Changes in median house prices are driving changes in affordability in most regions.
The latest Massey University Home Affordability Report shows a continued improvement in national affordability due to declining house prices in many areas and falls in mortgage interest rates.
“Overall, at the national aggregate level, affordability improved by 2.6 per cent in the most recent quarter, which follows two previous quarters of modest improvements,” report author Dr Arshad Javed, from Massey’s School of Economics and Finance, says.
However, the report, which covers from June to August 31, shows mixed results when viewed at the regional level.
“Half of the 16 regions have shown improved affordability over the quarter, while the other half have shown declines,” Dr Javed says. “Most of this is being driven by house price fluctuations, including in Auckland where the median house price declined by $40,000, resulting in an 8 per cent improvement in affordability for the region.”
The other region to show significant improvement in affordability was Gisborne, which showed a 12.2 per cent improvement after an 11.7 per cent decline in the previous quarter. This improvement was also mainly driven by declining house prices, Dr Javed says.
Report author Dr Arshad Javed.
Annual results versus quarterly result
Twelve out of the 16 regions showed an increase in median house prices in the most recent quarter, which was partially offset by lower interest rates. The impact of incomes varied across regions.
“Interest rates went down by 0.11 per cent to 4.67 per cent, which is a return to the medium-term trend of interest rate reductions,” Dr Javed says. “Overall, incomes increased slightly by 0.6 per cent, with the direction of change evenly split across all 16 regions. This ranged from a 2.3 per cent decrease in Taranaki to an 8.8 percent increase in Tasman.”
When viewed over a 12-month period, the results also show improved affordability at the national aggregate level, but mixed results at the regional level.
“An annual increase of $30,000 in the national median house price was partially offset by a 6.79 per cent decrease in mortgage interest rates,” Dr Javed says. “This combined with a steady increase in wages of 3.7 per cent for the year, resulting in a 5.2 per cent improvement in affordability for the 12-month period.
“However, when viewed region-by region, only half the regions show improvements in affordability over the year. The greatest changes for the year were in Southland, which declined by 17 per cent and Tasman, which improved by 15.8 per cent.”
Despite a 4.7 per cent decrease in median house price in the most recent quarter, Auckland remains the country’s least affordable region. Similarly, despite a 16.2 per cent increase in median house price, West Coast is the country’s most affordable region.