In June 2017, Massey University released its Home Affordability Report, which shows that most regions across New Zealand have become less affordable over the past 12 months. We take a closer look at what is arguably the country’s single most important policy issue: restoring housing affordability.

Harder than ever to buy a home

The latest research from Massey University has revealed an unsurprising fact: across New Zealand it’s harder than ever to buy a house.

The two least affordable areas to buy property according to the report, are the Central Otago Lakes and Auckland, which are 70 per cent and 48 per cent respectively less affordable than the rest of the country.

To measure affordability, economists compare house prices and borrowing costs to wages. For the period from March to May 2017, median house sale prices increased by 9.1 per cent for the quarter, and 6.8 per cent annually nationwide. House price to wage ratios – the number of wages needed to service a mortgage – have risen to 15.2 for the Central Otago Lakes region and 13.3 for Auckland.

Southland remains the most affordable region despite a 13.7 per cent decline in affordability and a 14.8 per cent increase in median house prices.

Cost of a housing shortage

Aside from the many costs that are a direct result of a housing shortage – like overcrowding leading to health problems, and a shortage of rental properties driving up rents – the indirect costs are significant too.

Earlier in July 2017, the Ministry of Social Development released its annual report on household income trends. According to its findings, the number of children living in low-income households is declining, but when housing costs are factored in, that figure jumps to three times as many children living in low-income households.

Employment is also affected by the housing shortage, with many Auckland schools unable to fill vacancies and attract teachers with salaries that are fixed and that do not take into account the cost of living in New Zealand’s largest city.

Is there a solution?

Any solutions to the housing shortage issue will understandably take time to implement and be felt in the property market. Possible long-term solutions include:

• Building further out of the major centres and improving infrastructure to these areas.
• Encouraging higher-density developments and smaller homes – this will help alleviate the bottleneck that is currently preventing older couples wanting to downsize from selling to younger couples looking for their family home.
• A low-level tax on land or capital gains could help combat property speculation and address the growing wealth gap between renters and property owners.
• Further changes to LVR or restrictions to bank’s lending could help slow down demand and subsequently house price increases. 

How can we help you?

Whatever your situation, we’d like to help. Whether you’re a first home buyer looking to get a foot onto the property ladder, or you’re a seasoned investor growing your property portfolio, talk to our team of mortgage advisers. We’ll shop around on your behalf and ensure you get the right financial package to fit your needs. 

Resources:

http://www.interest.co.nz/property/89013/falling-house-prices-around-nz-bring-home-ownership-step-closer-first-homes-buyers

https://www.nbr.co.nz/opinion/winding-road-housing-affordability

https://www.stuff.co.nz/business/94924525/report-shows-housing-affordability-dropping-throughout-nz

http://www.massey.ac.nz/massey/learning/colleges/college-business/school-of-economics-and-finance/research/mureau.cfm

https://www.msd.govt.nz/about-msd-and-our-work/publications-resources/monitoring/household-incomes/

Disclaimer:

While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.

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