'Drastic fall' in NZ housing affordability takes it to worst level on record
Date 21 Feb 2022
Housing affordability in New Zealand has deteriorated to the worst level on record, with the average property worth 8.8 times the average income at the end of last year, a property analyst says.
That ratio was up from 8.3 just three months earlier, and from 7.0 in the last part of 2020, according to CoreLogic’s latest housing affordability report.
It was significantly higher than the long-term average of 5.9, and than previous cycle peaks of 6.1 in 2007 and 7.0 in 2016 to 2017.
The generally accepted definition of “affordable” was house prices of three times the median income.
CoreLogic chief property economist Kelvin Davidson said the mechanics behind the “sharp” decline were simply that steep house price rises had far outpaced any increases in the average household income.
The report showed the average national house price was $1,006,632 in the last quarter of last year, a 58 per cent increase on five years earlier.
At the same time, the average annual household income was $114,697, a 27 per cent increase on 2016.
That meant there could be no avoiding a reduction in affordability, Davidson said.
“But this drastic fall illustrates just how much property prices have increased compared to incomes lately.
“In fact, since March 2020 when Covid hit, property prices are up 38 per cent while household incomes rose by less than 3 per cent.”
All the main centres and the 12 main urban areas monitored hit record high house price to income ratios.
But Tauranga, where the average price was $1,139,186 and the average income was $96,082, was the least affordable main centre with a ratio of 11.9.
Auckland, with an average price of $1,426,882 and an average income of $140,901, was the second least affordable main centre with a ratio of 10.1.
Dunedin, Hamilton and Wellington all had ratios at 9.1, 8.6, and 8.3 respectively.
Christchurch was the most affordable main centre with a ratio of 6.9. It had an average price of $774,661 and an average income of $108,545.
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