Falling mortgage rates change affordability trends

Figures improved slightly over the past quarter but unaffordability levels are still close to historic highs.

The latest Massey University Home Affordability Report shows some improvement in affordability figures over the past three months, due mainly to falling mortgage rates and broadly static house prices.

“Even Auckland falls in line with this trend – affordability in our largest city has improved by 4.9 per cent since our last report in June,” says Massey University senior property lecturer Dr Susan Flint-Hartle. “Having said that, affordability in Auckland has still decreased by 16.6 per cent over the past 12 months.”

The report, which covers the period from June 2015 to August 2015, shows home affordability across New Zealand improved by 2.3 per cent over the quarter, but the national index still shows a year-on-year decline of 6.7 per cent.

“While affordability trends show some improvement in this report, the relative levels of affordability across the country haven’t really changed much. You must remember that these small improvements are coming off the back of historic levels of unaffordability,” Dr Flint-Hartle says.

Auckland remains 52 per cent less affordable than the national average – down slightly from 56 per cent last quarter, but still close to that historic high.

House prices still a key driver

Regional movements in affordability have largely been driven by house prices. Central Otago Lakes, Southland, Manawatū/Wanaganui, Northland and Taranaki, which experienced the largest improvements in affordability, also had the largest falls in house prices.

“Meanwhile, the only region not to show some improvement over the past three months was Nelson/Marlborough, where house prices increased by the largest margin,” Dr Flint-Hartle says.

Dr Flint-Hartle also points out the Reserve Bank has reduced the Official Cash Rate by a further 0.25 per cent since the period covered by the report.

“While that reduces borrowing costs for homebuyers, improving affordability in the short-term, it remains to be seen whether lower mortgage rates also push up house prices in the longer-term.”

Download the full Massey University Home Affordability Report, with regional breakdowns, here: http://bit.ly/home-affordability-sept2015

Key findings:

  • Annual deterioration in national affordability of 6.7 per cent
  • Quarterly improvement in national affordability of 2.3 per cent
  • Quarterly improvements in all regions except Nelson/Marlborough
  • Quarterly improvement in Auckland affordability of 4.9 per cent

Most affordable region: Southland – 57 percent more affordable than the national average.

Least affordable region: Auckland – 52 per cent less affordable than the national average.



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