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Source: CoreLogic

Record house price growth has led to rapidly declining affordability, with little sign of easing despite the recent introduction of regulatory constraints and rising mortgage rates.

CoreLogic NZ’s Housing Affordability Report, published every six months, shows as of Q2 2021, the average property value across New Zealand is 7.9 times the average annual household income, a record high in the series’ 18-year history.

The figure is up sharply from the 7.4 times recorded just three months ago and 6.6 times of 12 months ago. The long-term average is for property values to be 5.8 times the average annual household income.

Property values in Aotearoa rose 15% during the first six months of 2021, well ahead of the increase in gross average household income which rose 1.0%, illustrating the acute affordability challenges we face, CoreLogic NZ Chief Property Economist Kelvin Davidson said.

“Since our last Housing Affordability Report in late February, the New Zealand economy and property market have generally remained very buoyant,” Mr Davidson said.

“Even though mortgage rates have remained very low, albeit they’re now starting to rise, housing affordability has simply become worse, and that’s from an already stretched position. Those higher mortgage rates themselves will exacerbate the situation in the coming months, albeit they should eventually aid affordability by dampening house prices.”

Declining affordability has been a key reason for a raft of new regulatory changes introduced in 2021, which have largely centred around investors. These buyers are now required to have a 40% deposit and have seen a reduction in the ability to claim interest as a tax deductible expense. An extension of the Brightline Test for additional property purchases was also introduced in March.

Mr Davidson said while these factors along with rising mortgage rates should contribute to a slowdown in property value growth, especially if the current lockdowns have an impact on the economy and employment, it won’t occur in the short-term.

“In lieu of a big drop in employment or a GFC-style reduction in credit supply, it’ll still plausibly take at least five years for housing affordability to adjust back to some kind of normality, which won’t be much consolation for aspiring first home buyers,” he said. Indeed, the Reserve Bank recently estimated that an adjustment phase could take as many as eight years.

The report also found it currently takes more than a decade to save a house deposit (10.6 years), beating the previous record high of 9.9 years, which was set in Q1 2021. It takes almost three years longer to save for a house deposit than the long-term average of 7.8 years.

On average, households who take out a new home loan spend 38% of their income on their mortgage repayments, compared to tenants, whose rental payments absorb 21% of household income. Despite historically low interest rates, average mortgage payments as a proportion of household income have increased from 32% a year ago.

“However, this is not to say that renting is easy either – indeed, that figure of 21% is also above average. It’s also worth noting that the typical income for a renting household may well be lower than the overall average, which would imply a much higher figure than 21% of their income being spent on accommodation costs,” Mr Davidson said.

“Mortgage repayments are now back to levels not seen since early 2018, when typical fixed mortgage rates were much higher, above 5%. These patterns of declining housing affordability have been seen right across the country, from the main centres down to the smaller rural areas. Of 66 main authorities, 49 currently have a value to income ratio at its highest recorded level, going back to 2004. Looking at the mortgage affordability measure, 43 of 66 areas are currently above average, despite low interest rates.”

New Zealand’s Least Affordable Areas

Tauranga and Auckland are New Zealand’s least affordable main centres, requiring 49% and 43% of gross household income respectively, to service an average mortgage with an 80% loan to value ratio.

Despite ultra-low mortgage rates in the past three to six months, Hamilton households require 38% of their income to make payments, the highest level since just prior to the GFC in Q2 2008. Similarly mortgage holders in Wellington spend 36% of their income on mortgage repayments and Dunedin households spend 39%. Christchurch’s figure is comparatively low, albeit rising, at 28%.

Affordability Outlook

Mr Davidson said it’s conceivable that house prices have further to rise before flattening out, which could see affordability metrics decline further in the next three to six months, particularly with the added threat of continued interest rate rises (which will serve to push up mortgage repayments in the near term before they eventually help affordability by restraining house prices).

“However, towards the middle and later stages of 2022 slower house price growth should allow for some improvement in affordability, especially as rising incomes in a squeezed labour market should help those first home buyers trying to cobble together the deposit.

“That said, even with housing supply expanding, a return to ‘normal’ for most affordability measures looks likely to be a long grind.”

For more information or to access a copy of the Housing Affordability Report, visit

CoreLogic NZ’s Housing Affordability Report Explained
CoreLogic NZ’s bi-annual Affordability Report provides a comprehensive measurement of the country’s housing affordability, analysing the relationship between property values and household incomes, the challenge of saving for a deposit, mortgage serviceability and rental rates relative to household incomes. Our analysis dates back to 2004 and is based on average property values and household income, covering granular information for every territorial authority in NZ.

About CoreLogic NZ

CoreLogic NZ is a leading, independent provider of property data and analytics. We help people build better lives by providing rich, up-to-the-minute property insights that inform the very best property decisions. Formed in 2014 following the merger of two companies that had strong foundations in New Zealand’s property industry – Terralink Ltd and PropertyIQ NZ Ltd – we have the most comprehensive property database with coverage of 99% of the NZ property market and more than 500 million decision points in our database.

We provide services across a wide range of industries, including Banking & Finance, Real Estate, Government, Insurance and Construction. Our diverse, innovative solutions help our clients identify and manage growth opportunities, improve performance and mitigate risk. We also operate consumer-facing portal – providing important insights for people looking to buy or sell their home or investment property. We are a wholly owned subsidiary of CoreLogic, Inc – one of the largest data and analytics companies in the world with offices in New Zealand, Australia, the United States and United Kingdom.  For more information visit