Cautious buyers leave housing market subdued

Cautious buyers and determined sellers combined with very low rates of new construction are leaving the housing market subdued, Massey University’s latest Home Affordability report shows.

Home affordability improved slightly in the past quarter but is slowing. Nationally, affordability increased by 0.8 per cent in the three months to August 31, compared to a 5.2 per cent improvement in affordability during the previous quarter.

The improvement was a consequence of growth in wages and low mortgage interest rates offsetting a slight increase in the national median house price, says report compiler Professor Bob Hargreaves from the University’s School of Economics and Finance.

The median house price is up $5000 to $355,000, the average monthly mortgage interest rate decreased from 6.29 per cent to 6.21 per cent and the third affordability driver – average weekly wages – increased from $997.42 to $1006.68.

“The national housing market is characterised by cautious buyers, weak turnover rates, determined sellers, expectations of mortgage interest rates remaining stable in the short term, very low rates of new construction and a continuing exodus of New Zealanders to Australia. The first signs of future improvements in house prices are likely to be increased turnover rates, particularly in Auckland, coupled with improvements to the overall New Zealand economy,” Professor Hargreaves says.

Over the past quarter, six of the 12 regions showed improvements in affordability; Hawke’s Bay 9.2 per cent, Manawatu/Wanganui 6.3 per cent, Nelson/Marlborough 5.4 per cent, Wellington 4.7 per cent, Auckland 4.2 per cent and Waikato/Bay of Plenty 1.7 per cent. A deterioration in affordability was evident in Taranaki 7.7 per cent, Otago/Lakes 6.4 per cent, Northland 5.4 per cent, Canterbury/Westland 3.0 per cent, Southland 2.7 per cent and Otago 0.3 per cent.

Annually, all districts national affordability index improved by 8.4 per cent, equal with the previous period. All twelve regions showed improved annual affordability. Regional annual improvements were led by Hawkes Bay 19.1 per cent, followed by Wellington 16.5 per cent, Manawatu/Wanganui 13.6 per cent, Nelson/Marlborough 13.2 per cent, Southland 12.7 per cent, Taranaki 11.1 per cent, Waikato/Bay of Plenty 10.7 per cent, Otago/Lakes 9.6 per cent, Northland 8.5 per cent, Canterbury/Westland 8.3 per cent, Auckland 7.6 per cent and Otago 1.9 per cent.

Central Otago Lakes with an index of 139.3 per cent was the least affordable region. Auckland at 122.1 per cent was followed by Nelson/Marlborough at 99.8 per cent. Southland retains its place as the most affordable region with an index of 58.7 per cent of the national average, Manawatu/Wanganui is in second place at 67.8 per cent followed by Otago in third at 72.7 per cent. The full quarterly affordability reports may be viewed here: http://economics-finance.massey.ac.nz/homeaffordability.php