A recent report by the International Monetary Fund (IMF) has revealed that New Zealand’s house prices are becoming increasingly unaffordable.
According to the report, the median house price in the country is currently around 4.5 times higher than average income, some 20 per cent higher than the average of the past 30 years.
Internal research carried out by the Washington-based global institution as part of the IMF report suggests that housing in the country is overvalued by around 25 per cent, having previously been overvalued by between 10 and 20 per cent.
What’s more, the IMF warns that property prices in New Zealand could become much more unaffordable if prices in the country continue to rise and the Reserve Bank of NZ is forced to hike interest rates.
The report said that rising house prices could: “lead to an increase in debt-financed household spending which would put pressure on aggregate demand and increase the risk of an abrupt price correction.”
Recent research from the Real Estate Institute of New Zealand (REINZ) revealed that the number of complete house sales hit a six-year high in April, while property prices have risen by almost 10 per cent compared to where they were a year ago. In Auckland and Christchurch these price rises have been more extreme, rising by more than 14 per cent and 13 per cent respectively.
The average house price in NZ is currently NZ$390,500, while in Auckland the average price is NZ$555,000, the latest REINZ figures show).