CoreLogic Insights: Measuring New Zealand's Housing Affordability

Date: 18 May 2017

The Ministry of Business, Innovation and Employment (MBIE) has announced a new measure for housing affordability and it’s being referred to as a ‘world first’. CoreLogic is proud to be providing data that forms part of this measure.
 
The Housing Affordability Measure (HAM) will eventually be released quarterly and aims to deliver a more accurate understanding of how much is spent on housing by New Zealanders. It also tracks the factual reality behind the age-old debate currently raging between millennials and baby boomers - whether housing is becoming more (or less) affordable over time for those renting, and for first home buyers too.
 
Having a more robust picture of affordability will in turn help better inform government policies and decisions around housing for New Zealanders. CoreLogic is proud to be providing data that forms part of this measure, alongside Statistics NZ, the Reserve Bank of NZ, the tenancy bond database and other data such as housing service costs, social welfare and tax data. 
 
What the first measure tells us:
So, what does the very first measure show? The first available data is captured from March 2003 - June 2015 and shows that unsurprisingly it’s more unaffordable to buy than rent. But perhaps more importantly, it highlights that nationwide housing affordability has remained relatively stable since 2009. 
 
This is despite strong property value growth occurring in this time. From early 2012, when the average property value was roughly $400,000, to the middle of 2015 (when the HAM series ends) values have increased by 30% ($520,000), yet the affordability measure hardly moved. 
 
The lack of change in affordability is mostly due to persistently low interest rates during this time and is further verified when analysing first home buyer activity during this period. According to the CoreLogic Buyer Classification series, first home buyers nationwide accounted for between 17% and 20% throughout this time, the only major shift occurring after the first round of loan-to-value restrictions were introduced by the Reserve Bank in late 2013. 
 
How this measure will be used:
CoreLogic Senior Research Analyst, Nick Goodall comments: “It’s really important to understand that this series is experimental and is undergoing a period of user testing. MBIE have been very clear that the measure maps the shifts in affordability over time but does not define the percentage of households able to afford a home, because the term ‘affordable housing’ can be very subjective. We consider that when used in conjunction with other measures/reporting, it will be a very useful tool for understanding the property and rental markets and the forces driving them”
 
You can read the first report using HAM here.
 

Tags: Property, CoreLogic, Affordability, Housing, Real Estate, Property Market, Property Values, Homes Values


Comments:

6 Comments

adrian turner (New Zealand)
07:22 PM 23 May 2017
The crucial question remains unanswered: Affordable to whom? For "ordinary New Zealanders" I think "affordable" means attainable by a person/family working 40 hours a week on a median wage. Mortgage interest rates are a bit of a distraction. I bought my first house in the 70s when interest rates were in the 10+% range. In the 80s my interest rate rose to the 20s but "ordinary New Zealanders" were still able to buy houses, probably because there were enough houses to go around and prices more closely matched what people could afford. And there you have it: there were enough houses to go around. Think of a Rolls Royce or Ferrari - are they affordable? Does the fact that they sell well mean they are considered "affordable"? Which brings us back to that question: affordable for whom?
Rachelle Goldfinch (New Zealand)
02:48 PM 23 May 2017
We are currently looking to buy our first home. We are renting for $380 per week for an 80 square meter house, which will be considerably cheaper than buying. We own our own business also. We have missed out on five houses so far which one of which GV was $450000 it sold for $717000. And have just had a similar thing happen last night. I believe it is people paying ridiculous amounts which are pushing up the prices. I have witnessed people having their parents help and people moving from owing in Auckland to Hamilton. Keeping in mind that each time we try to buy a property we need a LIM, valuation, and our lawyer to look over the documents this is becoming unaffordable even for us with a $140000 deposit! Also the stress on relationships is massive. It is a full time job just to find a house. I feel for others who are also in a similar position.
steve sutcliffe:
I have watched and read with dismay the reporting by QV over the years, breathlessly cheer leading the rise in property prices, as if its a good thing. Now you pretend that because of low interest rates, un-affordable housing was affordable all along! Wow! What happens when interest rates rise? Well, we're all in deeper doo than we are now for sure. Admit it QV, you are now too politically tied to National Party thinking to be considered independent. I predict that the HAM will certainly be a HAMfisted exercise, that wont help in good policy setting at all.
Cedric Whitford (New Zealand)
10:03 PM 22 May 2017
Don't shoot the messenger Steve. ....
John Butt (New Zealand)
08:02 PM 22 May 2017
This analysis is a national analysis, not usually useful for people, only policy makers. I did a similar exercise in May last year with a separate analysis for Auckland and Wellington. No surprise, for Wellington, maybe like most of NZ, there is little difference between renting and buying. But for Auckland is is far better renting.
My analysis is showing changes now, but not a lot
Here is my published charts: http://listings.jonette.co.nz/blog/rent-save-or-buy-auckland-2.html
Brent Wheeler (New Zealand)
05:37 PM 22 May 2017
Good initiative.. A difficult but crucial measure to tie down is (perhaps surprisingly) what is meant by a "home". This alters over time - typically people expect and buy more "home quality" over time (just as they do with other items. This needs to be factored in as it is with other similar measures. Economist Deidre McCloskey has looked at this phenomenon across the wider economy over years since 1830 in the western world. She concludes that "quality" of goods and services increases at around 1% per annum. So a 2003 "affordable/non-affordable house is NOT the same as a 2017 dwelling. Let's at least try to get this noted. A related issue is the how much "house" a dollar buys - the link is obvious enough.
steve sutcliffe (New Zealand)
04:53 PM 22 May 2017
I have watched and read with dismay the reporting by QV over the years, breathlessly cheer leading the rise in property prices, as if its a good thing. Now you pretend that because of low interest rates, un-affordable housing was affordable all along! Wow! What happens when interest rates rise? Well, we're all in deeper doo than we are now for sure. Admit it QV, you are now too politically tied to National Party thinking to be considered independent. I predict that the HAM will certainly be a HAMfisted exercise, that wont help in good policy setting at all.