Kelvin Davidson: CoreLogic Property Economist on the increasing housing affordability, high rent-to-income ratio

Housing affordability is improving, but it's not the same story for renters. 

New CoreLogic data for the fourth quarter of last year shows falling property values, rising incomes and lower mortgage rates have seen affordability at its best level since pre-Covid. 

It says the median home value is around seven times the median annual household income, well down from the market peak in 2021. 

But renters are still facing some strife, with the rent-to-income ratio at a record 28%. 

Chief property economist Kelvin Davidson told Mike Hosking this is due to previous increases in rents. 

He says rents tend to flatten off more than fall, and that's what seems to have happened over the past year and a half. 

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Episode Transcript

Speaker 1 (00:00):
And more evidence that we have a resuscitation of sorts

(00:02):
of the New Zealand real estate market. You call logic data.
This shows we're back to the best levels of affordability
since COVID. So what's going on here? Call logics to
your property economist is of course Kelvin Davidson, who's back
with this. Calvin morning, Good morning. So let's look at
these factors. You've got prices, you've got wages, you've got
interest rates. Are they all sort of playing their part
at the moment we're mixing them up into something sweet

(00:22):
and lovely?

Speaker 2 (00:23):
Oh? Well, absolutely. I mean, look what's happened in the
past for the two or three years. Prices down twenty percent,
incomes have gone up some percentage over that time. I
don't have to state off the top of my head. They've
send have gone up. And of course the biggie is
mortgage rates. You know that those sharp falls really putting
cash back in people's pockets and making them more confident
training in the housing market.

Speaker 1 (00:43):
Do you have to move now? Is this a sweet
spot before it's too late or not?

Speaker 2 (00:49):
I think most fears about the market over the next
couple of years are still fairly cautious and then yes,
mortgage rates we've seen before the impact they have. But
at the same time, the economy is still a little
bit so there's still a lot of this things. It's
definitely still a biased market, and we've got debt to
income ratio restrictions this time, which we aren't doing anything
right now, but it's sort of lurking out. They're ready

(01:11):
to restrict loans if and when mortgage rates get even last.
So I think there's there's a few reasons to be cautious.

Speaker 1 (01:17):
I'm told investors are back.

Speaker 2 (01:19):
Yeah, they definitely are. You see said that in because
the market share for investors has been rising for six
and nine months and now it's probably back to about
where it normally is, so big changes for investors, and
of course tax bills have got smaller. But I think
really it's again about those mortgage rates. You have a
low mortgage rate, the top ups that you have to
put into a new rental property ownsburg and I guess

(01:41):
that's just turning activity around.

Speaker 1 (01:43):
The bank's writing money. Are people flooding and going yes please?

Speaker 2 (01:47):
Yeah, the mortgage lending has definitely picked up, and it's
been driven a lot by certainly trading houses. But also
we have seen a bit of bank switching activity. So
now those are the ability or people on floating rates
or short fixes, so they do actually have the ability
to switch banks.

Speaker 1 (02:04):
Interesting, we're actually.

Speaker 2 (02:05):
Sitting there a bit going on, and I guess some
keen deals from some of the banks have been entitled
people across.

Speaker 1 (02:11):
Now you're commentary on rentals. Now what I thought there
was a flood of rentals on the market, therefore prices
were going down. Why are you trying to tell us
that things are tight?

Speaker 2 (02:20):
So at the moment, the ratio of rents to household
incomes is at a record high, and I guess it
reflects what's happened over previous years. We did see a
big rental boom that pushed rents up in relationship incomes.
That that rental boom has pizzas out. And I mean
rents aren't necessarily falling. You don't tend to see them
fall very much. They tend to flatten off. And I
guess that's sort of just what's happened in the past

(02:40):
twelve or eights in months, But certainly attendant's market, there
is a lot of choice out there. Net migrations come down.
So yeah, just a little bit difficult for landlords to
be pushing through rent increases at the moment. But at
the same time, you don't tend to see rents fall.
There could be a flattering period.

Speaker 1 (02:55):
Good stuff for come. Appreciate the expertise as always, Kelvin Davidson,
Core Logic, Chief Property and Manner.

Speaker 2 (03:00):
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