RESIDENTIAL
October 2021 - January 2022
T
he figure is up sharply from the 7.4 times recorded just three months ago and 6.6 times of 12 months ago. The longterm average is for property values to be 5.8 times the average annual household income. Property values in Aotearoa rose 15% during the first six months of 2021, well ahead of the increase in gross average household income which rose 1.0%, illustrating the acute affordability challenges we face, CoreLogic NZ Chief Property Economist Kelvin Davidson says. “Since our last Housing Affordability Report in late February, the New Zealand economy and property market have generally remained very buoyant. “Even though mortgage rates have remained very low, albeit they’re now starting to rise, housing affordability has simply become worse, and that’s from an already stretched position. “Those higher mortgage rates themselves will exacerbate the situation in 16 propertyandbuild.com
Where is housing most affordable? The average property value in New Zealand is a record 7.9 times the average annual household income according to the latest CoreLogic Housing Affordability Report, though there is wide variation across the country the coming months, albeit they should eventually aid affordability by dampening house prices.” However Davidson says it’ll still plausibly take at least five years for housing affordability to adjust back to some kind of normality. Indeed, the Reserve Bank recently estimated that an adjustment phase could take as many as eight years. The report also found it currently takes more than a decade to save a house deposit (10.6 years), beating the previous record high of 9.9 years, which was set in Q1 2021. It takes almost three years longer to save for a house deposit than the long-term average of 7.8
years. On average, households who take out a new home loan spend 38% of their income on their mortgage repayments, compared to tenants, whose rental payments absorb 21% of household income. Despite historically low interest rates, average mortgage payments as a proportion of household income have increased from 32% a year ago. “However, this is not to say that renting is easy either – indeed, that figure of 21% is also above average,” Davidson points out. “It’s also worth noting that the typical income for a renting household may well
be lower than the overall average, which would imply a much higher figure than 21% of their income being spent on accommodation costs. Mortgage repayments are now back to levels not seen since early 2018, when typical fixed mortgage rates were much higher, above 5%. These patterns of declining housing affordability have been seen right across the country, from the main centres down to the smaller rural areas. Of 66 main authorities, 49 currently have a value to income ratio at its highest recorded level, going back to 2004. Looking at the mortgage
