Housing affordability in Auckland better than in 2008, says Nick Smith

Minister for Building and Housing, Hon Dr Nick Smith. Photo / Dean Purcell

Housing affordability is no worse in Auckland than in 2008, Housing Minister Nick Smith says.

Dr Smith pointed to home affordability data from Massey University while appearing before a Parliamentary select committee today.

He was grilled by Labour's housing spokesman Phil Twyford on measures being taken by the Government to try to dampen Auckland's surging property market, and on the pace of construction.

Afterwards, he told media that, with the exception of Auckland, houses were significantly more affordable now than when the current National-led Government came to power.

And affordability in Auckland was slightly better than 2008, Dr Smith said - although most properties were still out of reach for first homebuyers.

"In the debate around housing affordability, I do challenge people to not just look at house prices, but also look at interest rates that are at the lowest level for 50 years," Dr Smith said.

"In 2008 you had interest rates of about 11 per cent, and now they're 4 per cent. And that has a really strong impact on the capacity for people to be able to service mortgages."

Massey University's home affordability report assesses housing affordability by comparing the average weekly earnings with the median dwelling price and the mortgage interest rate.

Auckland's index in February 2008 was 38.73, compared to 33.8 in February this year. A low index equals improved affordability.

"It is still incredibly high -- that nearly 100 per cent of the average person's income would be required to service their mortgage," Dr Smith said.

"Under the Massey index, housing is not affordable for first homebuyers in that market of Auckland. But it is not as bad as it was in 2008."

Finance Minister Bill English this week warned that some homeowners could be put under pressure when interest rates rise, particularly if that occurred at the same time as a forecast fall in net migration.

"Buyers need to pay attention to the fact that interest rates will inevitably rise even if in the next couple of years they can't see that happening quickly. The debt related to mortgages lasts a long time," Mr English said.

Last month's Budget forecasts show net long term migration peaking at a net 70,700 inflow in the year to June 2016, dropping back to the long term average of 12,000 by 2019.