Residential property in New Zealand is as affordable now as it was six years ago with prices static and the market subdued, according to a new report.
The latest Home Affordability report from Massey University shows that the national affordability index has improved 11.1% over the past year, improving by 2.7% during the quarter ending May 2010 and is now about the same level as it was in 2004.
According to Professor Bob Hargreaves, who compiled the report, the housing market remains subdued with the national median house price static. ‘This is due to tighter lending criteria used by most lenders, warnings about pending mortgage interest rate increases, changes to the taxation treatment of rental houses resulting in reduced total returns for investors and the slow recovery in the world economy,’ he said.
Eight out of 12 regions showed improvements in affordability during the last quarter with Waikato and Manawatu/Wanganui recording the biggest leaps at 7.6% and 6.2% respectively, followed by Taranaki at 6.2%, Hawke’s Bay and Wellington both at 4.5%, Auckland at 2.5% and Nelson/Marlborough and Canterbury/Westland both at 2.1%.
The regions showing a reduction in affordability were Northland, down 2.4%, Central Otago Lakes down 2.2% and Otago falling 0.9%.
Southland retains its spot as the most affordable region with an index of 63.2% of the national average, despite a drop of 0.7% affordability from the last quarter. While Central Otago Lakes is the least affordable region, with an index of 138.3% of the national average, followed by Auckland at 122.3% and Nelson/Marlborough at 105.9%.
Meanwhile, about 10,000 new properties are needed in the country to keep pace with population growth and ease the current housing squeeze, a report from Westpac shows.
The report says the number of houses built halved in the two years to 2009, while population grew 0.4%. The resulting squeeze on housing, only the third since reliable data began in the 1960s, has boosted the average number of people per house in New Zealand from 2.52 to 2.55 during 2009.
Westpac is predicting a 23% growth in residential construction in 2011 but that is only just be enough to keep up with population growth. Even more would be required during 2012 to make inroads into the shortage.
‘There is a juicy profit opportunity on offer for larger firms that are less reliant on finance to get involved in residential property development which is precisely what we think will happen,’ the report says.