But spare a thought for those who purchased around the market’s peak in 2021.
Close to 2000-first home buyers (on paper at least) have seen the deposit they scrimped and saved disappear in a falling market. If they are forced to sell, they face losing that money and ending up back at square one.
“It’s a feeling of hoping that none of the wheels fall off. We can’t afford the roof to give in or the weatherboards to rot out. There’s no buffer. If anything drastically goes wrong like that, we will have to be begging and borrowing off family. We cannot get additional lending to maintain this really expensive asset,” one homeowner told RNZ this week.
Paradoxically, this situation is a byproduct of the structural problems in our deeply unaffordable housing market.
Consider this stark analysis from the economists at Infometrics:
“In New Zealand the average house value was seven times its average household income in 2024. Since 2005, the house value to income multiple in New Zealand reached a maximum (least affordable) of 8.8 in 2022 and a minimum (most affordable) of 4.9 in 2012. In New Zealand, 49.5 per cent of the average household income would be needed to service a 20-year mortgage on the average house value, with a 20 per cent deposit at average two-year fixed interest rates in 2024.”
Compare that to 2005, when Infometrics says average house values were 5.1 times the average household income and servicing the mortgage accounted for 36.6 per cent earnings.
Homeowners since that time have witnessed a ridiculous rise in the value of their properties compared to income growth, and successive waves of first-home buyers are now literally paying the price, hoping for the same trend to be repeated.
This is not a sign of a successful, functioning market.
Successive Governments have paid lip service to finding solutions to housing affordability, but few have wanted to upset well-heeled property-owning voters by making any meaningful change.
Housing Minister Chris Bishop wants homes to cost three to five times household incomes – with moderation in that ratio coming over a 10- or 20-year period.
Bishop said in February he aims to “flood urban housing markets” with more land for development. Changes would include rezoning land and allowing densification in existing suburbs.
Bishop released a Cabinet paper that said housing affordability was “arguably the single most pressing economic, social and cultural problem facing” the coalition Government.
For such great a need, we’ve yet to see enough from Bishop or colleagues about just how they plan to address it.