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How does the government’s new affordability measure work?

By Craig Catley

Ready for a new way to view the North Shore housing market? The Ministry of Business, Innovation and Employment (MBIE) has unveiled its latest way to measure the affordability of New Zealand real estate, and it's been lauded as very, very good.

While it won't tell people that can't afford to buy property anything they don't already know, it provides some incredibly value market insight to those looking to sell or make their next purchase. 

How is this new measure different?

In a May 10th release from the MBIE, deputy chief executive Chris Bunny detailed the Housing Affordability Measure (HAM), which covers statistics from 2002 through to 2015.

Ready for a new way to view the North Shore housing market?

"The measure provides a picture of shifts in affordability, broken down by local council and by ward in Auckland. This robust measurement of how much income households have left after their basic household costs have been paid will inform policies and decisions for Kiwis and their housing."

It uses data from Statistics New Zealand to track affordability for two groups in particular – first home buyers and renters. So for those renting on the North Shore or looking to find their very own home, what does the HAM say?

Green acres and HAM 

The HAM records the percentage of New Zealanders looking to buy (or currently renting) that can realistically afford to buy property around New Zealand. While it is not a strict measure, as the term affordable can be very subjective, it gives a rough idea of where our country is at. As you might have guessed, the Auckland figures are not fantastic. As of 2015, 85.66 per cent of people in this position in the Auckland region were below the HAM line.

While all parts of the country recorded a percentage above 70, some other major centres were much better off, with more than 25 per cent of Wellingtonians on the right side of the HAM line.

The bottom line is that it's hard to afford property no matter where you are in New Zealand. The HAM data actually shows a surprising thing or two about overarching trends in NZ property markets.

Affordability has not changed that much

The data indicates that less than 20 per cent of Auckland's first home buyers can afford to make a purchase, but this figure has remained largely the same since 2005. This means that even when real estate on the North Shore increases in value by 10 to 12 per cent in a year, the number of people that can afford it doesn't waver much.

According to CoreLogic NZ, this is mostly due to one thing: low interest rates.

How many New Zealand first home buyers can afford to purchase property?

On top of this, CoreLogic's research shows that between 2009 and today, the percentage of home buyers that were first-timers has also remained steady between 17 and 20 per cent. So even though values have seen meteoric increases, Kiwis are always finding a way to buy.

What's next for the HAM?

While this has been described as an experimental measure, it's an important one – especially with housing such a hot topic in an election year. Being able to see the exact levels at which someone can or cannot afford a home helps buyers and sellers shape their savings, their marketing and even their fabled five year plans.

Wherever you sit on the affordability spectrum, there's always time to start planning. Working out where you might be able to purchase, how that functions for your long-term finances, even when you could sell for a profit.

We can't change the housing market with a wave of our hand. But when you're ready to take it on yourself, we're here to help you out.

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