Houses more affordable - but it may not last

Photo / Hawkes Bay Today

More affordable homes are driving enthusiasm in property sales, but experts warn the relatively cheaper housing may not last.

In a Herald-Nielsen survey of 2300 people, 66 per cent of respondents felt this summer would be a good time to buy or sell a house.

This came as a major real estate firm reported improving sales, and research was released showing housing continued to become more affordable in the three months to November.

A Massey University study showed affordability had improved by 20.3 per cent over the last year, and by 2.6 per cent in the last quarter.

Professor Bob Hargreaves, who compiled the report, said low interest rates were behind the improvement.

But he said the more hawkish statement issued by the Reserve Bank made it less likely low interest rates would be sustainable through the year.

"Interest rates for 2010 are more likely to go up, and house prices will rise too. Although we've had this improvement up to November 2009, things may not be so good in 2010."

He also said there were some moderating factors for house buyers.

"Finance is not as easy, as banks have less to lend out. People will find it a little harder to get money."

The Home Affordability Report showed the most affordable regions for property were Southland, Otago, Manawatu and Wanganui.

The most costly was Central Otago Lakes, followed by Auckland. In third place was Northland - the highest it has registered in the list of least affordable regions.

The optimism of the Herald survey respondents was reflected in the Auckland market - real estate company Barfoot and Thompson reported its busiest December in Auckland in two years, selling 648 properties.

Managing director Peter Thompson said Auckland houses were fetching prices not seen since the 2007 property boom. The average house price for December was $552,933 - the highest in two years.

This was in line with Real Estate Institute of New Zealand figures, which showed rises in the last quarter.

Mr Thompson said buyers were committing to houses on the basis of lifestyle choice and value for money, as opposed to speculation.

Professor Hargreaves noted signs of growth in the market were relative, as they followed a recession, during which homeowners tended to stop selling.

"House sales are still nowhere near where they were during the boom. The volume of sales has come up, but you have to remember what you're comparing it to."

The home affordability index weighs house prices against average weekly earnings and mortgage interest rates.