The number one answer to housing affordability issues is addressing land supply, Building & Construction Minister Nick Smith said after new data added to indicators of how difficult it has become for first-home buyers in Auckland to get on the property ladder.
Smith said he has been encouraged by flattening prices in Auckland, and referred to increasing affordability levels in Christchurch due to extra land coming on stream, as indicating that should also work for the Auckland market.
The Ministry of Business, Innovation and Employment (MBIE) on Wednesday released a long-awaited government housing affordability measure for first home buyers, detailing data up to June 2015. MBIE said the series – worked on since 2012 – was still experimental, and would be made more current over the next six to nine months. MBIE is also working on reducing the lag from 18 to six months.
The series is similar to Interest.co.nz’s Home Loan Affordability Index in that it focuses on affordability for lower-quartile housing due to the fact that first home buyers typically target this segment of the market.
It also incorporates the government’s ‘IDI’ household-level income data. For potential first home buyers, it calculates how much money they would have left over if they were to transition from renting to home ownership by purchasing a 'modest' home in the area in which they currently live.
The new 'HAM Buy' index includes a National Affordability Benchmark, being the median affordability for homeowners and renters in 2013. A growing number beneath the benchmark indicates housing is becoming less affordable.
The series showed that in Auckland, the proportion of households below the benchmark in mid-2015 was 86%, having “steadily worsened” since 2013 against the national trend, which had remained steady at about 81%.
In contrast, affordability for first home buyers in Canterbury improved over that time, with the proportion of households below the 2013 benchmark at June 2015 at 78% from 84% at the end of 2010.
In relation to improving affordability in Canterbury, the MBIE release states: “This increasing affordability for first home buyers in Canterbury between 2011 and 2015 was due to average household incomes in Canterbury growing faster than housing costs after the 2010 and 2011 earthquakes.”
Smith was asked by media in Parliament Wednesday whether the 86% figure for Auckland concerned him. He responded that the 2013 benchmark was “quite a complex measure.”
“The more important thing for me is the trend. I don’t think it’ll come to anybody as a surprise that housing affordability has deteriorated as those house prices in Auckland have risen quite sharply,” Smith said.
“What I’m encouraged by is, in a market like Christchurch, housing affordability has improved very considerably as a consequence of measures to free up the supply of land. It provides a clear signal of the sort of measures that will work in other markets like Auckland.”
"The number one answer to housing affordability is getting on top of the land supply issues, of which the government’s been quite aggressive with the special housing areas, with changes to the RMA, and with the urban development national policy statement," Smith said.
A spokeswoman for Smith confirmed that his Christchurch comment related to increased supply having kept down the housing cost side of the equation. This had also happened to a greater extent since 2015, she said.
Meanwhile, the new MBIE series also details rental affordability. “Renting in New Zealand is consistently more affordable than buying a first home,” the department said.
Nationwide, 67% of renters were below the 2013 benchmark at June 2015 – the latest available data – down from just over a peak of 70% in 2013. In Canterbury, the latest figure was 61%, down from a peak of 75% at the end of 2010. In Auckland it was 63% from a peak of 67% in March 2013.