NZ housing market most overpriced - report
Monday 19 May 2014 6:56 a.m.
Prime Minister John Key is playing down findings of an OECD report which rates New Zealand houses among the most expensive in the world.
The paper published by Organisation for Economic Co-operation and Development this month ranks New Zealand's house prices the second worst in the developed world on a price-to-income ratio, and the most overpriced on a price-to-rent ratio.
It says that relative to rents, New Zealand house prices are 70 percent too high.
Mr Key denied this proved the country's housing market was in crisis.
"If you look at what's driving the housing market in New Zealand, it's a combination of factors. One is just buoyancy in the overall economy and high levels of employment... that are encouraging people to want to go into the housing market," he told Radio New Zealand on Monday.
He said there was no indication this was going to slow.
"If anything, if you look at the Budget, it made it quite clear there will be strong growth in the years ahead."
He tried to deflect the statistics by referring to house price rises of 96 percent between 1999 and 2008 under the last Labour government.
Mr Key also said Auckland prices were still well below those in cities such as London and Sydney.
The OECD report states New Zealand's house prices have had an annual rise in real terms of 8.2 percent. Australia and the United States were next closest, each with 6.6 per cent, followed by Canada with 5.2 percent and Germany with 5.1 percent.
Labour MP Phil Twyford says right now, it takes almost half the average wage to service the average mortgage – but that is set to skyrocket in coming years.
"In five years' time that's projected to reach 63 percent, and in Auckland a staggering 86 percent, of the average wage to service the average mortgage," says Mr Twyford.
Housing Minister Nick Smith says the report shows there are "hard yards" ahead.
NZN / 3 News