Conditions easing for buyers but remain challenging for renters

Buying or renting in New Zealand is certainly not cheap, but housing affordability at the end of 2024 was the best it had been in five years, according to CoreLogic.

That was due to improvement in three of the four key metrics, all of which related to buyers:

• The median home price at the end of December was 7.3 times the median annual household income, compared to 10.1 in late 2021.
• Saving for a 20% deposit took 9.8 years on average, compared to 13.5 years in 2021.
• Households spent 46% of their income on servicing an 80% loan-to-value ratio mortgage, compared to 56% in 2022.

However, affordability worsened for the fourth metric, which related to tenants:

• The rent-to-income ratio at the end of December was a record-high 28%.

Renters struggling to save a property deposit

CoreLogic Chief Property Economist Kelvin Davidson said the surge in property prices in 2020 and 2021 had created a “significant affordability challenge”, but much of that deterioration had now reversed.

“Lower mortgage rates and falling house prices have helped affordability, but getting into the market is still no easy task. For first home buyers, the deposit hurdle remains high, and mortgage repayments are still taking a large share of income,” he said.

“That being said, compared to a few years ago, buyers now have more breathing room and may find it easier to get a foothold in the market, especially in areas where house prices have softened the most.”

Mr Davidson said the news was less positive for renters, as high rents made it hard to save for a deposit, reinforcing the financial divide between owners and renters. 

“The affordability equation for renters hasn’t improved in the same way as for buyers. Many tenants are already stretched, and this limits landlords' ability to raise rents further,” he said.

“Without stronger wage growth or greater access to affordable housing, rental costs will remain a key challenge for many New Zealanders.”