CoreLogic

PHOTO: CoreLogic Housing Affordability Report

The CoreLogic Housing Affordability Report for Q2 2021 shows housing affordability is as bad as it’s ever been with the average property value across New Zealand 7.9 times the average annual household income, a record high in the series’ 18-year history. The figure is up sharply from the 7.4 times recorded just three months ago and 6.6 times of 12 months ago.

The record house price growth has led to rapidly declining affordability, with little sign of it easing despite the recent introduction of regulatory constraints and rising mortgage rates (pushing up payments). 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 being faced.

KEY POINTS:

  • 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.
  • Tauranga and Auckland are New Zealand’s least affordable main centres, requiring 49% and 43% of gross household income respectively, to service an average mortgage with an 80% loan to value ratio.
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Mr Davidson said it’s conceivable that house prices have further to rise before flattening out, which could see affordability metrics decline further in the next three to six months, particularly with the added threat of continued interest rate rises (which will serve to push up mortgage repayments in the near term before they eventually help affordability by restraining house prices).

“In lieu of a big drop in employment or a GFC-style reduction in credit supply, it’ll still plausibly take at least five years for housing affordability to adjust back to some kind of normality, which won’t be much consolation for aspiring first home buyers,” he said.

READ THE FULL REPORT HERE: Report_NZ_Housing-Affordability_Q2_2021_REPORT

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