Home loan affordability improved nationally in December because of a fall in house prices, but remains very difficult in Auckland Central and Auckland’s North Shore, which are now both more expensive than Queenstown for the first time in the monthly Roost Home Loan Affordability report.
Median house prices fell in Auckland’s most expensive areas, but not as much as the slide in Queenstown prices in December. Interest rates were stable nationally and a marginal rise in disposable income helped improve standard home loan affordability across the nation to its best level since May 2009 and back to levels previously seen in June 2004.
The result underlined emerging signs of a two-speed housing market where prices of more expensive homes in Auckland are firmer than entry level and investment properties in the outer suburbs and in provincial cities, where prices are weakening and buyers have the upper hand.
“First home buyers in cheaper areas and cities are in the strongest position they’ve been in since the end of 2004,” said Margaret Smith, spokeswoman for mortgage broking group Roost Home Loans.
“Affordability for young couples has improved strongly over the last year as interest rates have stayed low and after-tax incomes have risen in the wake of tax cuts,” Smith said.
A young couple earning the median wage can afford to buy a first quartile priced house with 23.0% of their disposable income required to service an 80% mortgage. This is down from 23.6% in November and down from a June 2007 high of 35.1%. First home buyer household affordability is at its best levels since February 2005.
The national median house price fell to NZ$352,000 in December from NZ$360,000 in November, although there was a slight rebound in activity late in the year, particularly in the wealthier suburbs in central Auckland where after income tax incomes rose most because of the October 1 tax cuts. The first quartile house price also fell to NZ$245,250.
The Roost Home Loan Affordability report measures affordability nationally and regionally for individual income earners and households, taking into account median house prices, interest rates and incomes.
The Roost Home Loan Affordability measure for all of New Zealand showed the proportion of a single median after tax income needed to service an 80% mortgage on a median house improved to 55.5% in December from 56.8% in November.
Affordability improved marginally in central Auckland and on the North Shore of Auckland, but did not improve as much as Queenstown where the median house price fell to NZ$429,000 from NZ$480,000.
Affordability improved in Invercargill after the median house price fell to NZ$180,000 from NZ$195,000, meaning it remained the most affordable city in New Zealand, although only just ahead of Wanganui, where affordability improved dramatically after a slump in the median house price to NZ$175,000 from NZ$189,500. Incomes are marginally higher in Invercargill.
Affordability nationally has been improving since December 2009 as house prices have flattened out and interest rates have fallen, the monthly measure calculated by interest.co.nz in association with Roost found.
Most home owners are still on fixed mortgages, but more new borrowers are choosing to float, given floating rates at around 6.2% are cheaper than average longer term fixed rates at around 6.6%. However, the gap has closed over recent months as fixed rates have fallen from 7.25% last year, making the fixed vs floating decision more evenly balanced.
Home loan affordability hit its worst level of 83.4% in March 2008 just after house prices peaked and 2 year mortgage rates were close to 10%.
Affordability is difficult in Auckland, Wellington, Christchurch, Hamilton and Tauranga for those on a single median income, but homebuyers in smaller provincial cities will find home ownership much more affordable. Households with two incomes are also in a stronger position, particularly those bidding for homes priced in the lower quartile.
Affordability for households with more than one income improved in December because of a rise in take-home pay and the fall in house prices. This measure of a ‘standard typical household' found the proportion of after tax income needed to service the mortgage on a median house fell to 37.5% from 38.5% in October.
This measure assumes one median male income, half a median female income aged 30-35 and a 5 year old child that receives Working-for-Families benefits. Any level over 40% is considered unaffordable for a household, whereas any level closer to 30% has coincided with increased buyer demand in the past.
The survey’s measure of a ‘standard first-home-buyer household' found the proportion of after tax income needed to service the mortgage on a first quartile home fell to 23.0% in December from 23.6% in November.
This measure assumes a first home buyer household includes a median male income and a median female income aged 25-29 with no children. Any level over 30% is considered unaffordable in the longer term for such a household, while any level closer to 20% is seen as attractive and coinciding with strong demand.
Full regional reports of home loan affodability for typical buyers are available below:
- New Zealand (159kb .pdf)
- Northland (159kb .pdf)
- Whangarei (159kb .pdf)
- Auckland region (159kb .pdf)
- Auckland Central (159kb .pdf)
- Auckland North Shore (159kb .pdf)
- Auckland South(159kb .pdf)
- Auckland West(159kb .pdf)
- Waikato and Bay of Plenty (159kb .pdf)
- Hamilton (159kb .pdf)
- Tauranga (159kb .pdf)
- Rotorua (159kb .pdf)
- Hawkes Bay and Gisborne (159kb .pdf)
- Napier (159kb .pdf)
- Hastings (159kb .pdf)
- Gisborne (159kb .pdf)
- Taranaki (159kb .pdf)
- New Plymouth (159kb .pdf)
- Manawatu and Wanganui(159kb .pdf)
- Palmerston North(159kb .pdf)
- Wanganui(159kb .pdf)
- Wellington region (159kb .pdf)
- Wellington City (159kb .pdf)
- Wellington Hutt Valley(159kb .pdf)
- Porirua (159kb .pdf)
- Kapiti Coast (159kb .pdf)
- Nelson and Marlborough (159kb .pdf)
- Nelson (159kb .pdf)
- Canterbury (156kb .pdf)
- Christchurch (156kb .pdf)
- Timaru (156kb .pdf)
- Central Otago Lakes (159kb .pdf)
- Queenstown (159kb .pdf)
- Otago (159kb .pdf)
- Dunedin (159kb .pdf)
- Southland (159kb .pdf)
- Invercargill (159kb .pdf)
| Regional home loan affordability comparison: | ||||||
| mortgage payment as a % of weekly take-home pay | ||||||
|
Dec-10
|
Nov-10
|
Dec-09
|
Dec-08
|
Dec-07
|
Dec-06
|
|
| New Zealand |
55.5%
|
56.8%
|
63.0%
|
60.0%
|
81.3%
|
72.9%
|
| Northland |
51.4%
|
53.9%
|
59.1%
|
62.5%
|
85.7%
|
69.4%
|
| - Whangarei |
45.0%
|
47.1%
|
50.4%
|
50.7%
|
71.5%
|
62.3%
|
| Auckland |
67.6%
|
71.0%
|
77.6%
|
75.7%
|
101.3%
|
86.9%
|
| - Central |
75.9%
|
79.5%
|
85.8%
|
77.7%
|
104.3%
|
97.5%
|
| - North Shore |
74.8%
|
75.3%
|
80.5%
|
76.6%
|
102.9%
|
93.1%
|
| - South |
69.8%
|
71.2%
|
78.7%
|
77.3%
|
100.7%
|
81.8%
|
| - West |
54.9%
|
60.4%
|
69.3%
|
68.2%
|
85.0%
|
72.4%
|
| Waikato/BOP |
52.7%
|
53.5%
|
59.6%
|
58.7%
|
82.2%
|
70.0%
|
| - Hamilton |
54.9%
|
54.5%
|
65.5%
|
60.7%
|
82.2%
|
72.9%
|
| - Tauranga |
65.9%
|
57.1%
|
65.2%
|
71.2%
|
91.1%
|
83.2%
|
| - Rotorua |
37.1%
|
44.8%
|
40.4%
|
44.6%
|
62.4%
|
57.3%
|
| Hawkes Bay |
50.4%
|
47.7%
|
57.1%
|
53.8%
|
72.0%
|
62.8%
|
| - Napier |
55.5%
|
50.9%
|
61.5%
|
58.9%
|
79.6%
|
73.0%
|
| - Hastings |
51.3%
|
48.7%
|
60.4%
|
52.7%
|
72.7%
|
60.8%
|
| - Gisborne |
43.5%
|
51.4%
|
54.7%
|
53.7%
|
72.7%
|
58.4%
|
| Manawatu/Wanganui |
37.6%
|
39.9%
|
43.8%
|
44.1%
|
62.9%
|
51.9%
|
| - Palmerston North |
41.6%
|
44.5%
|
47.2%
|
46.1%
|
63.2%
|
57.8%
|
| - Wanganui |
32.6%
|
35.4%
|
42.8%
|
34.2%
|
53.5%
|
46.7%
|
| Taranaki |
45.8%
|
45.4%
|
53.3%
|
51.4%
|
67.0%
|
65.1%
|
| - New Plymouth |
56.5%
|
50.6%
|
64.9%
|
56.0%
|
75.3%
|
77.2%
|
| Wellington region |
58.4%
|
58.5%
|
64.9%
|
62.6%
|
81.0%
|
74.7%
|
| - City |
64.6%
|
66.3%
|
69.8%
|
66.6%
|
88.3%
|
79.5%
|
| - Hutt Valley |
52.0%
|
53.0%
|
57.2%
|
57.3%
|
70.1%
|
65.4%
|
| - Porirua |
63.1%
|
61.0%
|
63.4%
|
67.5%
|
80.2%
|
76.3%
|
| - Kapiti Coast |
57.1%
|
57.2%
|
60.7%
|
59.4%
|
80.4%
|
76.8%
|
| Nelson/Marlborough |
56.9%
|
57.6%
|
66.6%
|
60.2%
|
87.4%
|
77.8%
|
| - Nelson |
57.4%
|
59.3%
|
68.8%
|
54.0%
|
81.0%
|
74.6%
|
| Canterbury/Westland |
49.5%
|
49.9%
|
57.7%
|
56.3%
|
77.2%
|
67.0%
|
| - Christchurch |
58.1%
|
54.4%
|
64.0%
|
61.2%
|
83.0%
|
75.1%
|
| - Timaru |
38.4%
|
37.2%
|
43.4%
|
40.1%
|
61.6%
|
56.2%
|
| Central Otago Lakes |
68.1%
|
71.8%
|
82.0%
|
84.1%
|
106.9%
|
100.6%
|
| - Queenstown |
73.0%
|
81.9%
|
91.2%
|
88.1%
|
137.1%
|
135.5%
|
| Otago |
40.0%
|
39.2%
|
43.6%
|
45.2%
|
63.8%
|
54.5%
|
| - Dunedin |
45.6%
|
43.3%
|
49.5%
|
51.5%
|
69.6%
|
60.9%
|
| Southland |
31.5%
|
32.4%
|
35.1%
|
32.8%
|
49.4%
|
36.1%
|
| - Invercargill |
32.4%
|
35.2%
|
37.9%
|
31.5%
|
53.0%
|
40.9%
|
No chart with that title exists.
40 Comments
Property listing in Blenheim since the start of the year have increased by over 19%....an extra 46 listings!
What will each extra 1% in mortgage payment cost do for the affordability table data?
"Home loan affordability hit its worst level of 83.4% in March 2008 just after house prices peaked and 2 year mortgage rates were close to 10%." So there is the answer...and Bollard has warned he will soon be raising rates...and the cost of debt is set to rise...it does not take much brainpower to see what is going to happen!
Either a greater % of household income will go to the banks and from there out of the country...meaning a second dive into recession conditions...or is it number three....
or property will have to collapse so that households can afford the rent or the mortgage payments.
"Median house prices fell in Auckland’s most expensive areas, but not as much as the slide in Queenstown...where the median house price fell to NZ$429,000 from NZ$480,000.." That's a 10.6% fall in QT ~ down 21% so far from the '07 $543k highs ~ It's only a matter of (not much!) time untill those cash-strapped in Auckland need to follow their southern cousins.
QV say:
In the Auckland region values increased by over 1.5 percent between January and March then slid back until July. The decline slowed through the second half of the year with the last few months being relatively stable. Values in the Auckland area ended the year 0.6 percent above the same time last year.
= 2010 was in general flat.
What do you think of the over bidding required for people to get into decent houses in central auckland?
I had to laugh when Alan Bollard said yesterday the housing market was stabilising. He just does not live in the real world. The posh areas of Auckland might be stable but tell that to the tens ouf thousands of NZers who have their houses on the market and no one is making an offer. And a lot of those houses have been on the market for months even a year or two. Prices will have to come down for many of them to get a bite.
I had to laugh when Alan Bollard said yesterday the housing market was stabilising. He just does not live in the real world. The posh areas of Auckland might be stable but tell that to the tens ouf thousands of NZers who have their houses on the market and no one is making an offer. And a lot of those houses have been on the market for months even a year or two. Prices will have to come down for many of them to get a bite.
Good on you ex agent...it must be hard to change those spots but you are getting there...we do indeed need the prices to fall for the properties to sell. Bolly was doing his bit to keep the bubble inflated.....! You needed to be there...to see the smile on his face when he said that.
It's as affordable to buy a house now as it was in 2004. In a few years it could be back to the affordability we had in the early 2000's - then it will be time for another boom!! I'm picking a flat period for another 3 years and then a slow start to a smaller boom than the last one.
Yep, I do. And thousands of your fellow countrymen are about to realise, as 'renters' worldwide are finding out, that they can't afford to...rent one..either. And when the rental price downward squeeze comes on, as opposed to lack of availability, watch those 'rentals' that haven't got a tenant , rent prices fall! What we have at the moment is actually just a reduction in rental velocity - less people move; less proeprties come back to the rental market, less 'appears' for rent. The reality is, no one moved much anyway!
Nonsense.
Auck vacancy stands at 0.7% rents only have 1 way to go.
Minus a load of leaky rubbish that needs to be pulled down over the coming years.
Throw in the fact that nothing is being built.
Throw in the fact wages are starting to rise and hiring is starting to fire again.
Throw in the fact that tennants are actively overbidding each other to get a decent roof over their heads.
Well I can only say I personally don't see any of those things either happening or about to happen. As a renter who has just renegotiated another year, I can't say I found the slightest difficulty either researching an alternative or staying put. But because I'm a nice tenant, I didn't ask the landlord to reduce his rent, I'm kind, like that :) You remain a pessamist; that prices of assets will cost more than they should. I remain an optimist; that things will get cheaper.
Nice cave though! The All Blacks use this as their accommodation during Auckland stays, and they can choose just about anywhere up here. And re the Deflation thing in Japan ? I thought it worth a read as it's 'hot off the press' so to speak; none of this ages old stuff, and quite relevant given the downgrade of their debt yesterday. Why do you think JK is , now, so worried , all of a sudden like, about 'our debt'?
true to a point, but you ignore the inherent limits of people's income to pay higher rents in an era of minimal wage growth (I for one don't buy your argument of booming employment growth in the next couple of years)
Its like the old argument spruikers have been making the last few years - NZ has a housing shortage therefore hous prices will go up!
Well, they've actually gone down the past few years, so that proves that a "housing shortage" does not causatively lead to higher house prices
Supply and demand is an undeinable influence, but there is a just as sotrng behavioural / affordability component
Finally someone with well thought out opinions.
I didnt say 'booming' employment - however it is, and will continue to gradually improve. Same goes for wage increases - slowly but surely.
As this happens - all the graduates and others who struggled to get a decent job will
1 - move out of their parents house and go flatting. 2. move out of their flatting situation and purchase their own house without flatmates. 3. move out of their relatives garage and into a flat etc etc.
This is when we will see the housinging shortage - and I think the RWC will a potential catalyst for everyone to realise this.
true to a point, but you ignore the inherent limits of people's income to pay higher rents in an era of minimal wage growth (I for one don't buy your argument of booming employment growth in the next couple of years)
Its like the old argument spruikers have been making the last few years - NZ has a housing shortage therefore hous prices will go up!
Well, they've actually gone down the past few years, so that proves that a "housing shortage" does not causatively lead to higher house prices
Supply and demand is an undeinable influence, but there is a just as sotrng behavioural / affordability component
Affordable houses being built in a town near you. Campaign for coming up elections? Release land for urban growth, drop the council planning permission costs paid for by CGT on secondary homes and presto more supply. Will the future government want this to happen?
Here we go...govt sponsored bullshit:
"A predicted national shortage of more than 14,000 homes has sparked urgent calls from the housing minister to "bowl a whole bunch of buildings and subdivide sections".
For the first time, the Building and Housing Department has put together all the data on supply and demand in the housing market.
The New Zealand Housing Report shows a predicted shortfall of 14,772 houses during the next five years and more than 10,000 in the following decade.
"The current rate of new housing construction is below the rates of population and household growth," the report says.
"To meet the needs of its growing population, New Zealand will need to either release new supplies of residential land, or make more intensive use of existing residential land."
http://www.stuff.co.nz/national/politics/4596093/Urgent-call-for-action-on-housing
Wanna know the truth...this amounts to an effort to pork buying activity...to boost borrowing from banks for a splurge on property.
So where is this property 'shortage', then? If I recall, we have ,at present, pretty much the lowest dwelling/person ratio...in our history, at 2.35 odd! 2.35 people per property, says to me that it's not a 'property shortage' per se, but a property wastage situation. All those 4+ bedroom houses with 2.35 people in them ( one , I guess must be a 6 y.o.!) - that's 2 rooms+ per dwelling, surplus in those, and about right for single and 2 bedroom places. Get those 'spare rooms' occupied, and just see how much 'shortage' there is! Answer: There isn't one...!
(NB: Anyone who thinks our property isn't ludicrously valued today should do the sums on working out 'how much per person' it costs to buy a house, now, given the higher occupation rates, and lower income multiples, of the past)
Hello For years I have sold materials to builders an home owners.There is many new areas starting for new houses,the houses are taking longer to sell.In town big sites turning to 3 townhouses on one section.Mostly Asian builders 70% Indian 15% Euro 15% this shows you who has the money.Europeans want blue chip areas,so there familys grow up in good school zones.So they will do anything an buy an fix up the older houses,as many of these need major everything.Bluechip areas keep the building industry going,lots of renovations due to start soon.
NZ has to look at the growing run down areas,subdivsions of cheap houses.Yes crap everything an nobody wants live in them,who said NZ houses are expensive.
Many of these areas you would not find a buyer or person that works.
Fix the schools with support in the poor areas,turn them around into great schools.
So many problems could be fixed at this level,many people could be used in these areas.
Sports,fitness,learning,maybe its time to start thinking about the people who are going to be living in the next generation.
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