Household income data and house prices

Why does so much coverage of this “housing crisis” neglect to explore actual household income data and the relative economic status of those featured?

The best source of data we have for looking at household incomes is the Household Economic Survey, the latest release being for the year ended June 2015.

It’s clear that using the example of a couple earning, say, $120,000 between them not being able to afford a house in Auckland makes total sense when you can see that they’re in the 8th decile of household income.

household_economic_survey_household_income_deciles

On an individual basis, it makes even more sense when you look the relative position of such a household in the context of actual IRD individual income data.

Based on my calculations from that data, if they’re both earning $60k, they’re not individually in the top 20% of individual earners based on the IRD data. Thus, it makes complete economic sense that they can’t afford to buy a house in Auckland in the suburb their tastes and preferences might lead them to believe they deserve.

There is a seeming reluctance to acknowledge that it’s not really foreign buyers if they’re only 9% of property transactions (Source: Generation Rent estimate). It’s well-educated and very high earning couples teaming up, splitting fixed costs and being able to save for deposits in a couple of years if they budget well. Add in Kiwisaver and a non-trivial proportion of the households buying $1m plus houses aren’t even stretching their finances.

This “housing crisis” coverage is fascinating given that there are also stories currently running about rental warrants of fitness and the inability of lower income households to afford decent rental housing at all. This really is a story of first world problems.

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