Housing is becoming less affordable in New Zealand, despite easing property value rises over recent months. According to Massey University's latest quarterly Home Affordability Report, the national affordability index fell 11.4 percent for the year ending August, with wages only rising fractionally in comparison to house prices.
"The average annual weekly wage increase of $28.06 was not enough to offset a $30,000 increase in the national median house price and an increase in the average mortgage interest rate from 5.52% to 5.86%," the survey found, adding "Indications are affordability will remain difficult for the remainder of 2014 and into 2015... The average interest rate is likely to continue to increase as borrowers roll over their mortgages."
While most of New Zealand experienced a decrease in housing affordability, three areas did have improved results on an annual basis. Affordability was up in Manawatu/Wanganui by 2.7 percent, Taranaki by 1.2 percent, and Northland by 0.2 percent. These small improvements were more than overshadowed by downturns across the rest of the country, however, with housing at its most unaffordable level in the booming Auckland market.
Affordability deteriorated in nine regions, including Auckland down 14.4 percent, Canterbury down 11.7 percent, and Southland down 9.4 percent. Other less affordable regions included Otago down 9.2 percent, Central Otago/Lakes down 8.9 percent, Waikato down 7.8 percent, Wellington down 7.7 percent, Hawkes Bay down 2.1 percent, and Nelson/Marlborough down 1.2 percent. These results see Auckland at 138.6 percent of the all districts national index, followed by the only other area above the index, Central Otago/ Lakes, at 119.3 percent.
While property prices are easing in some parts of New Zealand, average weekly wages don't even come close to offsetting climbing house prices and interest rates. According to the Massey report, wages have actually fallen over the last quarter: "Also over the last quarter the national average weekly wage actually fell by $5.75 per week and small declines in the average weekly wage were evident in ten out of twelve regions."
Despite a drop in average wages, however, New Zealand employment confidence rose to a six-year high in the latest Westpac McDermott Miller Employment Confidence Index survey. The index rose to 111.5 in the September quarter from 109.9 in the June quarter, after New Zealand's unemployment rate fell to a five-year low of 5.6 percent as employment growth in Canterbury fuelled the labour market.
The Massey report comes in the wake of new data from the Real Estate Institute of New Zealand (REINZ) and Quotable Value (QV), with their figures showing annual property price increases of 5 percent and 6.4 percent respectively. While prices are still going up across much of New Zealand, and conditions in Auckland remain strong, September results show the lowest annual growth in New Zealand property values for 15 months. Despite these easing conditions, however, housing affordability is unlikely to improve while wages remain low and interest rates continue to rise.