12 Nov 2010

House prices still high relative to NZ incomes

10:38 am on 12 November 2010

Economists and housing experts say a slump in house sales and falling prices don't yet go far enough to make housing affordable for many New Zealanders.

Real Estate Institute figures show 3903 properties were sold during the month, a third less than in October last year.

It is the first time sales have fallen below 4000 in October in at least 18 years.

The average sale price remained flat at $350,000 for the third straight month.

For most of this decade, the rise of house prices has driven more people into rental accommodation.

Home ownership rates have fallen from almost 74% two decades ago to 68% most recently.

At present, prices are now 6.5% lower than the pre-crash high in 2007, a price drop that Council of Trade Unions economist Bill Rosenberg thinks may help more people buy a house.

However Christchurch housing researcher Hugh Pavletich says house prices remain higher than in many similar countries and a 6.5% drop is not enough to make homes affordable for many.

Mr Pavletich, who reports on New Zealand for the US-based housing think tank Demographia, says new homes should be provided on the fringes of New Zealand cities for $140,000 to $160,000.

Goldman Sachs economist Philip Borkin he says at present levels, house prices are still expensive relative to average incomes.

Mr Borkin says prices and sales rose during 2009 but have since fallen back to near the lows of 2008.