Professor Paul Gallimore
The latest Massey University Home Affordability Report underlines New Zealand’s ‘two-track’ housing experience.
Figures from the most recent quarter – December 2014 to February 2015 – show an improvement in affordability across New Zealand of 6%, but Auckland and three other regions bucked this trend.
When you look at the past 12 months, houses in Auckland are now 22% less affordable while, for the country as a whole, the annual deterioration in affordability is only 10.4% These figures underline the ongoing two-track housing experience of New Zealanders.
Over the past year the 10.4% fall in affordability has been driven by a modest 3.6% rise in house prices and a 0.5% rise in interest rates, which outstripped the 2.3% increase in the average weekly wage.
But the situation in Auckland is quite different – wages actually rose at less than the national average while the median house price rose by a substantial 14%, or $83,000.
The recent improvement in affordability in many regions really accentuates the high costs in Auckland. Our largest city is now 49% less affordable that the rest of the country.
That is a larger gap than we have had at any other time in the 25-year history of the Massey Home Affordability Report.
This divergence in regional experience is likely to continue throughout 2015.
While house prices are currently dropping in some regions, that is not the case everywhere, most notably in the country’s largest city.
Will Auckland’s affordability continue to move apart from the rest of New Zealand?
That will hinge on how supply and demand factors play out in that market, but the answer could well be yes.
Home Affordability Report
Annual deterioration in national affordability of 10.4%
Quarterly improvement in national affordability of 6.0%
Auckland is one of four regions (alongside Otago, Nelson/Marlborough and Taranaki) to show continuing declines in affordability over the last quarter
Auckland’s unaffordability relative to the whole country is now at its highest level since the Massey index began.
Least affordable region: Auckland 49% more unaffordable than national average
Most affordable region: Southland 52% more affordable than national average
Dr Paul Gallimore is Professor of Property at the Massey University School of Economics and Finance. He is the author of the ‘Home Affordability Report.’