarter in Northland down 3.7 percent, Wellington 1.4 percent and Southland slipped 0.5 percent.

On Monday, the Real Estate Institute said New Zealand house sales rose 8 percent in September, with a shortage of listings causing buyers to make rapid decisions and lifting house prices to record-highs in the Auckland and Nelson/Marlborough regions. The national median house price rose 5 percent to $371,000.

Quotable Value, the government valuer, will release its monthly property values this afternoon.

Press Release – Massey University
Auckland is now the only region in New Zealand where home affordability has declined over the past year. The latest report from the Massey University Real Estate Analysis Unit shows that buying homes in every other region in the country has become easier since August 2011. Affordability is based on house prices, interest rates and average incomes.

Despite Auckland’s overall 0.4 per cent deterioration in affordability in the past year, the region has seen a 2.7 per cent improvement in the last three months.

During the third quarter, ending August 2012, national affordability improved by 2.8 per cent, and eight of the 12 regions also showed improvements.

Home affordability has improved nationally by 4.9 per cent in the past 12 months, compared to 2.9 per cent at the same time last year. Of the 12 regions, only Auckland has declined in affordability over the past year.

And there will be no respite for Auckland homebuyers for a while yet, according to Professor Bob Hargreaves, director of Massey’s Real Estate Analysis Unit.

“House prices in Auckland are increasing faster than other regions due to the imbalance of new supply to meet demand from the increasing population,” he says. “In the short run, while interest rates stay low and builders aren’t building, houses prices will continue to rise in Auckland.”

Low interest rates are encouraging first home buyers to enter into the market, which is also putting pressure on the housing market, he says.

Regional quarterly improvements were led by Manawatu/Wanganui (9.4 per cent), followed by Hawkes Bay (8.4 per cent), Waikato (4.9 per cent), Taranaki (3.9 per cent), Nelson/Marlborough (3.6 per cent), Auckland (2.7 per cent), Otago/Lakes (1.4 per cent) and Otago (0.7 per cent).

In four regions housing affordability deteriorated over the past quarter: Northland (3.7 per cent), Wellington (1.4 per cent), Southland (0.5 per cent) and Canterbury/Westland (0.3 per cent).

Two of the three drivers of affordability improved during the third quarter. The national median house price increased by $1000, but this was offset by a $6.25 average wage increase and the average monthly mortgage rate decreased from 5.99 per cent to 5.84 per cent.

The full Home Affordability Report – September 2012 can be downloaded from:

http://economics-finance.massey.ac.nz/publications/property/140687HomeAffordabilitySEPT2012.pdf

 

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