NZ homes among least affordable: BIS

Another survey, this one from the world's most senior bank, has confirmed New Zealand houses are among the most "unaffordable" in the world compared to people's incomes.

A survey of 55 countries by the Bank of International Settlements (BIS), the bank used by central banks, shows that New Zealand's ratio of house prices to income is well above its historical norm.

At just below 140 per cent, New Zealand was placed alongside Canada and Australia and just below Belgium, whose ratio was just above 140 per cent.

A value of 110 per cent means the country is 10 per cent above its historical average.

"We're pretty much up there with the most expensive housing markets in the world," said the New Zealand Institute of Economic Research's chief economist, Shamubeel Eaqub.

New Zealand fared a little better when it came to rents. Its price-to-rent ratio (a measure of rental income compared to the purchase price) was 120 per cent, 20 per cent above its historical average.

Canada had a ratio of 180 per cent, while Australia was fifth at about 150 per cent. New Zealand was ranked 12th.

In most other countries, house prices were not far away from rent values and the BIS noted that there "could be a reason to expect a price correction" in countries where the ratio was 120 per cent or higher.

The study also found New Zealand had the fourth highest growth rate in unadjusted house prices, up 15 per cent over the last three years.

It was just behind the US (up about 17 per cent), Malaysia (25 per cent) and Estonia (40 per cent).

Norway was the world's most expensive housing market, followed by Australia where prices were double the average on a  seasonally and inflation adjusted index of advanced economies.

Yet real Australian house price growth had been flat over the last three years after being adjusted for long-term trends.

Eaqub said Australian house prices had peaked earlier on low interest rates and first-home buyer subsidies after the global financial crisis.

"We've been going in the opposite direction. Our housing market, in Auckland and Canterbury anyway, has been soaring ... and what we already know is that house prices in New Zealand are very high and quite disconnected from underlying fundamentals."

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