Steve Hart: House prices drop a little

The survey covers December to February and shows that slightly lower median house prices are the main driver of improved affordability. Photo / Janna Dixon

Home affordability has improved across the country according to a survey by Massey University. But problem areas persist in areas such as Northland, Hawke's Bay and Central Otago Lakes.

The survey covers December to February and shows that slightly lower median house prices are the main driver of improved affordability.

Most regions saw a decline in median price but there were increases in Northland ($25,000), Hawke's Bay ($29,950) and Central Otago Lakes ($53,500).

The country's most affordable regions are Southland (down $25,000), Manawatu/Whanganui (down $9000) and Taranaki (down $10,000).

Associate professor Graham Squires, author of the Home Affordability Report — which takes into account the cost of borrowing, house prices based on sales and people's income — says while there is a small drop in median prices (1.9 per cent down on the previous quarter), year-on-year changes show a national increase of $35,000.

"We saw a resurgence in house prices for many regions last quarter, followed by a fall-back for some and a rise for others," he says. "The very different sub-market characteristics of regional property may play a role in this regional volatility — particularly when we look at Hawke's Bay and Central Otago Lakes compared to the dominant market of Auckland."

He says the surge in house prices in Central Otago Lakes means the region's median house price is now 15.4 times its average annual wage, compared to Auckland where house prices are 13.1 times annual wages.

The ongoing housing issues in Auckland are addressed by Westpac economist Satish Ranchhod writing in the bank's Auckland Housing Market Conditions.

He says strong population growth and relatively low levels of home building in recent years have seen the housing shortage in Auckland rise to acute levels.

"For every 1000 people in Auckland there are now about 320 houses. That's down from 340 in 2013, and is a far cry from other parts of the country, where there are about 430 homes for every 1000 people," he says.

Ranchhod believes the housing shortage in the SuperCity will be painful for some years.

"Even assuming a pick-up in home building, it will be several years before building levels catch up with population growth, and even longer for the shortage of homes to be eroded," he says.

"Record levels of net migration have seen population growth in Auckland surging to rates of more than 2.5 per cent in recent years. In part, that has been due to an increase in the number of new arrivals from other countries.

"We've also seen higher-than-usual numbers of New Zealanders coming back from abroad and lower-than-usual departures of New Zealand citizens."

Ranchhod predicts that net migration and population growth will gradually ease, arrivals have levelled off and departure numbers are trending upwards.

"We expect that these trends will continue for the next few years, and they will be reinforced by a planned tightening in migration settings by the new Government," says Ranchhod. "Auckland's population will continue growing at a strong pace for some time yet."