Housing affordability plummets in June quarter

Thursday 5 August 2004

Rising house prices and interest rates in the June quarter caused the steepest decline in home affordability since the December 1996 quarter, the latest AMP Home Affordability Report shows.

By The Landlord

The index declined 7.9 per cent in the quarter with the Auckland region leading the way with an 11.2 per cent decline.

The annual decline in affordability was 8.5 per cent -- the eighth consecutive fall in affordability in that series.

AMP said the drop was mainly due to rising home prices. The median price of a home rose 7.4 per cent to $248,000 in the June quarter.

A 1.5 per cent lift in average weekly earnings, was insufficient to offset the rise in house prices and interest rates.

Twice during the quarter the Reserve Bank hiked the Official Cash Rate by quarter of a percentage point. Retail banks hiked mortgage rates commensurately.

"We've had two years of steady rises in the property market and that has severely impacted home affordability," said AMP's savings and investment manger Roger Perry.

Although heralding a slowdown in residential sales, the latest Real Estate Institute figures point to a continued lift in house prices led by a strong showing from the Auckland region, Mr Perry noted.

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