CoreLogic highlights rental challenges in improved NZ market
New Zealand's housing market has seen noticeable improvements in affordability, according to the latest CoreLogic NZ Housing Affordability Report for the fourth quarter of 2024.
This improvement is attributed to a combination of declining property values, increased incomes, and recently reduced mortgage rates, making it easier for buyers to enter the market, though affordability is still tight compared to historical norms.
RBNZ’s decision to lower rates, reducing the OCR from a cycle high of 5.5% down to 3.75% with the last 50-basis-point cut in February, has particularly helped to ease mortgage rates, adding momentum to a more buyer-friendly market environment.
Key metrics indicate favourable changes
The CoreLogic report highlighted a significant reduction in the mortgage payments as a share of gross median household income, marking its lowest point in over three years.
Kelvin Davidson (pictured), CoreLogic NZ’s chief property economist, emphasised that while the market conditions have improved, the cost of housing is still high by past standards.
“Housing isn’t cheap, but it’s the most affordable it’s been on many measures since before COVID-19,” Davidson said.
He noted the reversal of the sharp price increases seen during 2020 and 2021.
Challenges remain for renters
Despite the gains for home buyers, the rental market continues to experience difficulties. Rental costs are consuming a record-high portion of household incomes, highlighting ongoing affordability issues for tenants.
“Value-to-income ratios, mortgage servicing costs, and deposit-saving time frames have all improved, making homeownership more attainable,” Davidson said. “However, rental affordability remains a key issue, with tenants spending a record-high share of their income on rent.”
Regional variations in housing affordability
The report also shed light on regional disparities in housing affordability.
While areas like Auckland and Wellington are seeing improvements, returning to near long-term average levels of affordability, regions like Hamilton, Christchurch, and Dunedin have seen smaller price declines, which has limited their affordability improvements.
Tauranga, in particular, remains the least affordable main centre, although its affordability has improved from its peak in late 2021, CoreLogic reported.
Future outlook on housing affordability
Davidson was cautious about the future, noting that while current trends are positive, housing affordability is still not at “normal” levels.
He suggested that new lending restrictions, such as debt-to-income ratios, might help further, but sustained improvements will depend heavily on increasing the housing supply to meet demand.
“The government is focused on increasing supply, which is positive for long-term affordability,” he said, underscoring the need for continued efforts to address housing availability and cost issues effectively.
Read the CoreLogic article and access the full report for more details.
