It's almost never been a worse time for Kiwis to try and get on the housing ladder, according to new data.
Property market analysts CoreLogic's latest report says it now takes on average nine years to save for a deposit on the average property - even longer in places like Auckland, despite above-average incomes, after a year in which house prices inflated more than the average household earns in a year.
"Things have got worse in the last three to six months," CoreLogic senior property economist Kelvin Davidson told Newshub.
"We've seen house prices rise pretty sharply, right across the country - affordability pressures have just got that bit more intense in the last three to six months.
"It's not a great story, and we're seeing a divide between those who want to be on the property market and are trying to save that deposit and finding it getting further out of reach."
Nationwide, the average house now costs 6.8 times the average household income. Tauranga (nine) and Auckland (eight) are even worse, while Hamilton, Dunedin and Wellington are close to the nationwide figure. The only major market bucking the trend is Christchurch - but even its figure of 5.2 is far above the traditional affordable range - three or below.
The nationwide figure of nine is only just below the all-time highest recorded - 9.1 in late 2016. The Reserve Bank managed to temporarily cool the market by introducing strict loan-to-value (LVR) restrictions of up to 40 percent - just like it will again soon.
"If the market plays out the way it did back then, we could be poised to see a bit of a cooldown," said Davidson. "I think that is probably going to naturally happen in the second half of this year as the LVR rules take hold, and also just the affordability pressure will act as a natural handbrake... as the pool of people who can buy just gets smaller and smaller."
Household incomes grew 1.6 percent in 2020, while house prices increased between 11 and 18 percent, depending on who you ask. The median house now costs $725,000, while CoreLogic has the average (mean) at $788,967. In Auckland the median is around about $1 million. The mean household income last year $107,731 and the median $88,327, according to Statistics NZ. This means the average house price in New Zealand, over 2020, generated as much in capital gains for its owner as the median household earned - before tax.
To save for a deposit on an average home in Auckland, the average household will need to save for 10.7 years. In Tauranga it's even worse - 12.1 years. Christchurch, again, is the only outlier - taking 6.9 years.
It's not just a city problem though - CoreLogic notes affordability in "the vast majority of provincial areas" is at a record low, particularly in Kawerau, Rangitikei, Tararua, Masterton, Waitaki, and Clutha.
Echoing language used by Green Party co-leader Marama Davidson last year, Davidson says there is a growing "divide" between those who already have houses and those who don't.
"It's tough out there for people trying to save for a deposit, but at the same time because of very low mortgage rates, people who are already in houses are actually finding mortgage payments relatively comfortable."
It's a view shared by Milford Asset Management's Frances Sweetman.
"The actual cost of servicing your mortgage hasn't changed for the last 10 years because interest rates have come down... the amount you're paying is broadly unchanged," she told The AM Show on Thursday.
"If I had any advice for anyone, it's get KiwiSaver as early as you can and let it compound those returns."
She said the Reserve Bank's low interest rate policy, employed to keep the economy ticking over during the pandemic, has been a "huge driver" of price inflation.
Reserve Bank Governor Adrian Orr has rejected this criticism, saying he's just a "bit player" in the housing market. He had a warning for investors who believe the housing market can't fail.
"When interest rates are low, asset prices tend to get inflated and Kiwis, their favourite asset is the house. And it's been investors primarily getting in and getting carried away," he told The AM Show.
"Yes, we are concerned, and you saw us move very recently when you saw us increase the loan-to-value restrictions, especially for investors.
"We're saying look, tai ho here, folks - there is no free lunch, there is no one-way bet when it comes to any investment. When prices are so far stretched beyond the earnings of the household, that is a sign you've gone too far."
There were "hints" in Wednesday's monetary policy statement the Reserve Bank might raise interest rates late next year, Davidson said. This could hurt investors, as even just a 2 or 2.5 percent rise would literally double the interest they're paying.
"And of course they apply to larger mortgages than we've ever had before too."
Orr also warned investors to diversify away from buying up existing housing.
"Just gorging into existing dwellings creates financial instability. It's the investors who are the most fleet-footed, they're first into the market and they're also first to leave, and that can create booms and busts in house prices, leaving the owner-occupier - the likes of you and me who actually live, who own the house they live in - high and dry.
"It also leaves you incredibly vulnerable to any change in economic fortunes... Think about the risk, and not just about the return. Think about the many options - the second, the third house as an investment is stacking risk on risk and risk, and becomes unsustainable."
Sweetman said the LVR restrictions should work to cool the market.
"The key question is, what else is going to be done? We've been waiting for Grant Robertson to announce another suite of packages - they've been delayed a couple of weeks because of the COVID outbreak in Auckland. Adrian Orr has aksed to use debt-to-income limits - now this could have a big impact on the market."
She said any extra tools given to the Reserve Bank would "have to be used very, very carefully", because "no one wants house prices to plummet".
An international report released earlier this week had slightly worse income-to-house price figures - a multiple of seven for the country, and 10 for Auckland, ranking the super city amongst the world's most expensive. That report used median figures, while CoreLogic uses the mean.