The Treasury

Global Navigation

Personal tools


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

4.2  Regional Variations in Trends

4.2.1  Regional Councils

There is significant variation in affordability across regions in New Zealand. We have calculated ratios of average house price to average individual income for each regional council area, for June 2005. It is sufficient to use these ratios, rather than prospective mortgage payments to income, because adding an interest rate component that is constant across all regions would not alter the comparisons.[18]

House prices are the average sale price in the first six months of 2005, obtained from QVNZ. Our raw data was for each TLA, from which we derived figures for each region by calculating an average, weighted by the number of house sales (in the first six months of 2005).

Average gross individual income is derived from the 2001 Census figures. The actual 2001 figures for each TLA have been adjusted using the National Bank’s Indices of Regional Economic Activity, to obtain estimated figures for the June quarter of 2005. To obtain regional council figures, we then calculated the average for each region weighted by the 2001 usually resident population.

The house price to income ratios are shown in Figure 12. Auckland is the least affordable region, followed by Tasman and Nelson. Southland is the most affordable region, followed by West Coast and Manawatu-Wanganui.

Figure 11 – Average house price to average gross individual income ratios, 2005, by Regional Council

However, there is little obvious pattern to this data. Regions with large urban areas vary quite a lot in terms of affordability (Auckland is significantly less affordable than Wellington or Canterbury), as is the case with predominantly rural regions (Tasman is substantially less affordable than West-Coast or Manawatu-Wanganui). Obviously there is much variation within regions, which is discussed below.

Appendix Table 1, which shows the average house price, median individual income, and the respective ratio, for all Regional Council areas, as used to produce the above graph. The data allows greater analysis of the underlying patterns in the headline ratios.

Some regions with high house prices are relatively unaffordable (Tasman, Auckland) while others are reasonably affordable (Wellington). Conversely some regions with high incomes have comparatively reasonable affordability (Wellington again) while others are relatively unaffordable (Auckland). West Coast has low incomes but is very affordable in a relative sense, while Northland has low incomes but its housing is much less affordable than most other regions.

The difference between Auckland and Wellington is interesting, since they have the two highest incomes and house prices, yet Wellington is significantly more affordable. The difference lies in the fact that their incomes are relatively the same, yet Auckland’s house prices are far greater than those of Wellington.

Southland has the lowest house prices in New Zealand, but a significant reason for it being easily the most affordable region is that its incomes are relatively high (4th highest region).

There is little pattern to the differences in house price to income ratios. Reasons for the regional affordability variations are complex, and can arise from differences in average house price, average income, degree of urbanity, the extent to which it has holiday destinations, and its neighbouring regions. These factors are interrelated to varying degrees.

4.2.2  Variations within Regional Councils

We have calculated the same ratios for each Territorial Local Authority (TLA). The method used is explained above. There are large differences in affordability within each region. Figures showing the intra-regional variations are in the Appendix.

There appear few stylised facts regarding these differences. Within some regions it is the urban areas with larger ratios, and for others it is the rural areas. However the most unaffordable areas within each region tend to be the main urban centres (e.g. Auckland, Tauranga, New Plymouth, Palmerston North, Wellington) or so-called holiday areas (Far North, Thames-Coromandel, Kaikoura, Queenstown Lakes). The most affordable areas are rural and not considered tourist destinations. Obviously this last point only considers house prices, and areas with relatively low incomes also produce high ratios.

In Northland, the Far North is the most unaffordable TLA, significantly more so than the urban Whangarei (Figure 22). In Auckland, Auckland City is the most unaffordable followed by the North Shore (Figure 23). Of note is that Rodney is almost as unaffordable as the North Shore, despite being further from the city and much more rural. In Waikato, Thames-Coromandel is substantially more unaffordable than any other TLA, with Taupo the next worst (Figure 24). Both of these areas are seen as tourist spots, with Taupo being somewhat urban as well. Hamilton, the only large urban TLA in the region, comes next with a ratio less than half of Thames-Coromandel.

In the Bay of Plenty, Tauranga is the least affordable TLA (Figure 25). It is the largest urban area and also a tourist spot. In comparison, Rotorua, the next largest urban area, is over twice as affordable as Tauranga, and more affordable than the largely rural coastal TLAs of Western BoP and Opotiki. In Hawke’s Bay, the urban areas of Napier and Hastings are the least affordable (Figure 26). The same occurs in Taranaki, where New Plymouth is over twice as unaffordable as any other TLA (Figure 27).

Urban Palmerston North is the most unaffordable TLA in Manawatu-Wanganui (Figure 28). Wellington has relatively little variation. The urban Wellington City and the semi-urban and coastal Kapiti Coast are the least affordable TLAs. The most affordable TLAs in Wellington are on the eastern coast (Figure 29).

Tasman, Nelson and Marlborough are quite similar, with the rural Tasman being the least affordable (Figure 30). The three West Coast TLAs are all very similar (Figure 31). The urban Christchurch is the third least affordable TLA in Canterbury. Even less affordable are the rural Kaikoura and the semi-rural Banks Peninsula (Figure 32). Queenstown Lakes is the least affordable TLA in Otago. Dunedin is significantly more affordable, even more so than the rural Central Otago TLA (Figure 33). In Southland, Invercargill is slightly more unaffordable than the rural TLAs (Figure 34).

The most affordable TLA in New Zealand is South Waikato, significantly better than second-placed Tararua. The least affordable TLA is Thames-Coromandel, followed by Auckland and then Queenstown Lakes.

One thing to note with this analysis is that these ratios do not require that people live and work in the same TLA. Some areas may be quite affordable to live in, but only if an individual’s income was sourced from another area. For example, Lower Hutt is more affordable than Wellington, but part of that is likely to be due to many of those living in Lower Hutt working in Wellington and earning incomes that they could not obtain by working in Lower Hutt.


  • [18]It should be noted that the regional comparisons in this paper are for a point in time and do not allow for the fact that different regions can be at different points in a business cycle.
Page top