Mortgages absorbing bigger chunk of household income - CoreLogic | WATCH - Property News AU/NZ | propertynoise.co.nz & propertynoise.com.au

PHOTO: Kelvin Davidson Photo: SUPPLIED

The housing market is becoming more affordable but is still beyond the reach of the average household as the cost to service a mortgage is “alarmingly high”.

Property research firm CoreLogic said the average house value to income ratio dropped to 8.5 in the three months ended June from 8.9 in the first quarter, but was still well above the pre-Covid rate of 6.6, and the long-term average value of 6.

“This is at least a start and will provide some would-be first home buyers with a little more confidence,” CoreLogic chief economist Kelvin Davidson said.

Rising interest rates were another problem, he said.

Auckland house prices tumble by over $100,000 | TRADE ME

“The amount of household income required to service a mortgage remains alarmingly high.

“The falls in property values that we’ve seen in recent months will have helped the required debt servicing costs for households [given smaller mortgages], but this effect has been outweighed by the rise in mortgage rates themselves.”

CoreLogic estimated it would take about 53 percent of gross household income to service an 80 percent loan-to-value (LVR) mortgage, based on an average property value over 25 years, compared with 50 percent just three months ago.

New Zealand rate cuts and house price falls canary in the coal mine

In Auckland, Hamilton, Tauranga and Dunedin, mortgage repayments were absorbing at least 50 percent of gross annual average household income, with Wellington’s figure of 47 percent a record high.

“Compared to the long-run average of 37 percent, the latest reading is still the most problematic area of affordability and surpasses the sustained 50 percent peak we hit in 2007-08,” Davidson said.

Improvement for renters in some cities

Rental affordability was steady at 22 percent of gross average household income, with a slight improvement in Auckland, Hamilton, Tauranga and Wellington, while affordability had deteriorated in Christchurch and Dunedin.