22 Aug 2023

Housing more affordable but mortgages cost half household income - research

8:30 am on 22 August 2023
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A housing market commentator says only a significant increase in the number of houses built would impact the price and affordability of houses. Photo: RNZ

Buying a house has become more affordable amid falling prices and higher incomes, but will remain out of reach for many as mortgages come close to half of household incomes.

A report into affordability from property research firm CoreLogic showed the average value of houses was 7.2 times the average household income as at the end of June, the lowest in more than two years.

It compared with a ratio of 7.8 at the start of the year, the peak of 8.8 at the start of 2022, but a long term average of 6.1.

The improvement was driven by a fall in the average house price to $911,222, and a rise in household incomes, with mortgage payments taking 49 percent of household income from a peak of 53 percent in the previous survey, but still above the long-term average of 38 percent.

CoreLogic NZ chief property economist Kelvin Davidson said affordability had improved marginally, but in reality home ownership would remain a dream for many.

"Even after the recent improvements, almost half of a household's income being eaten up by interest repayments is relatively unaffordable compared to long-term averages.

"Although lower mortgage rates seem likely over a one to two year horizon, we're not expecting any relief via rate cuts in the immediate to short-term."

He said with signs of house prices rising again in some areas the improvement in affordability might be short-lived, until there was a real fall in interest rates.

Tauranga remained the least affordable main centre, with a value to income ratio of 9.5, followed by Auckland, Dunedin, Hamilton, Christchurch and Wellington, which was the most affordable of main cities.

The report showed the measure for time taken to save a deposit fell to 9.6 years, better than a year earlier when it was close to 12 years, but still above the long-term average of 8.1.

Davidson said housing affordability would likely remain significantly worse than normal, which in turn would be a restraint on any recovery in prices.

He said possible imposition of debt to income ratios by the Reserve Bank, which banks have been preparing for, would be another likely cap of price growth.

However, he said that only a significant increase in the number of houses built would have a meaningful impact on prices and affordability.

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