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New Zealand housing affordability is back under the spotlight with new international research ranking our housing among the most overvalued in the developed world.
The Economist magazine warns the housing market bears a dangerous resemblance to that of the United States just before it plunged into financial crisis, sparking a wave of foreclosures.
But the New Zealand Real Estate Institute (REINZ) is dismissing any similarities and says it does not expect a rush of mortgagee sales here.
The Economist looked at global house prices against people's relative income and the price of renting. It found our rampant housing market grew 7.3 per cent in the past year, the sixth fastest among 23 surveyed nations. Housing here was 74 per cent overvalued compared to rents. Only Canada on 76 per cent and Hong Kong on 79 per cent fared worse.
In relation to income, New Zealand housing was 30 per cent overvalued, behind Canada (32 per cent), Australia (33 per cent) and Belgium (46 per cent).
"Based on an average of these measures, houses are at least 25 per cent overvalued in nine countries," the Economist found. "Judged by rents, the most glaring examples are in Hong Kong, Canada and New Zealand. The overshoot in these economies and others bears an unhappy resemblance to that prevailing in America at the height of its boom before the crisis."
House price growth is primarily driven by Auckland where demand for housing has seen the median price jump nearly $60,000 in the past year alone to $610,000.
REINZ chief executive Helen O'Sullivan dismissed similarities with the US, saying that nation's housing collapse was triggered by a massive oversupply of housing and the ability of homeowners with non-recourse loans to abandon properties and mortgages.
By Lane Nichols of the New Zealand Herald