New Zealand is the sixth least affordable country to buy a house, according to a new report.
A 2022 Global Cost of Property Report, released by Compare the Market, shows New Zealand housing is less affordable than 32 other countries, including the UK, Australia and Canada.
Ranked as sixth least affordable, the report shows New Zealand's 'affordability ratio' (the cost per square metre as a percentage of income), is 17.8 percent. It's based on an average property price per square metre of US$4461 (NZ$6602)*, and an average post-tax household income of US$25,074 (NZ$37,110)**.
Applying the same metrics to each country, the report shows the UK is the eighth least affordable. It's followed by France, Denmark and Australia, shown as 11th least affordable.
With an affordability ratio of 16.2 percent, Compare the Market spokesperson Hannah Norton told Newshub Australians are in a slightly better position than Kiwis.
Australia’s position changed from 24th in 2020, to 28th in the 2022 report, bringing the country to just one spot outside the ten least affordable countries.
"These results are in line with Australia’s immense rate of property price growth in recent months...the nation’s recent housing boom is one of the fastest in the world compared to other countries," Norton said.
"Despite this, Australia’s disposable income remains one of the highest worldwide, which keeps affordability higher than other countries listed in the study."
The least affordable country to buy a house is South Korea, which has an affordability ratio of 59.4 percent.
At the other end of the scale, Turkey is the most affordable of all the countries, with an affordability ratio of 4 percent.
Rising property prices and living costs, mixed with property shortages and stagnant wages, have made it difficult to buy a house - and New Zealand's situation is not unique.
"New Zealand’s ranking has stayed consistent in comparison to other nations, which indicates that the tough market buyers are facing is not unique to Aotearoa," Norton added.
A CoreLogic bi-annual Housing Affordability Report released in February, shows it now takes New Zealand households almost 12 years to save a deposit, up from the historical average of 7.9 years.
Based on the average property value, almost half (48 percent) of gross household income is required to service an 80 percent loan-to-value ratio mortgage over 25 years.
CoreLogic head of research Nick Goodall, told Newshub when assessing housing affordability in New Zealand, it's important to take a number of different measures into account.
These include rising mortgage rates, credit availability, loan-to-value ratio (LVR) restrictions and CCCFA requirements, which impact how much people can afford to borrow and repay.
Compare the Market affordability figures are based on price per building size. But Goodall said the price per square metre of land is important, as it typically holds the most value.
"Land is significantly more expensive now, the largest portion of value of property now is the land," Goodall said.
*Figures were sourced by Compare the Market from OECD's Better Life Index and Numbeo.
**StatsNZ data shows in the year to June, 2021, annual average household disposable income is $88,454.
