Canterbury/Westland recorded the steepest home affordability decline at 12.2%, followed by Otago, down 11.2% and Southland, down 1.4%.
However, one South Island region reported a quarterly affordability improvement. This was Nelson/Marlborough, up 2.2%.
All regions reported an increase in Median Dwelling Prices over the past year. For the second consecutive quarter the South Island led the market up with a strong annual lift in house prices. Otago was up 48.3%, followed by Southland (39.5%) and Canterbury/Westland (35.1%).
AMP Financial Services general manager finance Stewart McRobie said, "During the 1990s the regional market relativity became quite distorted. The South Island lagged behind in the economic growth stakes and this kept house prices down, and home affordability up. But times have changed, particularly since the commodity price improvements from three years ago. The substantial rises in house prices across the South Island have begun to have a significant impact on home affordability."
The South Island figures were against an overall national picture which showed the New Zealand Home Affordability Index improve 2.3% in the March quarter. A fall in the Median Dwelling Price offset a slight rise in interest rates.
The New Zealand Median Dwelling Price dropped slightly, ending the quarter at $231,000, down 1.7% from the all time high of $235,000 reported in November 2003. However, eight of the 11 regions in the Index reported a quarterly lift in Median Dwelling Prices.
Quarterly dwelling sales reached 27,047, up 5.9% on the same period last year but at a three-year low for quarterly growth. Interest rates for the fifth consecutive quarter continued as one of the main drivers in sustaining strong market activity.
"The impact of interest rates on this affordability report is unusual. We haven’t seen this sort of stability in interest rates for many years. In the past few months there has been much talk of interest rate rises but if there has been a rise it’s only marginal," McRobie said.
"Although overall home affordability has improved slightly in this quarter New Zealanders still need to be aware that, as with any investment, they should understand their risk profile and be wary of exposing themselves to a situation where borrowings may outstrip their ability to repay." Massey University senior Lecturer in Real Estate, Graham Crews, said the big trend apparent in the report is the substantial decline in affordability in the South Island over the past year.
"The growth in house prices is a reflection of a return to regional relativity in the national housing market. Strong commodity prices and tourism activity, coupled with active marketing that recognises the strengths of each South Island region, have contributed to the restoration of that relativity.
"People have begun to recognise the strength of the economic base in their regions, whereas in the Nelson/Marlborough region it’s been a case of people chasing the sun and lifestyle," Crews said.
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