Median Multiples

House price-to-income multiple

This page is an addition to the comprehensive housing affordability analysis we already cover at interest.co.nz.

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 US research on the US housing market.

 

Updated 14 Dec 18
Median
Median
----------------Median multiple----------------
(see Notes below)
Population
House price
H'hold Income
 
       
 
Nov-18
 
 
Nov-18
Oct 18
Sep 18
Nov 17
Nov-16
 
 
 
 
 
 
 
 
 
NZ total 4,926,600 575,000 $88,904 6.47 6.32 6.31 6.22 6.04
                 
Whangarei 89,700 500,000 $85,401 5.85 5.84 6.11 5.11 4.89
                 
Auckland metro 1,657,000 867,000 $93,031 9.32 9.31 9.19 9.69 9.74
 - North Shore 225,800 1,041,000 $98,620 10.56 10.16 10.08 11.06 11.60
 - Waitakeres 204,500 772,500 $91,330 8.46 9.06 8.30 8.41 8.90
 - Auckland City 444,100 999,000 $96,190 10.39 9.99 9.80 10.22 10.63
 - Manukau 368,500 842,000 $86,713 0.00 9.11 9.51 9.64 9.63
                 
Hamilton 165,400 555,000 $85,422 6.50 6.66 6.45 6.35 6.43
                 
Tauranga 131,500 656,000 $83,431 7.86 7.90 7.61 8.04 7.93
                 
Rotorua 71,700 420,000 $85,173 4.93 4.71 4.95 4.87 3.95
                 
Gisborne 48,500 341,600 $76,961 4.44 4.04 4.47 3.93 3.53
                 
Napier 79,900 499,000 $78,553 6.35 6.51 6.17 6.10 5.09
                 
Hastings 62,000 461,000 $78,310 5.89 5.50 5.64 5.36 4.72
                 
New Plymouth 80,700 420,000 $81,346 5.16 5.24 5.06 4.95 5.03
                 
Whanganui 44,500 240,000 $77,537 3.10 3.30 2.94 2.73 2.52
                 
Palmerston North 87,300 410,000 $86,342 4.75 4.76 4.69 4.51 3.87
                 
Wellington metro 487,700 613,000 $96,967 6.32 6.17 6.16 5.81 5.40
 - Kapiti Coast 52,700 550,000 $84,846 6.48 6.86 5.98 6.34 5.68
 - Porirua 56,100 660,000 $92,846 7.11 6.69 7.19 6.40 6.13
 - Upper Hutt 43,200 $484,150 $94,301 5.13 5.12 5.10 4.93 4.78
 - Lower Hutt 104,700 580,000 $95,270 6.09 5.78 5.90 5.46 5.16
 - Wairarapa 40,800 430,000 $69,110 6.22 5.07 5.67 4.80 4.20
 - Wellington City 212,700 751,000 $107,876 6.96 6.37 6.65 6.71 6.38
                 
Nelson 51,400 520,000 $80,560 6.45 6.44 7.38 6.38 6.01
                 
Christchurch 381,500 460,000 $88,530 5.20 5.36 5.13 5.44 5.42
                 
Timaru 47,100 365,000 $82,712 4.41 4.03 4.07 4.52 4.38
                 
Dunedin 128,800 435,500 $76,253 5.71 5.69 5.27 5.12 4.31
                 
Queenstown-Lakes District 37,100 985,000 $72,823 13.53 12.24 14.26 12.04 11.27
                 
Invercargill 54,800 279,000 $78,855 3.54 3.24 3.30 3.31 2.93
                 

 

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. Unfortunately, the new RBNZ-REINZ stratified 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 https://www.interest.co.nz/terms-conditions 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
206 Jervois Road, level 1, Herne Bay
PO Box 47-756, Ponsonby
Auckland, New Zealand

Phone: +64 (0)9 360-9670
Mobile: +64 (0)21 997 311
Fax:       +64 (0)9 360-9319
Email:   david.chaston@interest.co.nz

 

Related Commentary:

demographia.com

House price to income multiple

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4 Comments

It is all Irish I tell ya,
http://www.independent.ie/business/personal-finance/property-mortgages/p...
Too old for a mortgage at 40. Too worried about negative equity and its consequences.. 
Bin there done that.
http://www.independent.ie/business/personal-finance/property-mortgages/i...
Too worried about where property is going. Even an adviser rents as Houses over cooked.
Median Multiples...Nah worries mate.
.NZ is different.
We can work past our Prime.

David & team - ever consider converting this page into one of your charts?  Where you can select NZ as a whole or each city, and graph the multiples over time?  Would be very neat.

Here's a couple of additional lines I reckon would make the table more complete and informative, respectively:
- 'Rest of NZ / Small town NZ' - pop. 1,336,000 with a Jan-17 MM of 3.02*
- 'NZ total ex-Auckland' - Jan-17 MM of 4.18*

*my approx calcs, calculated based on the NZ total data and the data for the towns and cities you listed.

Neither of these are far off the housing affordability benchmark MM of 3.0x or less, a rather different housing affordability story for NZ Inc (ex-Auck) than when the Auckland-inclusive stat is used.

The single NZ total MM you (and other media) currently provide is so significantly influenced by the large population MM 'outlier' of Auckland metro that it doesn't give a useful picture for housing affordability - on average - across the rest of NZ. Sure Queenstown is also an outlier on the MM front but its small population means its impact on the NZ total MM is negligible.

Oh my Gosh , those public servants are the best paid in the land down in Wellington !