Home affordability improves, market remains subdued

Homes are as affordable now as they were six years ago, according to the latest Home Affordability report from Massey University.

The national affordability index improved 11.1 per cent over the past year, which is good news for first-home buyers.

It improved by 2.7 per cent during the quarter ending May 2010 and is now about the same level as it was in 2004.

The average weekly wage rate increased by $3.70 over the quarter, but this was offset by a 0.16 per cent decrease in the average monthly mortgage interest rate.

Professor Bob Hargreaves, who compiled the report, says the housing market remains subdued with the national median house price static.

"This is due to tighter lending criteria used by most lenders, warnings about pending mortgage interest rate increases, changes to the taxation treatment of rental houses resulting in reduced total returns for investors and the slow recovery in the world economy," he said.

Eight out of 12 regions showed improvements in affordability during the last quarter with the Waikato (7.6 per cent) and Manawatu/Wanganui (7.2 per cent) recording the biggest leaps, followed by Taranaki (6.2 per cent), Hawke's Bay and Wellington (both 4.5 per cent), Auckland (2.5 per cent), Nelson/Marlborough and Canterbury/Westland (both 2.1 per cent).

The regions showing a reduction in affordability were Northland (2.4 per cent), Central Otago Lakes (2.2 per cent), Otago (0.9 per cent).

Southland retains its spot as the most affordable region with an index of 63.2 per cent of the national average, despite a drop of 0.7 per cent affordability from the last quarter.

Central Otago Lakes is the least affordable region, with an index of 138.3 per cent of the national average, followed by Auckland (122.3 per cent), then Nelson/Marlborough (105.9 per cent).

- NZ HERALD