by Miriam Bell
Historically low interest rates, tight supply and high net migration mean that, led by Auckland, house prices around the country continue to grow, according to the ANZ’s latest Property Focus report.
But the bank’s chief economist, Cameron Bagrie, said that house prices remain stretched relative to both incomes and rents.
“Strengthening house prices have pushed up the value of the nationwide housing stock to six times household incomes and roughly eight times labour incomes.
“Both are approaching 2007 peaks and are well above the three times level evident prior to the early 1990s.”
This means that affordability has got significantly worse.
Lower mortgage interest rates are helping, but debt servicing to income is going up, Bagrie said.
“Ultimately, incomes are the key determinant to house prices. And labour and household income growth is slowing and is likely to slow further this year.”
While the housing market is still buoyant, with strong sales volumes and record high house price inflation, the report states this “fizz” is likely to tail off.
Bagrie said that much of the recent market buoyancy has probably been the result of sales being brought forward ahead of regulatory changes to be introduced from October.
“A softer economy and the pending Reserve Bank and Government policy changes to cool investor demand are expected to help level out price movements.”
Further, there has been a noticeable easing off in mortgage approvals in recent weeks and this signals a pending housing market lull, Bagrie said.
| « Crazy price rises still the Auckland story | Home affordability improves » |
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