House price growth may have slowed while building activity may be on the rise, but these factors are doing little to alleviate Auckland’s affordability issues.
While the ratios vary slightly between different analyses, it is generally agreed that the average property price is disproportionately high when compared to the average income.
This situation attracted a flurry of attention earlier in the year when several major international surveys ranked Auckland as one of the most unaffordable cities in the world to buy property in.
Now, it is attracting attention again.
Knight Frank residential research specialist Kate Everett-Allen has highlighted Auckland’s affordability issues to landlords.co.nz.
She was commenting on the results of the consultancy’s inaugural Global Residential Cities Index.
Auckland was ranked as the second highest performing city housing market in the new index, which will track prices in 165 key urban residential markets.
Everett-Allen said the index shows that Auckland’s house price growth went up by 25.4% in the 12 months to December 2015.
Only the Chinese city of Shenzhen, in which house price growth rose by 47.5%, could beat it.
Auckland house prices have slipped marginally in the first quarter of 2016, Everett-Allen said.
“However, the underlying market fundamentals of high demand (high net migration and record low interest rates) set against limited supply (inventories are low and construction slowing) are expected to fuel further price growth in 2016.”
This means affordability will remain an issue for Auckland as it is as one of the least affordable markets worldwide when comparing house prices to incomes, she said.
While Knight Frank focused on Auckland’s market, comparative data published earlier this week looked at the New Zealand market overall.
It showed that, in the first three quarters of 2015, New Zealand had the highest house price growth of 23 developed nations.
Labour’s Housing spokesperson Phil Twyford, who publicised the Bloomberg data, said New Zealand’s house prices grew a whopping 10%, which made for a gold medal in housing inflation.
Some property owners will be happy to have seen house prices go through the roof, but growing numbers of Kiwis will never be able to afford to buy a house, he said.
“It now takes nearly half the income of a typical first home buyer to buy a lower-end home in Auckland.”
The situation also meant the Reserve Bank is between a rock and a hard place trying to control inflation without causing a housing bubble, he said.
“The government needs to embark on a massive state-backed house building programme to flood the market with affordable homes, reform the planning rules and crack down on offshore speculators buying up our homes.”
However, Housing Minister Nick Smith told Parliament that, overall, properties are more affordable on a mortgage-to-income basis now than they were in 2008.
He also said that interest rates are currently at their lowest level in 50 years.
“That is why interest rates and keeping them low for longer are pivotal to improving New Zealanders’ chances of being able to own and buy their own home.”
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