Home affordability improves – but not for Auckland

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