Prices were up nationally by 2.9 percent in the quarter. Photo: 123rf
Home ownership is now significantly more affordable than it was a year ago, a new report suggests, and the trend may be set to continue.
Massey University says housing affordability improved 9.3 percent in August to November of last year, even though median house prices only fell in two regions.
Prices were up nationally by 2.9 percent in the quarter but only Northland and Southland, with prices 18 percent and 16.1 percent in the quarter, had affordability deteriorate. Nelson had a 17.8 percent increase in affordability.
The affordability improvements were largely driven by falls in interest rates and improvements in income.
Mortgage rates dropped 0.86 percent in the quarter and average incomes rose 0.7 percent.
The Canterbury region experienced the largest income increase at 2.6 percent.
"The decline in mortgage rates has been a crucial factor in improving home affordability," Massey Business School senior lecturer Arshad Javed said. "Coupled with modest income growth, we are seeing a shift toward better conditions for first-time home buyers."
Year-on-year affordability was up 19 percent, even though house prices were up 0.6 percent. Every region became more affordable.
Mortgage interest rates dropped 1.31 percent over the year and wages rose 2.9 percent.
West Coast, Marlborough, Wellington, Waikato and Canterbury all had improvements in affordability of more than 20 percent over the year.
Javed said there had been a "long-awaited stabilisation of the housing market".
Gareth Kiernan. Photo: RNZ / Rebekah Parsons-King
"If interest rates continue on this trajectory and incomes keep rising, we can expect further improvements in affordability."
He said the report was good news for first-home buyers. The trend started to improve in March last year. With rateable value having dropped in many parts of the country and interest rates declining, there was an opportunity for buyers, he said.
As a percentage of the national average, Tasman was the least affordable region at 123 percent, followed by Auckland at 120 percent and Bay of Plenty at 113 percent.
West Coast was lowest, at 55 percent.
Infometrics chief forecaster Gareth Kiernan said even the improved affordability would look poor compared to history. He said the number of years it would take to save a deposit dropped during 2023 and into early 2023, which prompted more first-home buyers to enter the market.
"Reaching that required deposit threshold became easier once house prices dropped 15 percent to 20 percent, even if mortgage rates were relatively high and taking on a mortgage then meant large repayments... that initial pick-up in [first-home buyers] after the price drop petered out last year, with more investors coming back into the market as the tax rules became more favourable."
Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
