House prices nationally are now 12.4 times the average wage due to a drop in home affordability in recent months, new Massey University analysis reveals.
The national median house price increased 5.1 per cent, or $40,000, over the February to May quarter, the university’s latest Home Affordability report showed.
This, combined with a drop in wages in many regions, had led to a decline in home affordability of 6.8 per cent nationwide.
The national house price-to-income ratio also declined over the February to May quarter, with prices moving from 11.4 to 12.4 times average wages.
* Private infrastructure charges ‘the answer to boost housing supply’
* Southland still has most affordable houses in the country
* ‘We’re renting very long-term’: NZ’s new normal with more tenants and rising rents
Massey University professor Graham Squires said, two years ago, the price-to-income ratio was 8.9, so it had now increased by 3.5 across all regions, which was significant and indicated a dramatic separation between prices and wages.
If an annual view was taken, there had been a solid decline in home affordability of 10.1 per cent nationally, he said.
“The decline is reflected in 13 of the 16 regions, but there are regional differences with three regions seeing a slight improvement in affordability.”
The biggest quarterly drops in affordability were in the Tasman region where it was down 21.9 per cent, Gisborne where it was down 18.8 per cent, Manawatu/Whanganui down 17.9 per cent, and Taranaki down 17.7 per cent.
In contrast, affordability improved modestly over the quarter in Auckland, Nelson and Southland.
In Auckland, there was a quarterly improvement of 0.6 per cent and an annual improvement of 1.2 per cent. Despite this, the region remained the least affordable in the country with a price-to-income ratio of 15.7.
Squires said low interest rates was the main reason for the improvements in affordability in Auckland, Nelson and Southland, while pressure from limited stock and out-of-town buyers had contributed to the decline in affordability in regions like Tasman.
But what was interesting for this quarter was that wages had fallen slightly, he said.
“Given recent employment figures and skill shortages, you would think they would have started to increase, which would help affordability, rather than decline.”
The Government’s tax policy changes, which were announced in March, did not appear to have had an impact on the market at this stage, he said.
“If you look at the froth in the market, it hasn’t really gone backwards, so the buzz has continued. It’s the New Zealand way, for people to keep going until there is actually a dip in the market.”
This showed there was still confidence in the market, Squires said.
“In turn, this suggests that if dampening of house price growth is really what is wanted, further attention may need to be paid to alternative measures to help put on the brakes.”