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Affordability of Housing: Concepts, Measurement and Evidence - WP 06/03

4.1.4  Existing home-owners’ housing costs

We have calculated the proportion of households spending more than a given percentage of their income on housing, for those households where the owner is also the occupant. The data used is the same as for all households in section 4.1.1.

The data follows the same general trend as for all households. But the upward trend continues until 2001 for all four benchmarks, before falling in 2004 (Figure 8); ie, the peak value is in 2001, whereas the peak was in 1997 or 1998 for the all-households ratios.

For the low-income home-owning households, the improvement in affordability from 1995 to 2004 is even more marked. By 2004 the ratios have returned to roughly their 1984 levels (Figure 9). This trend is in contrast to all home-owning households where there was little improvement after 1997, and to all low-income households where the improvement was not nearly as substantial.

Figure 8 – Proportion of home-owning households spending more than a given percentage of net household income on housing costs
Figure 9 – Proportion of home-owning low-income households spending more than a given percentage of net household income on housing costs

4.1.5  House prices and incomes

We have calculated the ratio of median house price to the average income. We again use the median house sale price from QVNZ, the average household income from HES (with estimates for non-survey years, and TAXMOD to derive net values) and the average gross individual income from NZIS. Figure 10 shows these ratios.

Since 1983 there have been periods of upwards trends and periods of stability. The ratio to household income rose in 1983 and 1984, was stable until 1992 before rising to 1998. Then the ratio was stable until 2003, when the current upward trend began.

The ratio of median house price to average individual income declined from 1997 when our series begins. This slow decline ended in 2003 when the ratio went steeply upward to its current level. In terms of this ratio, the current level of unaffordability is easily the highest on record.

Figure 10 – Ratio of median house prices to annual average income
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