Wellington house prices had a sharp 18 percent decline from the capital city's pre-Covid-19 peak prices. Photo: RNZ / Dom Thomas
Houses are becoming more affordable as prices continue to drop, but are still expensive by most measures.
The latest CoreLogic Housing Affordability Report indicated continued rate rises and mortgage payments were eating up a large part of household income, but getting on the property ladder was becoming more affordable.
Residential properties were currently valued at 7.8 times the average household income, which was still well above the long-term average of 6.0, but better than the peak of 8.8.
"The falls in property values that we've seen in recent months will in part have helped the required debt servicing costs for a home-buyer, alongside higher incomes, but these effects have been outweighed by the rise in mortgage rates themselves," CoreLogic NZ chief property economist Kelvin Davidson said.
The cost of servicing a loan to value (LVR) mortgage requiring a 20 percent deposit would cost more than 53 percent of the average household income, which compares the long term average of 38 percent to service a mortgage.
The amount of time it took to save a deposit was still high at 10.4 years, but an improvement on the peak of 11.8 reached in the first three months of last year.
"In other words, this measure is signalling that housing is still as unaffordable as ever," Davidson said.
He said affordability as measured by mortgage repayments as a percentage of income should start to improve as prices are expected to continue to fall.
Most affordable region
Wellington City had overtaken Christchurch as the country's most affordable main centre on the home value to income ratio, following a sharp 18 percent decline from the capital city's pre-Covid peak prices.
"Incomes have been rising steadily in both markets, but with Wellington recording larger falls in home prices than Christchurch, the balance of affordability has shifted more significantly," Davidson said.
Tauranga had the longest period of time required to save a deposit of any of the main centres, at 13.7 years, well above its long-term average of 10.8 years, and the national figure of 10.4 years.
However, it had improved from the peak of 15.9 years in the first quarter of 2022.