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17 Apr 2015

Affordable Regions in New Zealand

Despite sky-rocketing prices in parts of Auckland and difficult lending conditions for first-home buyers, affordable homes are still available in New Zealand. The AMP360 Home Loan Affordability report recently listed the best and worst regions in terms of affordability, with home loans rated as affordable when mortgage repayments were 40 percent or less of median income. Both standard and first-home buyer affordability rates were analysed, with North Shore and Central Auckland the least affordable regions and Wanganui the most affordable place to get into the property market.

Based on the standard household profile from February 2015, it now takes 38.7 percent of median income to service a median priced home in New Zealand. This figure is down from 39.5 percent in January and 41.8 percent five years ago. According to the report, housing remains affordable for families in New Zealand when both adults are working. Despite the positive report card, however, there are still vast discrepancies in affordability depending on where you live. North Shore is the least affordable place in New Zealand with a rate of 66.4 percent, followed by Central Auckland at 65.8 percent and Manukau at 59.0 percent.

Affordability rates are also above 40 percent in Waitakere, Queenstown and Christchurch, with Wellington City very close at 37.7 percent. Wanganui is the most affordable place to buy property in New Zealand with a rate of 15.3 percent, followed by Invercargill at 21.1 percent, Rotorua at 22.3 percent and Gisborne at 22.5 percent. Affordability has worsened in Auckland and most of the South Island, with rates improving throughout the rest of the country. Single income affordability was down slightly, dropping from 60.2 percent in January to 59.0 percent.

The AMP360 Home Loan Affordability report also analyses first-home buyer housing affordability, with sales data from the Real Estate Institute of New Zealand (REINZ) used to identify the median house price of the cheapest 25 percent of homes. Using this profile together with the 40 percent limit, housing was reported as affordable in all parts of the country except Auckland with a rate of 23.8 percent. North Shore and Central Auckland once again topped the chart with 54.2 percent and 47.6 percent respectively, with first-home buyers in Wanganui the best placed with an affordability rate of just 8.6 percent.

Despite positive housing affordability rates throughout most the country, high prices in Auckland remain a serious concern. Average weekly mortgage payments climbed from $548 in February 2013 to $733 in February 2015, easily outpacing the rate of income growth over the same period. According to recent March sales figures from, strong property prices in Auckland are likely to continue. "With the slight fall in the number of new listings in March, sellers are in a good position to maximise the value of their homes," said chief executive Brendon Skipper.

ASB senior economist Chris Tennent-Brown also thinks the Auckland market will remain strong, saying "March housing data confirmed that the strength in the housing market is showing no signs of waning. If anything, the pressure in the housing market is lifting, and within the latest data showing an early sign of broadening beyond the Auckland-cantered theme of the past year... Saying that, the Auckland housing market is by far the most stretched region from an affordability perspective. We expect price appreciation in Auckland will continue this year, as strong population growth, low mortgage rates, and tight supply all play their part in this market, which represents around 39% of nationwide sales."