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Housing affordability feature

MoneyJune 24, 2021

NZ’s housing market is broken and we’ve got the maps to prove it

Housing affordability feature

Inspired by a map of the US housing market, analyst Emma Vitz created a graph showing how much people needed to earn to afford a property in their region. It quickly went viral.

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From the comfort of my 23 square metre apartment that I most definitely do not own, I mapped out the New Zealand property market. I took the common financial advice to not spend more than 30% of your gross weekly income on housing and calculated the household income needed to make this possible for a homeowner in each region of the country. 

This idea was sparked by seeing a similar map of the US, and it struck a chord. Soon the maps I created based on these numbers were being shared everywhere. New Zealanders have a love-hate relationship with property, and these maps were bringing it all out. Politicians, real estate agents, demographers, recent and aspiring first home buyers – they all had something to say. 

My calculations were based on the median property price by region. I assumed that the buyer had managed to put down a 20% deposit and that they would have a 30 year mortgage at an interest rate of 4%. 

Of course, the deposit is often the biggest hurdle for many people wanting to buy a property. A 20% deposit is difficult to achieve unless you currently own a home that has been appreciating in value, or you have particularly well-off parents who are willing to lend a hand. However, I wanted to be generous and, assuming this somewhat unlikely head start, see what it takes to buy property in New Zealand. 

The answer, unsurprisingly, is often a lot more than the average New Zealand household earns. In Auckland, an income of just over $170,000 is required, which is about $66,000 more than the median household income. Wellington requires an income of $132,000, $30,000 more than the average household actually earns. 

Only three regions in New Zealand required less than the actual median income in order to comfortably pay for a mortgage. The West Coast and Southland, which collectively contain less than 3% of the country’s population, and Canterbury. Canterbury has 12.7% of the population and apparently, the only reasonable housing market of any significant size in New Zealand. 

I’ve often said that in order to buy a property in New Zealand, you need at least two of the following three things: A dual income household, a high income job, and rich parents. In some parts of the country, it seems you might need all three. 

According to the 2020 Household Labour Force Survey, the Auckland median income of all household types – coupled, single, with children or without – was far below what you’d need to service a mortgage comfortably according to the 30% rule. 

In Wellington, the median income of a couple with two dependent children scrapes in just above the required number of $131,960 at $136,604, while all other households fall short. 

In Canterbury, the average single income household (whether with dependent children or not) fails to meet the threshold of $85,520, but all other household types achieve a median income above this. Once again, Canterbury seems to be the only large housing market in New Zealand that is anywhere close to being affordable for the average New Zealander. 

The New Zealand property market is a fascinating beast. We seem rather determined to make an economy out of trading non-productive assets between each other at higher and higher prices. Even Jacinda Ardern agreed, back in 2011, that our economy is a housing market with a few bits tacked on. However, it seems that the average New Zealand household struggles to get a toehold in this market, and these maps show why. 

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