Housing affordability across New Zealand has fallen 14 per cent, with Auckland's lack of affordability set to reach levels it hit during the height of the global financial crisis.
According to the latest Massey University Home Affordability Report, for the year to November 2014, almost three quarters of the change – 10 per cent – occurred in the last three months.
The worsening in annual affordability has been driven in equal measure by rising house prices, particularly in Auckland, and marginally increased borrowing rates.
A 46 basis point increase in average interest rates from 5.51 per cent to 5.97 per cent, coupled with a more than $30,000 rise in the national median house price, far outstripped the $19.35 increase in the average weekly wage.
Nationally, a progressively higher slice of people’s income was needed to buy a home in all regions.
Auckland again topped the list of least affordable regions sitting 40 per cent above the national median, followed closely by the Central Otago/Lakes region on 39 per cent. Both areas experienced steep house price rises during the report’s most recent quarter from September to November 2014.
Report author professor Paul Gallimore said the situation tends to bite harder for first homebuyers, especially in Auckland.
“If you look only at the last quarter, hikes in prices have really dominated, with around 85 per cent of the change in the national index over that period due to this factor,” he said.
All other regions are more affordable than the national average with Canterbury 5 per cent below, Nelson/Marlborough and Waikato both 13 per cent below and Manawatu/Whanganui 42 per cent below.
Southland remains the most affordable place to buy a house in the country at 54 per cent below the national median.
Prof Gallimore expects housing affordability to continue to deteriorate this year and, in Auckland, to potentially reach levels not seen since the global financial crisis.
“Its current trajectory suggests it may soon return to or exceed those levels,” he says. “Even without further price rises – which not one is predicting, a one percentage point rise in interest rates, without substantial wage increases, would put it on par with 2007/2008 levels”.