Westpac economists recently produced a detailed report into housing market conditions across New Zealand, with the countries' three major centres each facing unique problems and challenges. While housing affordability and market pressures due to population growth are more obvious in the heated Auckland market, Wellington and Canterbury are also facing issues with housing supply and reduced building activity.
The Auckland property market has been heated for a long time now, with strong population growth and low levels of home building putting pressure on housing affordability. Auckland's population grew by 11 percent between 2011 and 2016, with a further 17 percent rise forecast between 2018 and 2029. The report estimates a current shortfall of around 35,000 homes in the city, representing 7 percent of the housing stock. With less homes and more people, the average number of people per dwelling increased from 2.92 to 3.07 between 2011 and 2016.
Property prices in Auckland increased by 95 percent between February 2011 and 2017, with rents up 31 percent over the same period despite income growth of just 23 percent between 2011 and 2016. The median price for a home in Auckland was $800,000 in February 2017, with the median annual household income around $90,500. According to the report, "That gives a very high price-to-income ratio of 8.8, a level that makes houses in Auckland some of the least affordable in the world." While tighter lending restrictions have sapped some momentum out of the Auckland market, the gap between supply and demand will create ongoing pressure for some time to come.
The housing market in Wellington is also heating up, thanks to an under-building of homes in recent years and a shortfall in rental properties. Property values in Wellington increased by 36 percent between February 2011 and 2017, with rents up 21 percent and income up 20 percent. Wellington has also seen an increased disparity between supply and demand, with the region’s population growing by around 21,000 people between 2011 and 2016. "Looking at longer term trends in the region, we estimate that relative to its population Wellington currently has around 3,000 too few homes." said the report, which also mentioned a growing concern regarding a shortfall of rental properties in the region.
The property market in Canterbury is in a period of transition, with downward pressure on prices and reduced construction activity after the immediate post-earthquake flourish. House prices increased 29 percent between 2011 and 2014, and a further 7 percent between 2015 and February 2017. While rents increased 29 percent from 2011 to 2014 due to a sharp decrease in housing stock, they fell by 10 percent between 2015 and February 2017. "Six years on from the initial quakes, and reconstruction is now well advanced, with around two-thirds of planned work complete." said the Westpac report, with a more moderate period of house building forecast along with a reduced opportunity for capital gains and lower rental yields.
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