The housing affordability across New Zealand has worsened, according to Massey University's Home Affordability Report. The new report reveals the price of houses in the country will continue to rise in the coming years.

Home affordability has dropped to 7.6 per cent in 2013. Report author Professor Bob Hargreaves said the overall decline in affordability was no longer surprising. However, the report brings bad news to potential home buyers.

Hargreaves said the average annual increase of $34.53 in New Zealand was not enough to cover a $38,000 increase in the average house price. The worsening house affordability is more likely to continue as the recent increases in interest rates are included in the costs of debt servicing for home mortgage payments.

According to the report, the national affordability index worsened by 4.5 per cent compared to a 2.8 per cent improvement based on rates in the previous quarter.

The report revealed that Auckland was the "least affordable" when it comes to housing followed by the Central Otago and Canterbury. Southland maintained its status as the most affordable region in New Zealand while Manawatu/Wanganui and Taranaki followed as the regions with affordable housing.

A recent report by the OECD has revealed New Zealand has the second most expensive home among developed nations based on the price to income ratio. On a price-to-rent ratio, the OECD found the country to be the "most overpriced." New Zealand Prime Minister John Key has downplayed the latest information which found the nation's house prices to be 70 per cent higher than other countries in terms of rent.

Mr Key said Auckland has housing prices lower than in London and Sydney. According to the OECD, New Zealand's house prices have an annual increase of 8.2 per cent while Australia and the United States followed both with 6.6 per cent. Canada ranked fourth with 5.2 per cent, while Germany was in fifth position with a 5.1 annual increase.

Hargreaves remarked that one of the most "striking" trends in New Zealand is the widening gap between house affordability in larger cities and provincial towns due to differences in house prices.