Kelvin Davidson analyses shifts in NZ's property landscape
CoreLogic’s Kelvin Davidson (pictured), writing for OneRoof, reported significant shifts in NZ’s housing market, highlighting improved affordability and rising rent pressures, with Wellington emerging as the most affordable city.
Improvements in housing affordability
According to Davidson, CoreLogic’s chief economist, the housing market is becoming more accessible—a view supported by Tony Alexander’s latest NZHL Property Report, which noted increased activity yet a market that remains buyer-friendly.
Recent data indicated a significant drop in the percentage of gross median household income needed to service a new mortgage—from peaks of 56% in 2022-2023 to 46% now.
However, despite these improvements, the current figure still sits above the long-term average of 42%, indicating that full normalisation has not yet been achieved.
Regional affordability variances
The most notable changes have been seen in Auckland and Wellington.
In Auckland, the cost of mortgage payments as a percentage of income has nearly returned to its average at 49%, while in Wellington, the figure stands at 40%, making it one of the most affordable main centers.
However, Davidson noted, “Wellington now has a strong claim to being the most affordable main centre,” but cautioned that this doesn’t necessarily predict a market boom.
Challenges in rent affordability
Despite the positive trends in home buying, the rental market remains strained.
The national ratio of rents to household income has reached a new high at 28%, surpassing the long-term average of 26%. This suggests that tenants are finding it increasingly difficult to manage living costs and save for a house deposit, OneRoof reported.
Mortgage rate trends and borrower preferences
Recent lending data from the Reserve Bank indicated a shift in borrower behaviour, with a significant majority opting for short-term fixed rates or floating rates, aiming to capitalise on potential decreases in interest rates.
Davidson remarked on the evolving mortgage landscape, “But the next set of data which we’ll get in early April will be really interesting,” as it may indicate whether borrowers are beginning to favour longer-term fixed rates due to attractive deals.
Demographic Influences on the property market
Net migration, which has seen fluctuations over the past years, appears to be stabilising around the low 30,000s annually—a return to pre-COVID levels. This stabilisation, according to Davidson, is likely to prevent drastic changes in rental prices, although it won’t necessarily drive significant growth in the property market.
Economic indicators and property market projections
With inflation generally contained and upcoming GDP figures anticipated to show modest growth, the economic backdrop could support a slight upturn in the property market, OneRoof reported.
“Timelier economic data suggests things have improved a little further to start 2025,” Davidson said, pointing towards potential for modest property market improvements.
