Last week, the Reserve Bank announced debt-to-income restrictions (DTIs).
Since the news broke, many investors have asked: “What will happen to house prices?”
Let’s look at the numbers and see.
How much will NZ house prices increase when DTIs come in?
DTIs link the amount the country can borrow to our incomes.
As incomes grow, the country can borrow more. That pushes up house prices.
So, there are two questions to ask when thinking about the new rules:
- How fast do incomes go up?
- What’s the average DTI already?
The average household income went up 4.1% per year (since 2000).
More recently, household incomes have grown by over 5% per year.