Home affordability report shows difficult positions first-home buyers are in as gap widens between property and pay.
Kiwi wages have risen $34.53 on average in the past year while house prices have skyrocketed $38,000.
The dramatic comparison of real estate prices outstripping people's pay is revealed in Massey University's Home Affordability Report quarterly survey, released yesterday.
Written by Professor Bob Hargreaves, it showed a national deterioration in home affordability in the past year and a rising gap between house prices in larger urban centres and provincial centres.
National housing affordability deteriorated by 7.6 per cent in the 12 months ending May 2014, the report found.
"There was no real surprise in this result because the average annual wage increase of $34.53 was not enough to offset a $38,000 increase in the national median house price and an increase in the average mortgage interest rate from 5.57 per cent to 5.64 per cent.
"This deterioration in affordability is likely to continue as recent interest rate increases are incorporated into the debt servicing costs for home mortgages."
Salvation Army social policy analyst Alan Johnson said the situation was becoming "impossible" for some house hunters.
"People on fairly good incomes of $80,000-plus have aspirations to buy a house but the reality is they're looking at buying a house of more than $600,000. It's virtually impossible for them to do it. Even young middle-income households face an impossible task now. It's an unenviable decision."
New Zealand had very distinct and separate housing markets: Auckland and Christchurch, where volumes and prices were rising, and the rest of New Zealand, which was more stable. House prices would soften because of interest rate rises, he predicted.
ASB economist Christina Leung said interest rates were driving housing affordability deterioration but a jump in dwelling consents over the past year was encouraging.
The study showed affordability deteriorated in Central Otago/Lakes (by 12.2 per cent in the previous 12 months), Canterbury (10.6 per cent), Auckland (9.1 per cent), Waikato (4.8 per cent), Northland (3.5 per cent), Wellington (3.4 per cent) and Hawkes Bay (0.7 per cent).
Affordability improved in Southland (14.4 per cent), Taranaki (8.4 per cent), Manawatu/Wanganui (6.2 per cent), Nelson (2.2 per cent) and Otago (0.8 per cent).
Massey's real estate analysis unit used average weekly earnings and interest rate figures from Statistics NZ and the Reserve Bank, and compared those with data from the Real Estate Institute to reach its conclusions.
Meanwhile, new house-building consents in May were at their highest in seven years. Statistics NZ data showed the number of new dwellings for which consents were issued was back to the levels of September 2007.
But they are still below the series peak in 2004, says business indicators manager Neil Kelly.
Nationally, 2125 new dwellings gained consents in May, including 195 apartments (down from 432 apartments in April). Apartment numbers vary a lot from month to month.
The regions with the most consents for new dwellings were Auckland, with 611 (including 109 apartments), Canterbury 605 (including 46 apartments) and Waikato (192).
"A total of $1.2 billion of building work was consented in May, with $842 million of residential work and $370 million of non-residential work," Statistics NZ said.
Registered Master Builders Association chief executive Warwick Quinn said he expected 23,000 to 24,000 residential building consents to be issued this year, up from 21,300 last year and 16,929 in 2012.
Auckland and Canterbury still make up nearly 60 per cent of all activity and he predicted this would continue.
Identification of special housing areas in Auckland, and more recently Wellington, had not yet been manifested in any upturn in consenting levels, but an immediate response was never likely given it took time to work through the feasibility analysis and then the resource and building consent process, but the results should come, he said.
Housing Minister Nick Smith said the consent data was encouraging, particularly in Christchurch.
"The Government has a wide programme of work in place to address New Zealand's housing challenge. There is no magic bullet.
We are making good progress - we are freeing up land supply, reducing building material costs, reining in development contributions, cutting compliance costs, investing in skills and productivity in the construction sector, and supporting first-home buyers through our Welcome Home Loan and KiwiSaver First Home Deposit Subsidy schemes."
Read the full report online here: tinyurl.com/mayafford