By KAREN CHAN
The housing market is showing signs of becoming overheated, as
soaring house prices attract speculators, AMP said in its latest home
affordability report.
It found a surge in house prices in the June quarter more than
outweighed lower interest rates and a slight increase in wages, making
homes less affordable.
AMP's home affordability index fell 3.2
per cent in the quarter, resuming the downward path it has been on since
December 2001 after a slight improvement in the first quarter of this
year.
"Given that low offshore interest
rates will continue to push down fixed and floating mortgage rates, the
fuel driving the strength in house prices will keep flowing for the time
being," AMP managing director Ross Kent said.
The median house price rose 7.7 per
cent in the quarter, to an all-time high of $210,000.
Mr Kent said signs the market was
becoming overloaded were evident in high house prices compared to
incomes, falling rental yields and the recent move of speculators into
the market.
Massey University senior lecturer
Graham Crews said the property market was in an "abnormal
state", because the global economic situation might make it hard
for the Reserve Bank to contemplate raising interest rates as it usually
did when house prices rose on sustained buying.
But Mr Crews didn't believe a house
price bubble existed now.
"There are hotspots of
speculation, but speculation is not at the same level it was at in the
mid 1990s," he said. "Buyers are a lot more prudent about
decision making."
In five of the 11 regions surveyed,
houses became less affordable in the June quarter, including
Nelson/Marlborough, Hawke's Bay and Wellington.
Otago reported the strongest
improvement in affordability, followed by Taranaki.
Houses became more affordable in just
two regions for the year to June - in Northland and Manawatu/Wanganui -
but less affordable in nine regions. Nelson/Marlborough reported a 35
per cent fall in affordability, followed by Otago, which had a 16 per
cent drop, and Hawke's Bay, where home affordability fell over 13 per
cent.
Paul Harvey, general manager of real
estate agent Harveys Hawke's Bay, said demand in his region continued to
outstrip supply, driven by an influx of national and international
migrants, investors and first-time home buyers.
"There is no indication that the
market will slow down any time soon," he said.
