New Zealand housing affordability at highest level since pre-Covid 19

Housing affordability in New Zealand is at its most favourable level since pre-Covid 19, according to Cotality NZ’s Housing affordability report.

The property data company said lower mortgage rates, steady income growth and a decline in property values have helped to improve housing affordability across the country.

Auckland, Tauranga and Wellington have the most visible gains, but Tauranga remains the least affordable of the main centres in absolute terms.

“Tauranga is now only a little more stretched than normal, and in fact looks more fairly priced than Hamilton, Christchurch and Dunedin, where affordability has not improved to the same extent,” Coality NZ’s Chief Property Economist Kelvin Davidson said.

Auckland has a value-to-income ratio of 7.9, the lowest figure in a decade for the city, while Wellington is in line with its long-term average of 6.4.

That’s the first time the capital has hit this figure since 2016.

Hamilton, Christchurch and Dunedin saw limited improvements, with property values in these cities being more resilient.

The Reserve Bank cutting the Official Cash Rate to its lowest point in three years and national property values remaining nearly 17% below their post-Covid peak has contributed to a value-to-income ratio of 7.5 in the second quarter of this year for the entire country.

This ratio is at its lowest since 2019.

Nationally, the rent-to-income ratio sits at 28%, above the long-term average of 26%.

Hamilton, Christchurch and Dunedin renters spend nearly 30% of their income on rent – record highs for these markets.

Auckland and Wellington have their rates at about historical levels of 25% and 23% respectively.

Davidson believes that beyond the immediate cycle, there are structural factors that remain critical to New Zealand’s long-term affordability issues.

“New Zealand’s affordability challenges have been driven by a persistent imbalance between supply and demand,” he said.

“Sustained progress will depend on delivering more dwellings, more land and the infrastructure to support growth – both in terms of property available to buy and for renters.

“Recent policy moves are encouraging, but addressing supply will take sustained effort over many years.”