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House price-to-income multiple
This page is an addition to the comprehensive housing affordability analysis we already cover at interest.co.nz. (For the latest home loan affordability report click here)
The house-price-to-income multiple is a simplified, yet internationally recognised measure of housing affordability. It is covered in Agenda 21, Chapter 7 of the United Nations Framework and it is defined as the ratio between median house price and median annual household income, otherwise known as the median multiple. The World Bank also says this ratio is "possibly the most important summary measure of housing market performance, indicating not only the degree to which housing is affordable by the population, but also the presence of market distortions".
Based on this official work, it seems to have become accepted that a median multiple of 3.0 times or less is a very good marker for housing affordability. Much of the work in support of the 3x standard is based on analysis of US market data. For more on the comparatives with other international cities, see Demographia.
Use the following for international comparative purposes only. Real affordability measures should relate to take-home pay rather than gross incomes the UN/World Bank basis uses. Tax rates and other income support are important considerations, and are not covered on this page, but are covered in our core Homeloan Affordability series.
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Median |
Median |
----------------Median multiple---------------- |
| (see Notes below) |
Population |
House price |
H'hold Income |
Jan-10 |
Dec-09 |
Nov-09 |
Jan-09 |
Jan-08 |
| |
June-09 |
Jan-10 |
Jan-10 |
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|
|
|
|
| . |
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|
|
|
|
|
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| NZ total |
4,315,800 |
$350,000 |
$76,329 |
4.6 |
4.6 |
4.6 |
4.4 |
4.8 |
| . |
|
|
|
|
|
|
|
|
| Whangarei District |
79,000 |
$292,,500 |
$74,567 |
3.9 |
3.7 |
4.3 |
3.6 |
4.5 |
| . |
|
|
|
|
|
|
|
|
| Auckland metro |
1,436,400 |
$450,500 |
$82,426 |
5.5 |
5.6 |
5.6 |
5.3 |
5.7 |
| - North Shore City |
225,800 |
$541,341 |
$87,378 |
6.2 |
6.1 |
6.5 |
6.0 |
6.3 |
| - Waitakere City |
204,500 |
$389,200 |
$80,919 |
4.8 |
5.1 |
4.7 |
4.8 |
5.3 |
| - Auckland City |
444,100 |
$521,341 |
$85,225 |
6.1 |
6.2 |
6.1 |
5.7 |
6.0 |
| - Manukau City |
368,500 |
$447,922 |
$76,829 |
5.5 |
5.3 |
5.3 |
5.2 |
5.5 |
| . |
|
|
|
|
|
|
|
|
| Hamilton City |
140,700 |
$319,538 |
$73,055 |
4.4 |
4.7 |
4.5 |
4.1 |
4.8 |
| . |
|
|
|
|
|
|
|
|
| Tauranga City |
112,500 |
$349,000 |
$71,352 |
4.9 |
4.7 |
4.9 |
5.0 |
5.1 |
| . |
|
|
|
|
|
|
|
|
| Rotorua District |
68,200 |
$230,000 |
$72,842 |
3.2 |
2.9 |
3.1 |
3.4 |
4.1 |
| . |
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|
|
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| Gisborne District |
46,200 |
$225,000 |
$65,819 |
3.4 |
3.8 |
3.9 |
4.0 |
4.5 |
| . |
|
|
|
|
|
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| Hastings District |
74,300 |
$302,500 |
$68,500 |
4.4 |
4.4 |
4.1 |
3.6 |
|
| . |
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| Napier City |
57,200 |
$302,750 |
$68,712 |
4.4 |
4.5 |
4.1 |
4.3 |
4.6 |
| . |
|
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|
|
|
|
|
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| New Plymouth District |
72,300 |
$350,000 |
$69,389 |
5.0 |
4.8 |
4.8 |
4.6 |
4.8 |
| . |
|
|
|
|
|
|
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| Wanganui District |
43,400 |
$208,000 |
$66,140 |
3.1 |
3.1 |
2.8 |
2.8 |
2.9 |
| . |
|
|
|
|
|
|
|
|
| Palmerston North City |
80,300 |
$264,000 |
$73,651 |
3.6 |
3.5 |
3.6 |
3.6 |
4.0 |
| . |
|
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|
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| Wellington metro |
478,600 |
$375,000 |
$83,488 |
4.5 |
4.7 |
4.6 |
4.5 |
4.8 |
| - Kapiti Coast District |
48,900 |
$345,000 |
$73,052 |
4.7 |
4.5 |
4.4 |
4.5 |
4.9 |
| - Porirua City |
51,500 |
$383,750 |
$79,940 |
4.8 |
4.6 |
4.8 |
4.7 |
5.0 |
| - Upper Hutt City |
40,600 |
$303,250 |
$81,192 |
3.7 |
3.7 |
4.1 |
3.8 |
4.4 |
| - Lower Hutt City |
102,100 |
$357,500 |
$82,027 |
4.4 |
4.3 |
4.1 |
4.4 |
4.1 |
| - Wellington City |
195,500 |
$462,088 |
$92,881 |
5.0 |
5.2 |
5.6 |
4.6 |
5.3 |
| . |
|
|
|
|
|
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| Nelson City |
45,000 |
$315,000 |
$69,650 |
4.5 |
5.0 |
4.6 |
4.7 |
5.2 |
| . |
|
|
|
|
|
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| Christchurch City |
372,600 |
$345,935 |
$73,644 |
4.7 |
4.7 |
4.7 |
4.4 |
4.9 |
| . |
|
|
|
|
|
|
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| Timaru District |
44,100 |
$220,000 |
$68,803 |
3.2 |
3.1 |
3.2 |
3.4 |
3.5 |
| . |
|
|
|
|
|
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| Dunedin City |
123,700 |
$257,500 |
$65,936 |
3.9 |
3.6 |
3.9 |
3.6 |
4.1 |
| . |
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|
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| Queenstown-Lakes District |
27,100 |
$531,250 |
$70,998 |
7.5 |
6.7 |
7.8 |
8.1 |
8.9 |
| . |
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|
|
|
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| Invercargill City |
52,000 |
$185,000 |
$67,421 |
2.7 |
2.8 |
2.9 |
2.8 |
3.8 |
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Median house price:
Median house prices are as reported by the Real Estate Institute of New Zealand. Although the REINZ series is more volatile than the QV equivalent, there is a highly positive correlation between the two series. The REINZ series is more current and offers an earlier indication of market trends. Unfortunatley, the new RBNZ-REINZ stratafied house price index series does not have enough detail to be used in this analysis.
Median household income:
The household income for a standard household is made from one full time male median income, 50% of one female median income, both in the 30-34 age range, plus the Working For Families income support they are entitled to receive under that program. This standardised household is assumed to have one 5 year old child. Incomes are before tax and retrieved from the Statistics NZ / IRD LEEDS income series. LEEDS data are subject to revision. Work continues to more exactly match median incomes to local authority boundaries.
Reconciliation to Demographia reports:
The data on this page, and in the separately published international Demographia series use the same methodology. However, the reported results are different because:
- our results are tracked monthly, whereas Demographia focus solely on the September quarter each year,
- our median household income is based on a standardised house-buying household (see above) whereas Demographia uses a whole-of-population median which results in a lower overall income,
- we use income from the very detailed IRD-based LEEDS series which is for primary wage and salary income, plus W-F-F benefits paid, whereas Demographia use income data based on the last census (2005) for all age-groups and have applied factor increases to account for the later time period. The census income data includes income elements from all sources (wages, salaries, interest, dividends, benefits, self-employment, partnerships, foreign, etc).
Disclaimer
IMPORTANT – PLEASE READ
No reader should rely on the contents of this report for making a specific investment or purchase decision. The information in this report is supplied strictly on the basis that only overall market trends are being reported on, and that all data, conclusions and opinions expressed are provisional and subject to revision. If you are making a specific investment or purchase decision, you are strongly advised to seek independent advice from a qualified professional you trust. The conditions and disclaimers set out at www.interest.co.nz/legaldisclaimer.asp are applicable to this report as well.
This report is made available on these terms only, and neither JDJL Limited nor www.interest.co.nz will accept any responsibility for any actions taken on the basis of information in this report, nor for any error in or omission from this report.
Contact:
For sources, definitions, and methodology, please contact:
David Chaston
Publisher,
www.interest.co.nz
JDJL Limited
246A Jervois Road, Herne Bay
PO Box 47-756, Ponsonby
Auckland, New Zealand
Phone: +64 (0)9 378-9140
Mobile: +64 (0)21 997 311
Fax: +64 (0)9 378-9141
Email: dchaston@interest.co.nz
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Related Commentary:
demographia.com
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