How much does an average Kiwi family pay for mortgage?

by Roxanne Libatique04 Sep 2020

New Zealand households are using 32% of their income on average to pay for mortgage, according to the latest report by CoreLogic.

CoreLogic's Housing Affordability Report Q2 has found that the figure for mortgage payments as a percentage of average household income is 32%, down from 33% in the first quarter of the year. It is the lowest figure since the second quarter of 2013 (31%) and significantly lower than it was before the GFC when it skyrocketed to 49% in 2007.

“Generally speaking, we can see that affordability has improved/stabilised in recent years, and there were always going to be lots of moving parts for what might have happened in Q2. In the end, house prices were flattish, incomes held up, while mortgage rates fell as a result of steadily declining wholesale interest rates,” said Kelvin Davidson, a senior property economist at CoreLogic.

“However, it must be acknowledged that the national house price to income ratio is still high – 6.4 versus the 2004-20 average of 5.6 – and it takes an average of more than 8.5 years to save the deposit for a house,” he continued. “Historically, the average time to save a deposit has been a year less, at 7.5.”

Read more: COVID-19 continue to hit property values

Davidson said the latest results came at a pivotal time as the impacts of the latest level 2 and 3 restrictions and other factors on the economy over the next six to nine months would be crucial.

“On the one hand, any further falls in mortgage rates and/or drops in house prices would cause affordability to improve. On the other hand, there is potential for falls in household income as unemployment rises, and/or hours worked drop, and wages potentially feel some strain,” he said.

“This would push in the other direction, making housing less affordable. Given that rents have a tendency to flatten off rather than fall materially, any pressure on household income would also reduce the affordability of property for tenants.”

“Overall, it's important to note that affordability analysis can rarely be based on absolute comparisons – it has to be an area's figures measured relative to its own history or other parts of the country,” Davidson concluded.

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