More affordable but still NZ's most expensive

House prices in the Central Otago Lakes area, which includes Queenstown, fell $67,000 from March to May, but the region still remains one of the country's least affordable areas.

The Massey Home Affordability Index reports that prices in the tourist mecca declined 8.6 per cent in the quarter, along with drops in some other areas.

"Most regions show an increasing quarterly rate of median house price growth, except for minor quarterly falls in Canterbury/Westland (-0.6 per cent -$2750) and major falls in Hawkes Bay (-7.0 per cent -$30,000) and Central Otago Lakes ( -8.6% -$67,000)," the index said.

The drop does not, however, go far enough to make places in the Queenstown area affordable.

"Central Otago Lakes and Auckland/Thames/Coromandel remain the least affordable regions in the country, 51 per cent and 43 per cent respectively less affordable than the rest of New Zealand," the survey found.

In the previous quarter from December to February 2018, the median house price in Central Otago Lakes increased by $53,500 so the latest price drop was offset by previous gains.

Where is affordability best?

Southland, Taranaki, Manawatu/ Whanganui, Otago and the Hawkes Bay are the top five country's most affordable regions, the survey said.

The data measures house prices based on Real Estate Institute data and compares them to wages and mortgage interest rates from Statistics NZ and the Reserve Bank.

The report said that it was apparent that home affordability will remain a national and regional problem in the short and medium term, particularly for wage earners relying on a mortgage to purchase a home.

Where should investors look?

Report author Associate Professor Graham Squires Squires says high-value regions may be showing affordability improvements at the expense of lower-value regions.

"Outside of traditionally overheating markets like Auckland and Queenstown, regions with lower relative values like the Manawatū may be showing improvements as investors seek houses in regions that might yield greater returns on capital," he said.