New Zealand – month two and still not affordability

The New Zealand housing market is still no more affordable than a month ago and buyers are taking notice. With a drop in home sales, buyers realize peak is over.

In New Zealand, a second month of frustrating news for home buyers. Not only has the country been labeled the most costly housing market in the world, but also no change has been seen. With recent reports out that suggest that home buyers are not willing to buy at such high costs, the cost of loans as rise and economic growth is slowly.

As announced by the Real Estate Institute of New Zealand, the residential property market has hit its peak in December. The national median sales of property here were NZ $345,000 in December, which was down 2 per cent over November's numbers. Only 5, 597 properties sold in the month of December, which is down from the 8,245 that sold in December of 2006. All of this indicates that the potential property boom has died off.

This comes in to play as the government here combats a struggling economy. Last year, the central bank increased interest rates to curb inflation, which is growing too quickly. This has also caused the cost of a loan to purchase a home to be too expensive for new homeowners to afford.

One way that this is analyzed is through the percentage of the average income the home mortgage is. In December, the average home loan made up 82 per cent of the monthly income of the homeowner. That number was only 73 per cent in December of 2006. This also means that incomes are not rising as quickly as home affordability, which means fewer people will qualify for loans.

House sales have dropped accordingly. The drop, at 32 per cent in December, shows just as unaffordable New Zealand property has become.