Hon Dr Nick Smith

Minister for Building and Housing

12 July 2016
Housing affordability improvements welcomed

Independent data published this week by Massey University showing a 6 per cent national improvement in housing affordability during the past year is welcome, Building and Housing Minister Dr Nick Smith says.

“This independent index on housing affordability shows the average Kiwi home is 6 per cent more affordable today and 40 per cent more affordable than when National came to office. It highlights that in the debate over house prices and income-to-house ratios, the lowest interest rates in 40 years are being overlooked.

“The Massey University Housing Affordability Index has been published nationally and regionally since 2000. The index for May 2016 is 23.2 as compared to 24.7 in May 2015 and 32.9 in May 2008.

“The index improved in 10 of the 12 regions during the past year. It shows affordability improved during the past year in Auckland, Wellington and Canterbury but declined in the Waikato/Bay of Plenty and Central Otago Lakes regions.

“Interest rates are absolutely relevant to the debate on housing affordability, particularly for first home buyers. People very rarely buy a home with upfront cash, instead paying for it over many years out of weekly earnings through a mortgage.

“The monthly repayments on a median home of $346,458 in 2008 would have cost $603 per week at the floating rate of 10.88 per cent, while a median home today, worth $506,000, would cost $538 a week at today’s floating rate of 5.64 per cent.

“The improvements in housing affordability shown by the Massey University Index are reinforced by the similar index provided by interest.co.nz, which measures the portion of a person’s income spent on servicing their mortgage.

“New Zealand does have housing challenges, because we are doing well and our population is growing strongly. However, as this independent data confirms, the lowest interest rates in 40 years have to be included to understand what is occurring in our housing markets.”

http://img.scoop.co.nz/media/pdfs/1607/Massey_Affordability_Index_graphs.pdf

http://img.scoop.co.nz/media/pdfs/1607/Massey_Affordability_Index.pdf

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