New report ranks Auckland seventh least affordable housing market

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Auckland is the seventh least affordable housing market in the world, despite a year of falling prices, a new report shows.

The annual Demographia international housing affordability report assesses affordability using the “median multiple”, a measure of median house price divided by median household income.

Each year it ranked 94 major housing markets, with populations of more than one million in Australia, Canada, Hong Kong, Ireland, New Zealand, Singapore, UK and the United States.

This year it found that Auckland had a “median multiple” of 10.8, which meant house prices were 10.8 times the median household income.

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That was an improvement on last year when the price to income ratio was 11, and Auckland’s median price had fallen 15.2% annually to $1 million in February, according to the latest Real Estate Institute figures.

But the report noted the price to income ratio was still up the equivalent of two years in median household income from pre-pandemic 2019.

In early 2020, Auckland’s price to income ratio was 8.6, and back in 2010 it was 6.4.

Markets with house prices more than three times the median regional income were considered unaffordable by the report authors.

Those with prices more than five times the median income were severely unaffordable, and Auckland’s median multiple put it in that category.

Of the 94 markets ranked, Hong Kong remained the most unaffordable market in the world with a median multiple of 18.8.

Sydney was the second least affordable market with a median multiple of 13.3, while Vancouver, Honolulu in Hawaii, and San Jose and Los Angeles in California made up the top six with multiples of 12.0, 11.8, 11.5 and 11.3 respectively.

For the first time in the 19 years the report had been produced, none of the markets ranked qualified as affordable.

The most affordable markets were all in the United States. They were Pittsburgh at 3.1, followed by Rochester at 3.2, and Cleveland and St. Louis at 3.5.

But ACT deputy leader Brooke van Velden said markets that were less affordable than Auckland, such as Sydney, Vancouver, Honolulu, San Jose and Los Angeles, had lower interest rates.

“New Zealand buyers get the double whammy of high property prices and rocketing interest rates. Interest rates in New Zealand are 1% to 2% higher than other markets classified as severely unaffordable.”

The rising cost of housing had been the number one driver of poverty and inequality in New Zealand for the past three decades, she said.

CoreLogic’s latest housing affordability report showed that new home-buyers now had to spend over half their income, on average, on mortgage repayments, and that eroded other improvements in housing affordability.

But the pressure could start to come off over the next three to six months, if mortgage rates flattened, house prices continued to fall and wages rose, CoreLogic’s chief property economist Kelvin Davidson said.

Commentators expected prices to fall further over the coming months before the market stabilised, and ANZ economists recently said the market was about two thirds of the way through their forecast for a 22% peak-to-trough price decline.