The news for would be home owners is not good, according to the report from Massey University’s Real Estate Analysis Unit which covers the quarter from March to May 2014.
According to the report’s author Professor Bob Hargreaves the overall decrease in affordability is no surprise because the average annual wage increase of $34.53 was not enough to offset a $38,000 increase in the national median house price and an increase in the average mortgage interest rate from 5.57% to 5.64%.
He warned that this deterioration in affordability is likely to continue as recent interest rate increases are incorporated into the debt servicing costs for home mortgages.
On a quarterly basis, the national affordability index deteriorated by 4.5% compared with a 2.8% improvement in the previous quarter.
Auckland was, unsurprisingly, the least affordable region followed by Central Otago/Lakes and Canterbury. Southland retained its place as the country’s most affordable region, followed by Manawatu/Wanganui and Taranaki.
Professor Hargreaves pointed out that one of the most striking trends is the growing gap in affordability between larger urban centres and provincial towns, caused mainly by the differences in house prices between regions.
On a regional basis annual changes in affordability showed five regions with improved affordability. In Southland it improved by 14.4%, in Taranaki by 8.4%, in Manawatu/Wanganui by 6.2%, in Nelson by 2.2% and in Otago by 0.8%.
A deterioration in annual affordability was evident in seven regions. In Central Otago/Lakes it fell by 12.2%, in Canterbury by 10.6%, in Auckland by 9.1%, in Waikato by 4.8%, in Northland by 3.5%, in Wellington by 3.4% and in Hawkes Bay by 0.7%.
On a quarterly basis the all districts national affordability index deteriorated by 4.5% compared with 2.8% improvement in the previous quarter.
Auckland at 138% of the all districts national index was the least affordable region followed by Central Otago/ Lakes at 133.9% and Canterbury at 100.6%.
Southland retained its place as the most affordable region with an index of 42.5% of the national average. Manawatu/Wanganui at 55.2% was in second place followed by Taranaki at 56.7% in third.
The report says that there appears to be an ongoing trend where the affordability gap is widening between the larger urban centres and the provincial urban centres. Hargreaves said that this is mainly a function of differential house prices between regions.
