If you can't afford a house in Auckland the prime minister has some advice for you – head to Waikato.

John Key was in the region yesterday for a less controversial cup of tea at Zealong Tea Estate, before heading up to Pokeno to see what he made of growth in the area.

In an interview with the Waikato Times he said moving south of New Zealand's biggest city ought to be a "serious consideration" for buyers struggling to find the cash for Auckland homes.

"They pay less for their home so obviously they're going to pay more to commute. It's a tradeoff that people decide all around the world and it will give them a far higher quality of home at a lower price," he said.

Key said the option would be particularly attractive to those who could work from home.

He added that the Waikato Expressway made it a "really legitimate option, especially for people who work in the southern part of [Auckland] city".

But whether or not people heeded his advice, the prime minister predicted that the flood of those choosing to live on the outskirts of Auckland was unlikely to slow. His words come as official channels signal more unease over the state of super-city house prices. Reserve Bank Governor Graeme Wheeler said yesterday that he was concerned about a "sharp correction, leading to financial instability".

Wheeler said the Reserve Bank would be speaking more about the housing market over the next few months, but gave no clues as to what that might mean for homeowners.

Key's positivity didn't stop with the Waikato housing market, however. He said the bounce in Fonterra's GlobalDairyTrade (GDT) prices on Wednesday morning were a good sign for the region.

Dairy prices were up 9.4 per cent, boosted by a big increase in the price of whole milk powder.

The average winning price was US$3042 (NZ$4138) per tonne, up 20 per cent from its low of US$2513 in December but still down about 40 per cent in US dollar terms since February.

Despite ASB rural economist Nathan Penny warning that the lift was a "double-edged sword" as it showed uncertainty about production levels coming out of New Zealand, Key remained positive. He said he was "one of the few who has been vaguely optimistic" about dairy prices, which had been pushed down due to unusual global factors and a high dollar last year. Key predicted a lower exchange rate, and growing global demand would eventually flow through to a higher payout from Fonterra for dairy farmers.

"My own view is it's [the payout] more likely to head up near $6 than it is to head down to $4, that's for sure," he said.

"Overall I'm not nearly as pessimistic as others."

Waikato Federated Farmers president Chris Lewis said the auction was another positive one for farmers, but he remained cautious.

The price of whole milk powder had to get back up to $3500 a tonne for the dairy companies to justify a lift in the payout to at least $5/kg milksolids and give confidence going into next season, he said.

The average price of whole milk powder at the latest auction was $2874. "There's still a long way to go but it's a positive trend," he said.


- Waikato Times


Photo: Bruce Mercer/Fairfax Media

Brimming with confidence: Prime Minister John Key was all smiles at Zealong Tea Estate during a visit to Waikato yesterday.


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