Photo: Dom Thomas
Housing affordability has improved marginally, but remains high by historical standards in the face of rising prices and high interest rates, according to the latest data.
Property research firm CoreLogic's latest housing affordability report shows that mortgage repayments accounted for 49 percent of annual household incomes, staying in the 49-52 percent range of the past two years.
CoreLogic NZ chief property economist Kelvin Davidson said there was little consolation in the unchanging numbers.
"Housing affordability is still significantly stretched on this measure, given that the long-term average sits at 37 percent, illustrating the current challenges from high mortgage rates."
Tauranga was the most unaffordable and most expensive main centre - repayments consume 60 percent of incomes, it takes more than 11 years to save for a deposit, house prices are on average 8.5 times incomes, and rents take up 27 percent of incomes.
Auckland was the next most stretched of the main centres, but the pressures were also being felt in most provincial areas, to the extent that they were now losing the gains made just a couple of years ago as prices rose again, making affordability as stretched as ever.
The report said it was now taking more than nine years on average to save the deposit for a house, slightly higher than the previous quarter, but still below the peak of 11.5 years at the start of 2022.
Davidson said elevated housing affordability would tend to be a natural handbrake on the rate of house price growth.
"It's conceivable that prices may only rise roughly in line with incomes over the next few years. That wouldn't necessarily see affordability improve, but it might not get much worse either."
He said mortgage rates would likely fall over the next two years, and there was also new debt to income limits being introduced in the middle of the year by the Reserve Bank, which would hold back prices in the medium term.
"This may throw that delicate balance between prices and incomes off course a little, pushing up measures such as the value to income ratio.
"However, when it comes to actually servicing debt, lower mortgage rates would obviously be beneficial for affordability."
