Home affordability now down to 1989 levels

massey-university

Mon Jan 15 2007 13:00:00 GMT+1300 (New Zealand Daylight Time)

Home affordability now down to 1989 levels

Monday, 15 January 2007, 4:35 pm
Press Release: Massey University

Housing is now less affordable than in early 1989 when mortgage interest rates were as high as 15.5 per cent.

Professor Bob Hargreaves, director of Massey University’s Property Foundation, says home affordability declined by 5.1 per cent over the quarter ending November 2006, reaching its lowest level since 1989.

He says the decline was due to a rebound in the national median house price (up by 6.4 per cent) outstripping increases in the average weekly wage (1.5 per cent).

Mortgage interest rates were also up slightly, by 0.03 per cent.

Professor Hargreaves says national home affordability has been in decline for each quarter over the past four and a half years. In the quarter ending November, Central Otago Lakes was the only area to show improved affordability, of 14.7 percent, but is still the least affordable region.

The largest declines in affordability were in Otago (10.9 per cent), Wellington (9.4 per cent) and Taranaki (8.9 per cent).

On an annual basis, home affordability declined by 7.3 per cent, with increases in house prices of 10 per cent well ahead of a 6 per cent increase in the average weekly wage, and increases in the weighted average interest rates on home loans of 3.4 per cent.

Central Otago Lakes showed a 4.3 per cent annual improvement in affordability but all other regions recorded annual declines.

The largest was in Taranaki, down 24.3 per cent, followed by Nelson-Marlborough, down 21.4 per cent, and Southland, down 18.1 per cent. The smallest decline was for Hawke’s Bay (0.2 per cent) followed by Canterbury/Westland (2.8 per cent) and Otago (6.2 per cent).

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Southland is clearly the most affordable region, with the index at 51.4 per cent of the national average of 100 per cent. Manawatu-Wanganui at 70.3 per cent remains in second place followed by Otago on 78.4 per cent.

The least affordable region, the Central Lakes Otago area, has an index of 131.1 per cent of the national average. The Auckland region takes second place on 121.8 per cent, followed by Nelson-Marlborough on 111.4 per cent.

The Massey survey has been reporting on home affordability since 1989, using the variables of house prices, wage rates and mortgage interest rates, The December quarterly survey is available at http://propertygroup. massey.ac.nz/fileadmin/research_outputs/HomeAffordabilityReportDec_0 6.pdf

ENDS

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