Housing affordable housing has fallen to its worst level in 18 years, making home ownership inaccessible to more and more New Zealanders.
Corloc’s two-year housing affordable report shows that the average property price has risen about eight times the annual household income – 5.8 times the long-term average.
That’s when property prices rose 15 percent in the first six months of the year, while average household income rose just 1 percent.
“Even though mortgage rates have been very low, even though they are starting to rise now, housing prices have only gotten worse, and that’s from an already stretched position,” said Calvin Davidson, chief economist at Corloc.
The report also found that it now takes 10.6 years to make a 20% deposit for a property, which is more than 9.9 years.
That’s about three years longer than the long-term average of 7.8 years.
On average, households with new mortgages were spending 38% of their income on payments, while tenants’ rent payments were 21% of their income.
“Mortgage payments are now back to levels not seen since early 2018, when the fixed mortgage rate was over 5%.”
He said the payments are set to include a large portion of households’ annual income, which will increase interest rates by the end of this year.
Davidson said it would take about five years for the government and the Reserve Bank to take steps to help cool the market and slow the rise in house prices.
In the interim, he said, it was understandable that house prices would rise further.
“[This] The next three to six months could see a further decline in cheap metrics, especially with the added risk of rising interest rates.
He said that this would speed up the repayment of mortgages in the near future.
He was of the view that in the post-2022 period, the rise in house prices should come at a point where affordability is improving.
“Even with the expansion of housing supply, the return to ‘normal’ for the most affordable measures is likely to be a long-term complication,” he said.
Turanga and Auckland were the least affordable hubs in the country, requiring 49 per cent and 43 per cent of household income, respectively, to be mortgaged with 80 per cent of the cost of the loan.
Christchurch was at 28%.
“Of the 66 central authorities, 49 currently have their highest income ratios, going back to 2004,” Davidson said.