Thursday 11 February 2016

Christchurch’s housing affordability improves

Growing incomes, coupled with stabilising rents and house prices, are helping improve housing affordability in Christchurch.

The Christchurch and Canterbury Quarterly Economic Report (December 2015 Quarter), released by Canterbury Development Corporation (CDC) today, says that after the earthquakes the influx of construction workers, households displaced because of damaged housing and the loss of housing stock all contributed to sharply rising rents and house prices and declining affordability. In Christchurch, rents rose and peaked in February 2015 at 49 percent, while house prices peaked at 33 percent above pre-earthquake levels in November 2014.

However, since these highs, rents have fallen now for nine consecutive months and house prices have plateaued.

CDC Chief Executive Officer Tom Hooper says continuing repair work and new construction activity will keep a lid on price growth for some time to come.

“The number of houses available for sale and rent have been steadily increasing since the initial earthquake loss. This is due to a combination of repaired and rebuilt homes coming to market and new homes being constructed in greenfield subdivisions. There are further repairs and rebuilds to come which will keep price and rent growth rates stable.”

At the same time as rents and prices have eased, incomes have been growing. Median household income in Canterbury grew by 11 percent in both 2013 and 2014, in large part due to construction activity and high employment.

“Growing incomes are helping improve affordability for first home buyers in the city. However, for a percentage of the population this still remains a difficult challenge, although the growing income levels do help,” says Hooper.

CDC now estimates it takes 5.05 years for a working age couple, saving 15 percent of gross income, to put aside a 20 percent deposit – down from 5.5 years in 2014 but still above the 4.5 years it took pre-earthquake. Affordability in Christchurch is currently similar to that in Wellington and Hamilton.

Affordability for renters, measured by median rent as a share of median household income, has also improved in 2014-15 but is still well above pre-earthquake levels. CDC expects rent affordability to return to pre-quake levels during 2016.

The CDC economics team forecast in the report that for 2016:
Economic activity will remain at a high level, although growth rates have eased.
Dairy prices will remain volatile throughout 2016 as sellers try to increase the volume sold in a market sensitive to oversupply.
Construction activity is expected to remain steady at the current busy levels for the next two to three years, with the sector operating near peak capacity.
The unemployment rate of 4.1 percent in Christchurch is low by historic standards (below the national rate of 5.3 percent) but unlikely to go any lower in the medium term, with the possibility it may increase slightly as specific rebuild projects wind up.
Certain sectors can expect finding labour to become slightly easier, a reflection that the labour market in Canterbury has scaled to meet the workforce demand of the rebuild.

ends

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