Buying that house gets even tougher

Housing affordability has fallen for a fifth quarter in a row after both interest rates and house prices rose again.

Sunday, July 31st 2005, 9:25AM

by The Landlord

AMP's report on housing affordability for the June quarter showed its index fell a further 1.9 per cent and is now down 14.9 per cent for the year. The report, compiled by Massey University's real estate analysis unit for AMP, found affordability worsened most in Northland, where prices rose most sharply during the quarter.

Affordability improved in three of the 11 regions with Nelson/Marlborough/Kaikoura improving 4.3 per cent because of a fall in house prices around Nelson.

Economists have been confounded by housing market strength through much of this year despite falling migration, higher variable interest rates and a slump in affordability. Some have cited a mortgage price war at the end of last year and a trend toward using fixed mortgages, which have lower interest rates, for the surprising strength of the market.

Quotable Value's latest survey showed house prices up 14.2 per cent in the year ended June, compared with growth of 13.5 per cent in the year ended May.

Affordability in Wellington fell 3.4 per cent in the June quarter, dragging affordability down 10.8 per cent for the year. The Canterbury/Westland figure fell 5.5 per cent for the year and is down 22.1 per cent for the year. Waikato/Bay of Plenty was one of the three areas to improve, posting a 0.2 per cent improvement, though it is still down 29.5 per cent for the year. Otago was the other with a 2.8 per cent improvement. Affordability in Northland fell 13.1 per cent in the quarter.

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