New Zealand incomes haven't been keeping up with housing costs. Photo: 123RF
New Zealand incomes haven't been keeping up with housing costs, and the crunch is hitting poorest families the hardest.
New data from Stats NZ shows that almost one third of the lowest-earning households in the country spent more than 40 percent of their income on housing costs in the year to June last year.
About 31 percent of households in the lowest two income quintiles had 40 percent or more of their income going to housing costs.
Across all households, it was 19.7 percent, compared to 18.2 percent the previous year.
Households spent an average of $22.20 per $100 of income on housing costs last year, up from $20.80 in 2019.
"Although incomes increased, these statistics show that people spent a higher proportion of their money on housing costs than they had in the past," household financial statistics spokesperson Chris Pooch said.
"This creates further pressure on a household's budget, along with things like groceries and petrol getting more expensive over the same time period."
Average annual income lifted 5.5 percent between June 2023 and June 2024, but weekly rent payments increased 9 percent and mortgage payments 8.7 percent.
Just over 38 percent of households felt that their income was not enough or only just enough to meet their everyday needs. This figure has increased over the last two years.
Just over 28 percent of households who rented were spending more than 40 percent of income on housing costs. The average weekly rent lifted 9 percent year-on-year to $465.50 a week.
Over half of renters felt that their income was "not enough" or "only just enough" to meet their everyday needs in the year ended June 2024.
For those who owned or partly owned their homes, only one in seven households had more than 40 percent of income going on housing costs.
Average weekly mortgage payments continued to increase in 2024, from $605.50 to $658.20, an increase of 8.7 percent on the previous year. Mortgage interest payments rose 35.8 percent, while mortgage principal repayments were down 17.8 percent from the previous year.
Gareth Kiernan, chief forecaster at Infometrics, said housing costs had been running ahead of wage growth on average since at least 2007, but the increase had been most noticeable in the past couple of years.
"No matter which component you look at, rent, mortgage rates, insurance, rates, they have on average run ahead of income growth to varying degrees. The past two years were particularly critical."
He said in the near term there could be some relief, with interest rates coming down and less pressure on the rental market due to reduced migration.
"On the rates side, these figures don't incorporate the latest rate increase we had in the second half of last year, that will still be quite a bit worse. For insurance there is still a bit of a tail coming through in terms of cost increases, although we are seeing early signs that we are through the worst of it and should see more moderate insurance cost increases after 15 percent or 20 percent the past few years."
He said the lower-income households tended to be at the mercy of what rents were doing.
Mike Jones, chief economist at BNZ, said the data was "entirely unsurprising".
"By the middle of last year, the time period these figures reference, households were under almost peak cost of living strain. We'd had a couple of years of large rent increases with average rent inflation still running at 4 percent to 5 percent. Most mortgage borrowers had also rolled onto higher mortgage rates with the average paid mortgage rate at that time up around what turned out to be the peak of the cycle around 6 percent to 6.5 percent. The fact retail spending went backwards for most of last year was clear enough evidence of this strain. "
He said recent news had been more encouraging for households.
"Rent inflation seems to have flattened off and in fact the rental market if anything looks a touch oversupplied. Mortgage rates are also clearly falling.
"Most of the cash flow impact of lower mortgage rates is yet to hit but should come through more and more over the coming six months given half of all borrowings are set to refix onto generally lower rates. Cost pressures certainly haven't disappeared, rates and insurance costs spring to mind, but overall I think we'll see a bit of catch up in incomes with housing costs, and the modest lift we're seeing in retail spending and consumer confidence seems to support that."
