Extremes of affordability in the South

Otago has the slowest quarterly rate of median house price growth in New Zealand. Photo: Peter...
Otago has the slowest quarterly rate of median house price growth in New Zealand. Photo: Peter McIntosh.
Otago-Southland features prominently in the latest Massey Home Affordability Index, for reasons at both ends of the financial spectrum.

Central Otago Lakes remains the most unaffordable region in the country to buy a house and is now 70% less affordable than the rest of the country.

Affordability in Otago, which excludes the expensive Central Otago Lakes district, improved in the three months ended May by a modest 1.9%, one of only two regions to improve in the quarter.

The most affordable region in New Zealand remains Southland, despite a 13.7% decline in affordability in the three months ended May. Median house prices in Southland surged by $31,000, or 14.8%, over the period.

Report author Associate Professor Graham Squires, from Massey’s School of Economics and Finance, said there was a nationwide increase of 9.1% in the median house sales price over the quarter, contributing to an annual increase of 6.8%.

"Some of the regions are surging past Auckland as a percentage change."

Year-on-year median house prices in Northland had increased by 28.3% and in Nelson, prices were up 21.8% compared to a 3.7% increase in Auckland.

While house prices had been the driving force behind declining affordability in other regions, Central Otago Lakes and Auckland remained the least affordable regions in New Zealand, he said.

Affordability in Central Otago Lakes continued to decline at a faster rate than Auckland.

"It’s likely this decline in affordability in Central Otago Lakes is a continued reflection of tourism industry demand in Queenstown, a shortage of housing supply, speculative investment demand and largely stagnant wages in the region."

Auckland remained 48% less affordable than the rest of the country and first home buyers in those two regions still faced considerable barriers to entering the residential property market, Prof Squires said.

That was illustrated by the house price-to-wages ratios. Median house prices were now 15.2 times annual wages for Central Otago Lakes and 13.3 times annual wages for Auckland.

Southland had a traditionally low base in median house prices but had now joined eight other regions in surpassing Auckland in terms of their percentage price increase over the past 12 months.

Borrowing costs generally remained low and the key element driving New Zealand’s affordability statistics were property prices, he said.

The interest rate used in the quarter was a two-year fixed rate for new residential mortgages for April at 5.25%. However, New Zealand house prices needed to be placed in a global perspective. There had been a slowing down in house prices in some overseas cities and the global flows of funds could have an impact on bank lending and demand for housing in global cities such as Auckland.

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