30 Jun 2014

Home affordability worsens this year

6:33 pm on 30 June 2014

A new report has found home affordability has fallen over the past year. The study, by Massey University's Real Estate Analysis Unit, covers the March to May quarter in 2014.

This found home affordability declined by 7.6 percent compared with the same period a year ago, making it more difficult for people to acquire a first home.

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The study's co-author, Professor Bob Hargreaves, said the average weekly wage increase of $34.53 was not enough to offset a $38,000 surge, over the period, in the median house price.

The study found national affordability over the May quarter deteriorated by 4.5 percent, compared with a 2.8 percent improvement in the previous quarter.

Auckland was the least affordable region, while Southland was the most affordable.

Professor Hargreaves said a striking trend was the widening affordability gap between cities and provincial towns.

Prime Minister John Key says the Government is doing everything it can to make sure interest rates don't go up and put more pressure on households.

Mr Key said on Monday that housing affordability is a long-term issue that the Government is focused on.

"We've been doing a number of things. Firstly, I think these special housing areas and generally working on the supply side issues are a long-term solution to the problems. Secondly, making sure that we appropriately manage the Government's expenditure, so that we can do everything we can not to put extra pressure on interest rates again is very important."

Consents down

The latest figures show the number of consents for new houses and apartments has also fallen.

Official figures show the seasonally adjusted number of new permits declined 4.6 percent in May, compared with the previous month.

Excluding volatile apartment figures, building consents rose 4.6 percent.

Statistics New Zealand said the trend for the number of consents was at its highest level since September 2007, but had flattened in recent months.

'Overvalued' market

A report from the OECD released in May rated New Zealand homes as the most overvalued in the developed world - relative to rents and income.

The OECD said relative to rents, New Zealand house prices were 70 percent too high.

In January, the tenth annual Demographia survey of nine countries ranked New Zealand as the second most expensive to buy in behind Hong Kong. It put Australia as second equal.

The survey defined an affordable home as one that cost less than three times the median household income.

It said New Zealand buyers needed five-and-a-half times the median household income.