Central Otago Lakes has now overtaken Auckland as the most unaffordable region in New Zealand, a new report shows.
The latest Massey University Home Affordability Report for the period from December 2016 to February 2017, revealed national affordability had improved over the quarter, due to a fall in house prices in seven regions, including Auckland.
But affordability declined in Central Otago Lakes by 8.2% over the same period.
“This was in contrast to a considerable 7.5% improvement in Auckland’s affordability and, on the Massey index, Central Otago Lakes now ranks as the country’s least affordable region,” says report author associate professor Graham Squires from Massey’s School of Economics and Finance.
“Central Otago also has the largest decline in affordability over the 12-month period, which is a reflection of tourism industry demand in Queenstown, a shortage of housing supply, speculative investment demand, a focus on high-end lifestyle living in the area, and largely stagnant wage increases.”
Auckland’s median house price fell by $51,944 over the last quarter (6.1%).
“These two regions are the least affordable by a clear margin,” Dr Squires said. “Auckland still sits at 55% less affordable than the rest of the country, and Central Otago Lakes is now 68% less affordable than the rest of New Zealand.”
Despite the improvement in affordability in seven regions in both the report’s annual and quarterly figures, Dr Squires said the ratio of median house price to median wage remains very high in Auckland and Central Otago Lakes.
“In our two most expensive regions this will continue to place strain on first home buyers, especially in Central Otago Lakes where the median house price is nearly 14 times the median annual wage.”
Dr Squires noted that slowing house prices and record low interest rates were driving the improvement in affordability but that rates were on the rise.
“It’s important to note that that the quarterly interest rate used to calculate the index is a weighted average of all loans and that is currently at 4.85%. New customers’ rates for January are now much higher – generally between five and six per cent, depending on the type and term of the loan.
“It is possible more stringent deposit and bank lending requirements and interest rate rises could make it more difficult for home buyers in the future.”