Written by Susan Edmunds
On average, first-time homebuyers need to save for more than nine years to secure a down payment. File photo.
photograph: RNZ / Nate McKinnon
One economist says that solving the country's housing problem will require a combination of efforts, as home buying is reserved for the wealthy.
CoreLogic data shows housing affordability has improved since prices peaked in 2021, but growth remains stagnant due to high interest rates.
The ratio of mortgage repayments to total household income was 49% in the fourth quarter of last year. Since the first quarter of 2022, this metric has ranged from 49% to 52%. Before that, the highest rate was 46% in 2007-2008.
The long-term average is 37%.
The value of real estate is now seven times the average household income. Kelvin Davidson, chief real estate economist at CoreLogic, said this was an improvement from a peak of 8.6 in early 2022, but above the long-term average of 5.9.
According to this criteria, Tauranga was the most expensive at 8.5.
The average household income for first-time homebuyers was $152,700 in September last year, up from $145,800 the year before, according to Reserve Bank data.
The average annual income for New Zealand households from all sources is $132,496, with a median income of $115,000.
Economist Shambir Ekbu said housing is unaffordable for middle-income earners.
“The people who are looking to buy a home are high-income earners or people who already have wealth.The reason homeownership rates are on the decline is because housing is becoming more unaffordable and as we spend more and more on our incomes. People are being locked out of homeownership, not because they're overspending, but because we're spending more. ”
The average income of first-time homebuyers who borrowed with a debt-to-income ratio of at least six times was $133,000, according to the data.
“These are not young people with moderate incomes; they are wealthy people who are first-time homebuyers because we excluded everyone else.
“Imagine the savings you have to save, how hard it was, the percentage of your income that goes towards paying off your mortgage. What about your quality of life? But what is the alternative? How else can you access the security of tenure, the financial security that comes with owning a home? Does a home give you??
“Everyone knows its benefits, but fewer and fewer people are able to take advantage of it.”
Mr. Davidson said that the “years to save savings'' index was 9.3 years in the fourth quarter of last year, down from the worst of 11.5 years in the first quarter of 2022, but significantly higher than the long-term average of 7.9 years. He said he exceeded that.
Tauranga requires the longest amount of time to accumulate a deposit, at 11.3 years, followed by Auckland at 10.3 years.
Davidson said housing affordability growth itself tends to put a natural brake on the rate of home price growth.
“Prices are likely to rise almost in line with income over the next few years. That won't necessarily improve affordability, but it may not make it much worse either.”
He said mortgage rates are likely to fall within the next two years.
“This could upset the delicate balance between prices and income a bit, pushing up metrics such as the value-to-income ratio.
“However, when it comes to actually paying down debt, lower mortgage rates will have a clear affordability advantage. Debt-to-income ratio limits could limit house price growth in the medium term. There’s also gender.”
Airqub said the country needs to look at ways to build more housing and make it more accessible to rent in the meantime.
“When we talk about housing construction, there's this idea that if we build expensive new homes, the old housing stock will be distributed to poorer people and become more affordable, but that's not actually the case. Rent is also expensive. .
“As we look to emerge from this crisis, which has been accelerating for 30 or 40 years, we must ensure that some of the new housing we build is for rent or as social housing or affordable housing. We are saying to people with no income or assets, sorry, wait, live a life of misery for your generation. It is. ”
He said that although there were signs of improvement, there was a sense that the system was “very broken” and no one thought it would be fixed anytime soon.
This story was originally thing.