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Auckland '59% less affordable than rest of NZ'

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Fuseworks Media
Fuseworks Media

While there has been a modest improvement in the affordability of housing in most regions, the latest Massey University Home Affordability Report shows Auckland is now 59 per cent less affordable than the rest of the country.

The report, which covers the quarter from October to December 2015, shows an overall improvement in national affordability of 5.7 per cent. In Auckland, despite continuing high values and severe unaffordability, there has been a slight quarterly improvement of 1.4 per cent. This means that Auckland homes are more affordable than reported in September figures and that the previous deterioration trend in affordability has slowed from 16.6 per cent to 3.7 per cent.

However, at 59 per cent less affordable than the rest of the country, the margin by which Auckland exceeds the national figure tops historical levels. Other regions remain more affordable than the national average. The most affordable area to buy a home is Southland, closely followed by Manawatu/Whanganui and Taranaki. Areas close to Auckland like Waikato and the Bay of Plenty are less affordable, arguably because of the ripple effect of the hot Auckland market.

Is this a sustainable trend?

Report author Dr Susan Flint-Hartle says despite a trend of improved affordability in consecutive quarters there is real possibility of deterioration once again in the coming months. "Recent reductions in borrowing costs and positive sentiment about a two-year hiatus in interest rises hold the potential to keep pushing house prices higher."

Dr Flint-Hartle says interest rates have continued to fall and there is some speculation a historically low official cash rate of 2.5 per cent may fall even further. "This may encourage more people, both homeowners and investors, into the market increasing demand and putting upward pressure on prices."

There has been a minor drop in the national median value to $459,500, however house prices have still risen in all regions except Nelson, Marlborough and Kaikoura, where gains reported last quarter have not been sustained. The median house price in these regions has fallen by $10,000 to $375,000.

Who is winning the affordability race?

A decline in affordability was recorded in Wellington (3.3 per cent), and Manawatu/Whanganui (2 per cent), but the winners in the affordability race are Central Otago Lakes (10.7 per cent), and Nelson/Marlborough (7 per cent). Canterbury/Westland and Hawke’s Bay have improved affordability by 2.4 per cent and 1.8 per cent respectively.

Otago is in an interesting position. Affordability there has deteriorated by 9.5 per cent this quarter, as wage levels have dropped by around 11 per cent in the period, and 8 per cent in the past year. The opposite applies to Central Otago Lakes where wage levels have increased by just over 12 per cent this quarter and 13 per cent in the past year.

Key points:

- Annual improvement in national affordability of 8.7 percent

- Quarterly improvement in national affordability of 5.7 per cent

- Significant quarterly improvement in Otago Central Lakes of 10.7 per cent and Nelson/Marlborough of 7 per cent

- Slight quarterly improvement in Auckland of 1.4 per cent

- Improvements reported in the September quarter have been sustained in the December quarter

The full Massey University Home Affordability Report can be downloaded here:

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