Home affordability holds up

Housing affordability slipped only marginally in the September quarter after showing its worst decline in 7½ years in the June quarter, according to the latest AMP Banking/Massey University report.

In the latest quarter, a small rise in mortgage interest rates was offset by a slight drop in interest rates which meant houses nationwide were just 0.1% less affordable than in the June quarter. But houses were 4.4% less affordable in September than a year earlier.

The declines in affordability are modest in the context of the heightened activity in the housing market. The survey notes house sales were up 21.1% in the September quarter and for the year ended September they were up 31%.

"Given the sales activity, one would expect prices to be going through the roof, and certainly some real estate agents would have us believe that is the case," says Graham Crews, senior lecturer in real estate at Massey.

"But the bulk of the middle housing market is stable and what we’re seeing is more a price recovery than a speculative bubble appearing," Crews says. He notes that house prices nationwide rose 5.1% in the last 12 months which "appears relatively modest and is good news for home buyers."

As one would expect, home affordability has fallen most in Auckland, down 0.8% in the September quarter and down 10.1% in the year ended September. The median house price in Auckland rose 10% in the 12 months ended August.

AMP’s head of retail banking Michael Guggenheimer says home loan interest rates are expected to remain stable for the rest of the year, signaling ongoing strength in the market.

Massey prepares this quarterly report for AMP Banking combining data on house prices, mortgage rates and average weekly earnings.

AMP Banking Home Affordability Survey