Further deterioration in home affordability

massey-university

Wed Mar 28 2007 12:00:00 GMT+1200 (New Zealand Standard Time)

Further deterioration in home affordability

Wednesday, 28 March 2007, 1:36 pm
Press Release: Massey University

More bad news for first home buyers – confirmation that national home affordability continued to deteriorate in the quarter ending February 2006.

Affordability is now the most difficult it has been since the Massey University Home Affordability series commenced in February 1989.

Property Studies Professor Bob Hargreaves says the good news is that the current quarterly rate of decline in affordability of one per cent is lower than the previous quarter (5.2 per cent) and the average of the last four quarters (1.8 per cent).

However, in the affordability equation he says escalating house prices (up 1.5 per cent) over the last quarter, combined with increases in mortgage interest rates (up 0.88 per cent) more than offset an increase in the national average wage rate (up 1.41 per cent).

On a regional basis, quarterly improvements in affordability were recorded by Otago (5.6 per cent), Nelson Marlborough (5.4 per cent), Taranaki (2.0 per cent) and Wellington (0.4 per cent). The largest declines were Central Otago Lakes (13.1 per cent), Southland (8.8 per cent), Northland (6.1 per cent) and Manawatu/Wanganui (5.0 per cent).

Professor Hargreaves says the all districts annual decline in house affordability was 9.8 per cent. “As expected, this is mainly due to house prices increasing about twice as fast as average wages.”

On an annual basis, the only region to show improved affordability was Central Otago Lakes (2.6 per cent). The largest annual regional decline was in Southland (31.1 per cent), followed by Wellington (17.4 per cent), Manawatu/ Wanganui (13.5 per cent) and Northland (13.4 per cent).

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A snapshot on overall affordability continues to place the Central Otago Lakes area as the least affordable region. with an index of 146.7 per cent of the national average (set at 100 per cent).

The Auckland region (121.7 per cent) remains in second place followed by Nelson/Marlborough (104.4 per cent) in third. Southland remains easily the most affordable region at 55.4 per cent of the national average. Manawatu/Wanganui is next at 73.2 per cent followed by Otago at 73.3 per cent.

“No doubt the underlying demographic trends of population drift and north and east continue to be reflected in regional home affordability,” says Professor Hargreaves. “The Central Otago Lakes region appears to be the exception but this market is driven more by international buyers.”

Key points:

- House prices continued to increase in the February quarter.

- A record high affordability index creates more difficulties for first home buyers.

- The rate of deterioration in affordability moderated in the February quarter.

- Average wage rate increases continue to keep ahead of inflation.

ENDS

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