House Affordability Concerns Persist as NZ Households Allocate Half of Income to Mortgage Repayments

Date Published: 15 February 2024

Key Facts

• Housing affordability in New Zealand remains challenging in light of recent house price increases and high-interest rates.
• 49% of household incomes were spent on mortgage repayments in the final quarter of last year.
• The ratio of house prices to median income stands at seven, which is down from a high of 8.6, but still higher than the long-term average of 5.9.
• People spent on average 9.3 years saving for a home deposit in the last quarter of 2022. Tauranga is the most expensive city, requiring 11.3 years to save enough for a deposit.
• Households spend on average 22% of their income on rent, with Tauranga and Ōtautahi/Christchurch being the least affordable cities for renters.

Article Summary

The latest CoreLogic report presents a sobering outlook for New Zealand’s housing affordability. It indicates that Kiwi households are feeling the financial strain due to recent rises in house prices coupled with sustained high interest rates. During the final quarter of 2022, approximately half of household incomes were going towards mortgage repayments. This figure has been consistent for the past two quarters and well exceeds the long-term average of 37%, highlighting the arduousness of the current housing market conditions.

The report also brings to light the disparity in housing affordability across cities. For instance, those living in Tauranga Moana, Tauranga, spend 60% of their income on mortgage repayments, significantly higher than the national average of 49%. This city is also the least affordable for renters, with them allocating 24% of their income towards rent.

However, the Chief Property Economist of CoreLogic, Kelvin Davidson, maintains that this problem of unaffordability may curb the rate of house price growth. He postulates that over the next few years, house prices may only rise roughly in line with incomes. Davidson also expresses his belief that mortgage rates might decrease in the next two years, which would alleviate the issue of housing affordability.

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