Six-year high for housing affordability

A “dramatic reversal” in Auckland housing affordability has offered hope to first-home buyers, but many remain locked out of the market by steep prices and huge deposits.

A new report by Auckland Council’s chief economist David Norman finds housing affordability has improved 26 per cent since the frenzy of 2015 and is now the best it’s been in six years.

That is thanks to looser planning restrictions allowing greater density of housing, the foreign buyer ban, lending restrictions that took the heat out of Auckland’s searing property market, tighter exchange controls in China, and a strong Auckland economy delivering wage growth.

It also comes amid record low interest rates, making it cheaper to borrow money from banks.

However, Auckland is still considered among the least affordable housing markets in the developed world, with a median house price of $850,000 — 8.3 times the median household income.

Norman’s report — Apples and oranges: Simplicity and complexity in

world house prices — measured affordability by factoring in house prices compared to people’s incomes, deposit requirements and interest rates.

The report says that at current interest rates, the average Auckland household could afford a property worth 6.5 times their annual income — assuming they could scrape together the required 20 per cent deposit.

This meant a family earning the median wage could not afford a median-priced house.

Land supply and deregulation were often touted as the solution to housing affordability, Norman’s report said.

“While this is part of the puzzle, fixation on one factor fails to provide a full understanding of why Auckland’s housing market has remained unaffordable for many.”

Housing shortages reflected a complex range of factors, including incomes and employment rates, tax and ownership structures, the cost of material, regulatory hurdles and a city’s geography, he said.

While prices had surged during the last boom, over the past six years, Auckland’s housing market had benefited from a raft of changes that had helped moderate growth.

New consenting data showed Auckland was finally making inroads on its historic housing shortfall, Norman said.

The council estimated about 14,000 dwelling consents were needed each year to keep up with current population growth. A record 14,634 dwellings were consented in the year to September 2019.