The figures show that the market is leading into its fifth year of sustained growth in house prices.

“Over the past three years, the market has reached unprecedented levels of activity with sales volumes well in excess of those achieved at the top of any previously recorded real estate cycle,” says Graham Crews, senior lecturer in Real Estate at Massey University.

“The prime driver of that growth has been the strong performance of the domestic economy and, with few xceptions, those gains have been spread throughout the country,” he says.

Interest rates inched up one point over the quarter despite Reserve Bank indications that they may lift the rates further while, over all, the New Zealand Home Affordability Index for June reflected a quarterly decline of 1.9%, meaning home affordability has now declined for five consecutive quarters. Also, after lifting 1.5% in the previous quarter, average weekly wages also moved up a further 1.6% in this quarter.

“What is particularly interesting about the decline in home affordability is that this continued strength in the housing market is happening despite business confidence worsening in the three months to June, weaker consumer spending seen in May and much talk of the economy being on the verge of a predicted downturn,” says Greg Camm, managing director of AMP Financial Services.

Although residential sales reported by the Real Estate Institute of New Zealand showed a rally in May, sales were down on the previous two years. Quarterly dwelling sales of 28,554 were 6% down on the same period last year (30,381) while the New Zealand median dwelling price lifted 2.2% to $275,000 at the end of the quarter.

This figure is still down on the all-time high of $280,000 reached in March of this year.

In terms of median dwelling prices, in the quarter eight regions reported a quarterly rise, as well as a decline in home affordability.

Two North Island provincial regions reflected the steepest decline with Northland at 13.1%, followed by Taranaki (9.5%), Southland (6.7%), Auckland (4.8%), Canterbury/Westland (5.5%), Wellington (3.4%), Hawke’s 2.1%) and Manawatu/Wanganui (0.2%).

Meanwhile, three regions recorded a quarterly improvement in affordability. Nelson/Marlborough ranked highest in improvement for the second consecutive quarter at 4.3%, followed by Otago (2.8%), and Waikato/Bay of Plenty/Gisborne (0.2%). Both South Island regions also reported quarterly falls in median dwelling prices.

All 11 regions recorded a 12-monthly decline in home affordability for the fourth consecutive quarter.

Southland remains the most affordable region whilst Manawatu/Wanganui continues to hold second position. Auckland remains the least affordable region followed by Nelson/Marlborough.