First-home buyers are being told to change their expectations if they want to own a property in Auckland after it was named one of the most unaffordable cities in the world.
Those breaking into the Auckland market are viewing homes less affordable than those in New York, London and Los Angeles, according to the Annual Demographia International Housing Affordability Survey, which studies 337 urban markets worldwide.
It found New Zealand has become slightly less affordable in the past year, with median house prices now 5.3 times the median income (a score called the median multiple), up from 5.2. Auckland remains the tightest market in the country - and fourth tightest in the world - with a score of 6.7, although all eight of New Zealand's property markets surveyed ranked "seriously" or "severely" unaffordable.
The next tightest are Christchurch (6.6), Tauranga-Western Bay of Plenty (5.9), Wellington (5.4) and Dunedin (5.1).
The biggest discrepancy between tight markets overseas and Auckland was the type of properties buyers were looking for, Real Estate Institute chief executive Helen O'Sullivan said.
While those in major metropolitan cities such as New York and London were content squeezing into small apartments, many Auckland buyers were still intent on the "quarter-acre pavlova paradise", which they hesitated at looking for in outer suburbs.
"The reality is the further out Auckland goes, the closer we get to Hamilton."
Ms O'Sullivan said people needed to start accepting that "building up" could be more cost-effective than "building out".
First-home buyers in particular needed to be realistic about their budget and not simply "seek out what was deemed to be the coolest suburb to live in", Bayleys Real Estate director Mike Bayley said. "It's all about amending social expectations.
"First-home buyers are generally aged in their 20s and 30s, a generation that wants everything now and a generation that aspires to live in suburbs where their parents reside."
But what they often forgot was that their parents probably bought their first home in a cheaper suburb ... "and when they built up equity in the property over a number of years, they sold and moved progressively up the ladder into where they are now".
Barfoot & Thompson Grey Lynn branch manager Andrew Cosgrave said buyers could face waiting weeks for a property given the competition in his suburb. He said buyers needed to consider their home a long-term investment rather than waiting for a better deal that wasn't coming.
"What tends to happen is you see people who say 'I'm going to wait for prices to go down'. There's a good name for those people and that's tenants," he said.
In the affordability report, Christchurch co-author Hugh Pavletich points to urban containment policies, especially urban grown boundaries, as being responsible for the rising price of housing relative to income.
Read more: Auckland stays near top of unaffordable list
- APNZBy Kieran Campbell @KieranCampbell Email Kieran