Finance Minister Bill English: Auckland property prices may fall

Data released last week by the Real Estate Institute showed that median house prices in Auckland had increased by 25.4 per cent to $771,000. Photo / NZ Herald

The number of people willing to pay higher and higher prices for an Auckland house must start shrinking soon, and bring down prices, Finance Minister Bill English says.

He was commenting on data last week released by the Real Estate Institute showing that median house prices in Auckland had increased by 25.4 per cent to $771,000.

"Clearly at the moment there are New Zealanders who believe that they can afford that kind of house price," he told reporters at Parliament.

"Now the number of them who can [pay], must be shrinking because the ratio of the house price to incomes is getting up to nine or 10 times and that is, by any global standard, very expensive."

Asked if the independent Reserve Bank should introduce an income to loan ratio for home loans on Auckland residential property, he said it was up to the bank.

It was already bringing in new constraints on Auckland residential investors on November 1 - requiring them have at least a 30 per cent deposit.

"There are other tools they could possibly use but any of them are going to be a bit short-term."

The fundamental issue was that a lot of people wanted to live in Auckland, interest rates were fairly low, and the system had not been building houses fast enough to meet demand.

"Auckland Council has got a lot better at that. The numbers of houses getting built has risen quite strongly and will continue to rise and we'll see what happens with that rate of increase.

"Pretty much anywhere else that markets have gone up that fast, they have dropped back at some stage."

Mr English praised the Auckland Council for setting a new affordability target - to halve the ratio of household income to house prices by 2030.

That debate with Auckland Council was usually about drawing lines on maps, he said, but for the first time Auckland city was now paying attention to what it cost people for a house.

It would take some time for Auckland Council to implement its target "but that is the sort of measure, which in the future, should lead to planning rules that enable more houses when they are needed".

Labour housing spokesman Phil Twyford said Auckland house price rises, using CoreLogic Australia data, were larger than Sydney's with its price rise in the past year growing at 16.7 per cent and Auckland at 22.6 per cent.

Auckland's median price was now only $68,000 less than Sydney's even though New Zealand incomes were much lower, he said.

Housing Minister Nick Smith said the average price of a Sydney house was $930,000 and the average price in Auckland was $741,000.

A median price is the price in the middle of the whole range of prices used, whereas an average price is the sum of the prices divided by the number of sales.