ER5 Can work, cannot afford to buy - the intermediate housing market (full report) (August 2015)

The intermediate housing market is the fastest growing segment of the housing continuum. It is defined as private sector renter households with at least one member in paid employment who are unable to affordably (using no more than 30% of their gross household income to service mortgage expenses) purchase a dwelling at the lower quartile house sale price.

The number of households in the intermediate housing market has increased over the past 24 years by approximately 102% nationally and 182% in the Auckland region. The size of the intermediate market has increased despite interest rates falling. The increase has been driven by an increase in the size of the rental market and house prices increasing at a faster rate than household incomes.

Looking forward over the next decade, an increasing proportion of Auckland’s renters are likely to be priced out of the home ownership market if house prices continue to increase at a faster rate than household incomes. To some extent, the current low interest rates have masked Auckland’s deterioration in housing affordability. The proportion of renters unable to purchase a dwelling significantly increases if interest rates return to their long- term average.