Where have the affordable suburbs gone?

Thursday, 21 March 2019

There are now no suburbs in Auckland with a median value of less than $500,000.

Anyone who's been in the market for a first home in recent years would tell you that things have become tougher.

But new data from CoreLogic shows just how much more difficult it is to buy a house now compared to five years ago.

The research firm has released Mapping the Market, which shows the price movements since 2014 around New Zealand.

Five years ago, 71 per cent of all suburbs nationwide had a median value below $500,000. Today it is 44 per cent.

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Broker Glen McLeod said a household of two people earning the median income of about $52,000 a year could expect to be able to borrow up to $650,000 between them if they had sufficient deposit, no children and no other debt.

Assuming they had a 10 per cent deposit, in 2014 that would have given them access to 88 per cent of New Zealand's suburbs and 51 per cent of Auckland's. Today they could afford to buy in only 68 per cent of suburbs across New Zealand and only 14 per cent in Auckland.

In Auckland, 13.8 per cent of suburbs in February 2014 had a median value of at least $1 million. That has now risen to 48 per cent. There are now no Auckland suburbs where the median value is less than $500,000.

CoreLogic head of research Nick Goodall said it would have an impact on buyers. 'Five years ago you might have been able to afford Mt Wellington but now you're looking further south.'

He said prices were flattening, particularly in Auckland, and that looked likely to remain the case for some time.

But the fundamentals of the market were still strong, including good growth in gross domestic product, low unemployment and low interest rates.

Those factors meant it was unlikely that people would be forced to sell their homes, he said, which was often what turned market softness into actual price falls.

Even if interest rates were to rise, it was unlikely to have as much of an impact here as it would in Australia, where prices have fallen, because the majority of New Zealanders are on fixed-term home loans.

Other regional parts of New Zealand were seeing stronger price growth than Auckland, he said, with local economies going well and more people being able to work remotely.

In Wellington, there has also been a rapid increase in prices. In 2014, 67 per cent of Wellington suburbs had a median property value of less than $500,000. Now it is 14.9 per cent.

Dunedin also shot ahead - in February 2014, 61.7 per cent of Dunedin suburbs had a median value below $300,000. In February 2019, just one remained: South Dunedin. At the end of February 2014, four suburbs had a median property value greater than $400,000, but none above $500,000. Forty suburbs now exceed $400,000, and 14 exceed $500,000.

Christchurch has been the part of New Zealand with the most limited house price growth.

Across Christchurch, five suburbs now have a median property value of more than $800,000. In 2014, that was not much different, at four suburbs. Fendalton was second behind Kennedys Bush in 2014; now those two suburbs have swapped places in the rankings.

At the end of February 2014, 51.3 per cent of Christchurch suburbs had a median property value below $450,000, compared to 38.2 per cent now.