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Falling prices and mortgage rates mean more affordable homes

Housing affrdability improved in seven out of 13 regions over the last quarter.

The latest Massey University Home Affordability Report shows a 4.4 per cent improvement in national affordability over the most recent quarter due to falling house prices and historically low residential mortgage rates.

The report, which covers the quarter from June to August 2018, also shows a small improvement of 2.1 per cent in affordability over the past 12 months.

Report author Associate Professor Graham Squires says house prices continue to be the key driver.

“Across New Zealand, median house prices decreased by 3.4 per cent this quarter. In dollar terms, that means the median house price decreased by $19,500,” he says. 

“Interestingly, the country’s most expensive regions – Auckland and Central Otago Lakes – were amongst the regions to show declines in house prices. Auckland’s median house price fell by $14,000 and Central Otago Lakes’ by $20,000 over the quarter. 

“However, both these regions were eclipsed by Northland, where prices fell by $24,000, arguably due to spill-over effects from Auckland’s decline.”

The laatest Home Affordability Report shows large regional variations.

Northland more affordable; Nelson less affordable

As with the previous report, there were varying results across the country over the past quarter. Seven out of 13 regions showed improvements in affordability, led by Northland with a 6.5 per cent improvement.

Nelson/Marlborough experienced the country’s largest drop in affordability over the last quarter, declining by 8.5 per cent.

“Again, this change has been driven by changes in the median house price – in the Nelson/Marlborough region there was an increase of $34,000 over the last quarter,” Dr Squires says.

Over the past year, eight regions have shown improvements in affordability, aided by a significant decrease in residential mortgage rates, Dr Squires says. 

“We are currently seeing the lowest ever mortgage rate in the two-year fixed data series, so the ability for homeowners to repay mortgages looks favourable in the short term. Interestingly, lower rates are coinciding with a cooling property market in many regions.”

Report author Associate Professor Graham Squires.

House price-to-income ratios contracting

Despite recent house price decreases, Central Otago Lakes, which includes Queenstown, remains New Zealand’s least affordable region, followed by Auckland.

“However, median house price-to-income ratios are starting to contract, with house prices in Central Otago Lakes moving from 13.7 to 13.2 times annual wages,” Dr Squires says. “At a national level, this ratio has moved from 9.1 to 8.8. 

“Of course, this is still significantly higher than the national ratios that were common in the 1990s – when median house prices were around four times annual wages.”

Southland remains the country’s most affordable region, followed by Taranaki.

View the full report.

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