Housing affordability drops 14%, driven by Auckland prices 29 Jan 2015
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Article - BusinessDesk
Housing affordability drops 14%, driven by Auckland house price rises
By Fiona Rotherham
Jan. 29 (BusinessDesk) - Housing affordability across New Zealand fell 14 percent in the year ending November 2014, with Auckland’s lack of affordability set to reach levels it hit during the height of the global financial crisis, according to the latest Massey University Home Affordability Report.
Almost three quarters of the change – 10 percent - occurred in the last three months. The worsening in annual affordability has been driven in equal measure by rising house prices, particularly in Auckland, and marginally increased borrowing rates. A 46 basis point increase in average interest rates from 5.51 percent to 5.97 percent, coupled with an over $30,000 rise in the national median house prices, far outstripped the $19.35 increase in the average weekly wage.
Nationally, a progressively higher slice of people’s income was needed to buy a home in all regions. Auckland again topped the list of least affordable regions sitting 40 per cent above the national median, followed closely by the Central Otago/Lakes region on 39 per cent. Both areas experienced steep house price rises during the report’s most recent quarter from September to November 2014.
Report author professor Paul Gallimore from Massey’s School of Economics and Finance said the situation tends to bite harder at first homebuyers, especially in Auckland.
“If you look only at the last quarter, hikes in prices have really dominated, with around 85 percent of the change in the national index over that period due to this factor,” he said.
All other regions are more affordable than the national average with Canterbury 5 percent below, Nelson/Marlborough and Waikato both 13 percent below and Manawatu/Whanganui 42 percent below. Southland remains the most affordable place to buy a house in the country at 54 per cent below the national median.
Gallimore expects housing affordability to continue to deteriorate this year and, in Auckland, to potentially reach levels not seen since the global financial crisis.
“While Auckland’s affordability score still remains below the peaks seen in 2007/2008, its current trajectory suggests it may soon return to or exceed those levels,” he says. “Even without further price rises – which not one is predicting, a one percentage point rise in interest rates, without substantial wage increases, would put it on par with 2007/2008 levels,”.
The Reserve Bank this morning left the official cash rate unchanged at 3.5 per cent and abandoned its tightening bias for interest rates.
(BusinessDesk)
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