15 Jan 2016

House prices a 'catastrophic regulatory failure'

5:49 pm on 15 January 2016

Buying a house in Auckland will soon be unattainable for the average New Zealand family if house prices continue to climb, the Property Council says.

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Photo: 123rf.com

The council said it was shocked by a new global housing report that shows how extremely expensive New Zealand's homes are in relation to people's incomes.

The Fitch Ratings report shows house prices in New Zealand may have reached the absolute limit of affordability.

When linked to income, New Zealand's houses were the least affordable of the 22 countries analysed in the report.

The council's chief executive Connal Townsend was shocked by the report, saying New Zealand's housing market was "infinitely the worst".

"It's a catastrophic regulatory failure.

"Decisions were made years ago to artificially constrain the availability of land and it's the golden law of economics that when you, through regulation, constrain the supply of a commodity it drives the price up."

If the trend continues, buying a house in Auckland will soon be unattainable for the average New Zealand family, he said.

Fitch Ratings expected house price growth to decline to about 4 percent this year.

"A supply shortage will continue to drive growth in Auckland, but this will be offset by recent restrictions on low-deposit lending by the central bank and rising unaffordability for owner occupiers," it said in a statement.

"In regions outside Auckland, Fitch expects low-to-static growth in house prices."

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