The affordability of Manawatū/Whanganui homes is plummeting, as falling wages and soaring prices make it harder than ever to get on the property ladder.
Massey University’s latest Home Affordability Report showed the region’s affordability fell 30 per cent since last June, and only Gisborne slipped further with a 31 per cent drop.
High demand and short supply also saw house prices shoot up by roughly the same percentage over those 12 months.
Massey professor Graham Squires said that was combined with a surprisingly steep drop in the region’s average wages.
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Squires said counter to what you would expect when the unemployment rate was low, average wages fell in most of the country.
The Central Economic Development Agency reports put Manawatū’s unemployment rate under the national rate, at 4 per cent.
But despite that the region saw the biggest drop in average wages, which fell 11.8 per cent, from $1268 to $1118 a week, over the first quarter of 2021.
Squires said that didn’t even show the full effect falling wages were likely to have on affordability, since inflation was forecast to rise going forward.
“Which will probably compound the problem, and people’s real wages [their spending power] will fall even faster.”
The national figures also indicated a dramatic separation between prices and wages, Squires said.
New Zealand’s house price-to-income ratio was 8.9 two years ago, and now prices were 12.4 times the average wage.
The outlook wasn’t favourable for buyers on the house price side of the equation either.
Quotable Values property consultant Jason Hockly said Palmerston North house prices had a period of stability with little change month-to-month for three months before taking off again in June.
QV statistics showed Palmerston North houses sold for a median price of $688,000 last month, a 35 per cent increase from last June and 6 per cent more than in May.
Such “wait and see” pauses were normal in markets when competition was this fierce, and prices rose this quickly.
Hockly said they tended to be triggered by an increase in interest rates, when everybody stepped back to reassess what they could afford to pay.
The Palmerston North market saw three or four pauses in the past five years, but this one was unusually long.
Hockly said that was likely due to the Government’s March housing policy announcements, which gave people more to consider this time.