6.2 Non-homeowners

6.2.1  Descriptive analysis

Figures 10 through 13 illustrate patterns of housing affordability for non-homeowners. In particular we examine the proportions of individuals and couples who, according to our model, could afford to buy a home in each of waves 2, 4 and 6 of SoFIE, by income, age, ethnicity and region. Generally, couples are far more likely to find homeownership affordable than singles, with the proportion of couples being able to afford being 57% over all three waves compared to around 16% for singles. Overall, the proportion of individuals able to afford home ownership declined significantly between 2004 and 2008, from around 51% to 31%. Subsequently, house price and interest rates have both softened which, together with modest income growth, will have at least partially reversed this decline in housing affordability.

Figure 10 - Affordability by income (non-homeowners)

Source: Statistics New Zealand (SoFIE) data

Note: The figure for quintile 1 in 2007/08 is not presented for confidentiality reasons since the number of those who could afford was very small.

Housing affordability improves significantly with income, particularly for couples. Between 2004 and 2008 income quintiles 2 and 3 (for couples) and 5 (for singles) experienced the greatest falls in affordability. Indeed, in each case affordability levels fell to below half their 2004 levels. Other income quintiles either had persistently high or low levels of affordability over the period.

Between waves 2 and 6 all age groups experienced a decline in housing affordability, though this decline was more pronounced amongst the youngest age groups. Within each wave, for both singles and couples affordability initially increases with age, likely reflecting the higher incomes associated with greater work experience. However, beyond a certain point affordability actually decreases with age. This likely reflects that while most older people already own their home, some, such as the lifetime poor, cannot afford to buy a house. It also reflects that incomes tend to be lower in this age group due to retirement. Some older people may also have experienced adverse shocks such as marriage dissolution or other financial issues late in life, leaving them little time to recover financially.

Figure 11 - Affordability by age (non-homeowners)

Source: Statistics New Zealand (SoFIE) data

Affordability declined for all ethnic groups between 2004 and 2008. However, the capacity to buy a house varies across ethnic groups, and was highest for European New Zealanders and lowest for Pacific peoples over the entire period of analysis. This may partly reflect location choices, with some ethnic groups more likely to be concentrated in Auckland. Rather than disparities in income or net wealth per se, differences between ethnicities may also be due in part to age, with Maori for example tending to be much younger on average than Europeans.

Figure 12 - Affordability by ethnicity (non-homeowners)

Source: Statistics New Zealand (SoFIE) data

Across regions, Auckland had the lowest levels of housing affordability throughout the period of analysis. However, by 2008 affordability levels in other regions deteriorated such that they were much closer to those of Auckland.

Figure 13 - Affordability by region (non-homeowners)

Source: Statistics New Zealand (SoFIE) data