Housing affordability in New Zealand is showing signs of improvement, with the national median house value dropping to 7.2 times the annual median household income at the end of last year. This is the lowest it has been in almost a decade, signaling a positive shift in the market.
Cotality’s chief property economist, Kelvin Davidson, noted that prices have been relatively stable or decreasing for the past few years, resulting in a significant 18% drop from the peak. Factors such as rising incomes and lower interest rates have contributed to this improvement, with mortgage payments as a share of incomes returning to their average level.
While Tauranga remains the least affordable main center with a house price-to-income ratio of 8.5, Auckland and Wellington have seen improvements in affordability, with Wellington being the most affordable at 6.4. However, regions like Thames Coromandel and Queenstown Lakes continue to face challenges, with Kaikoura also experiencing double-digit affordability ratios.
Davidson emphasized the importance of ongoing housing supply to maintain affordability levels. He mentioned that it currently takes 9.6 years to save for a deposit, slightly above the long-term average but lower than previous peaks. Rents, on the other hand, are taking up a larger percentage of household income nationwide, posing a challenge for renters looking to transition into homeownership.
Looking ahead, Davidson does not anticipate a house price boom, predicting instead a period of modest growth aligned with household incomes. He believes that a more stable housing market could be beneficial in the long run, encouraging a shift away from the notion of ever-rising house prices.
Overall, the data suggests a positive trend towards improved housing affordability in New Zealand, with a focus on sustainability and balance in the market.
