Housing prices distance most people

Dr Susan Flint-Hartle – Housing prices distance-Dr Susan Flint-Hartle

Lower interest rates and the loan-to-value ratio restrictions of Reserve Bank of New Zealand are making Auckland houses more affordable.

The modest annual improvement in affordability of 3.1% in the country’s largest city is good news for policymakers intent on moderating the persistent inflation of Auckland house prices.

But this improvement offers limited respite for first homebuyers in Auckland.

Despite the small improvements that we have seen over the past few quarters, Auckland remains 59% less affordable than the rest of New Zealand, and that is a record high.

The only other region that is more unaffordable than the national average is Central Otago Lakes, at 48%.

Our ‘Home Affordability Report’ covers the period from December 2015 to February 2016, shows that many regions are fluctuating in their affodability from quarter to quarter.

Offsetting moves

For example, improvements over the last three quarters in Hawke’s Bay have been reversed by a 6.7% deterioration in the most recent quarter.

Similarly, the 10.5% improvement in affordability for the Central Otago Lakes region in the September quarter has been almost completely negated by declines over the past six months.

Recent movements in affordability have largely been driven by falling or rising house prices. Auckland’s median house price fell by $15,000 to $750,000 over the most recent quarter; but if you take a longer view, this figure still represents a $75,000 climb over the past 12 months.

Other regions – including Hawke’s Bay and Central Otago Lakes, where house prices have increased by 10.4 per cent and 15.4 per cent respectively over the last quarter – show corresponding decreases in affordability.

Dr Susan Flint-Hartle is Senior Lecturer at the Massey University School of Economics & Finance and the author of the ‘Home Affordability Report.’

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