Houses to cost $3m in 20 years

The average Auckland house price could rocket to an eye-watering $3 million within 20 years, new figures suggest.

That would push them to an astonishing 19 times the average household income.

The prediction comes from statistics experts Corelogic based on a “conservative” growth rate of 6 per cent per year.

Reserve Bank figures show the average annual rise since 1981 is 4.5 per cent, but there have been huge upswings in the past few years — between August 2015 and August this year, the rise was 16 per cent.

It means by 2036 the average house value would hit $3.25m.

Economist Shamubeel Eaqub said if prices kept rising at their current rate, housing would be out of reach for most.

“Mortgage payment will rise from half of household income to all of a family’s income.”

Corelogic describes its figures as a “rough projection” based on the annual house price growth rate between 1990 and 2014. It didn’t include 2015 because of the “exceptional growth period which is widely recognised as being unsustainable”.

Nick Goodall, Corelogic senior research analyst, said the projection assumed the market conditions would remain static, which was unlikely. “However, it does illustrate the potential severity of the current situation,” he said.

The company found the growth in household income from 1999 to 2016 was 3.35 per cent. On these figures, the average household income in 2036 would be $167,000.

Based on the new projection — which doesn’t take into account other economic data — in 20 years’ time, houses would cost nearly 20 times the average income.

This affordability ratio (19.5) would take Auckland off the chart by international standards.

According to the United Nations and World Bank, a house price-toincome ratio of 3.0 or less signifies an affordable housing market.

A ratio of 5.1 or more demonstrates “severely unaffordable” housing. Auckland’s ratio was 9.24 in September.