New lending restrictions may have started pulling back house prices in Auckland but regional prices are continuing to rise, making first homes less affordable for young people.
The Home Loan Affordability Report for September, released this week, said the new loan-to-value lending restrictions introduced by the Reserve Bank started on October 1, although most of the main banks had already introduced them over the previous two months.
That had produced a small respite for first-home buyers in Auckland, where the lower-quartile selling price dropped from its record high of $695,600 in August to $682,100 in September.
The only other region where affordability improved in September was Southland, where the lower-quartile price dropped from $157,900 in August to $153,700 — well below the high of $165,300 achieved in February.
However, the report showed lower-quartile prices continued to increase in all other regions in September, new highs being set in Central Otago-Lakes and Otago, as well as Nelson-Marlborough and Canterbury.
Affordability in those regions was continuing to worsen for first-home buyers but, overall, still remained within affordable levels. Mortgage payments on a lower-quartile-priced home took up less than 40% of a typical first-home-buying couple’s pay in each region.
In Central Otago-Lakes, the median dwelling price was $694,500 in September, down from $650,000 in August. In September last year, it was $492,500, putting annual growth at 41%. Five years ago, the median price was $385,000.
There were 146 homes sold in September, up from 137 in August. That compared with 132 sales in September last year and 81 sales five years ago. The lower-quartile house price was $535,200 in September 2016, down from $457,00 in July. Annual growth was 45.2% from the $368,700 lower-quartile house price in August last year.
In Otago, which includes Dunedin, the median dwelling price was $296,000 in September. In September last year, the median price was $280,000 putting annual growth at 5.7%. Five years ago, the median price was $230,000.The lower-quartile house price was $236,299 in September. Annual growth was 10.3%.
The trends evident in the Home Loan Affordability Report are consistent with patterns seen in interest.co.nz’s auction sales reports in the past few weeks, as investment apartments became more difficult to sell. This suggests investors may be struggling to buy investment properties in Auckland because of the 40% equity requirement and instead are looking for cheaper properties in the provinces, pushing up prices accordingly. The report said investors had also been buying for capital gains rather than the income stream residential properties could provide and might be avoiding the Auckland market if they felt the quick capital gains in the region might be slowing or coming to an end.
"That’s potentially good news for struggling first-home buyers, who may start facing less competition from investors for lower-priced properties. However, one month’s set of sales figures do not make a trend and the market is just at the very start of the summer selling season."
At least another two months of sales were needed for a trend to be evident, the report said.
