Abstract

The intermediate housing market is the fastest growing segment of the housing continuum and focuses on the households, who, under current market conditions, are unable to purchase a dwelling. 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. There are now 181,500 intermediate households nationally and 85,400 of these are located in Auckland. Growth in the size of the intermediate market has not been evenly distributed around the country. A total of 47% of all intermediate households are now located in Auckland compared to 34% in 1991 and 37% in 2001.

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. Between 2006 and 2015, the faster growth in house prices over household incomes accounted for 81% of the growth in Auckland’s intermediate housing market.

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.

August 2015