The likelihood of owning your own home in New Zealand sank to a new low in October, according to interest.co.nz's Home Loan Affordability Report.
The report tracks three main indicators of housing affordability for typical first home buyers: the Real Estate Institute of New Zealand's lower quartile selling price, mortgage interest rates and the median after-tax pay of 25-29 year-olds.
From this information it works out how much aspiring first home buyers would need to save for a 10% or 20% deposit on a lower quartile-priced home, how much they would need to borrow on the corresponding mortgage, the amount needed for mortgage payments at current interest rates and how much of their income that would consume.
It's the last figure that's the most important because the amount of weekly income eaten up by mortgage payments is a direct measure of housing affordability.
The October figures show home ownership is now the most unaffordable it has been for typical first home buyers since interest.co.nz began compiling the figures in 2004.
Mortgage payments are considered unaffordable when they eat up more than 40% of take home pay. That figure is particularly important when living costs are rising strongly, as they currently are.
The tables below show the main affordability measures by region and in the main urban districts throughout the country.
The first table shows affordability for first home buyers able to save a 10% deposit for a home purchased at the REINZ's lower quartile price. This would range from $36,000 in Southland to $85,400 in Auckland.
To buy a home at October's national lower quartile price of $610,000 they would need to save $61,000 for a 10% deposit and borrow $549,000 on a mortgage. To meet the payments on their mortgage at October's average two year fixed rate of 5.88%, they would need to set aside $849 a week.
The national, combined, median after-tax pay for couples aged 25-29 was $1835 a week in October, which meant the mortgage payments would have been eating up 46% of their take home pay, putting it well into unaffordable territory.
The national mortgage affordability measure has been above 40% and therefore unaffordable for people on average wages, since house prices peaked in November last year, and it is continuing to rise, meaning unaffordability is getting worse.
Most regions unaffordable
Not only only are the national figures at record unaffordable levels, the majority of regions are now also considered unaffordable for buyers with a 10% deposit.
The only regions where the mortgage payments on a lower quartile-priced home would be below 40% of take home pay for typical first home buyers are Manawatu/Whanganui, Taranaki, Otago and Southland.
And Otago is only marginally affordable and with mortgage payments at 39.97% of after-tax pay, it's just squeaking in below the 40% affordability threshold.
Otago is likely to move into unaffordable territory over the next few months and Taranaki isn't far behind, which would leave Manawatu/Whanganui and Taranaki as the only affordable regions in the country for typical first home buyers.
Affordability is obviously easier for buyers who can scrape together a 20% deposit, which would be no easy ask for hopeful buyers on average incomes.
Around the regions, a 20% deposit for a lower quartile-priced home would range from $72,000 in Southland to $170,800 in Auckland.
And even with a 20% deposit, the mortgage payments would still be considered unaffordable to typical first home buyers in Auckland and the Bay of Plenty, while repayments with a 20% deposit are getting close to unaffordable levels in Waikato, Wellington, and Nelson/Marlborough.
Unless they are on high incomes, the situation for aspiring first home buyers in Auckland and the Bay of Plenty is already dire and with mortgage interest rates continuing to rise, most of the rest of the country is not far behind.
The comment stream on this story is now closed.
204 Comments
A massive headwind for the housing market.
When stress tested that $1189 per week in Auckland would be above $1500 per week….
We are fast running out of people to sell these still over-priced houses to. Greater fools are now a rare breed. Deeper discounts required in order to get sales across the line. Its a sacrifice worth making as delays in accepting this reality will prove more costly for vendors.
Hence why labour are ramping up immigration - it's NZ's number one party trick.
To prop up the housing market? Deploying "old tricks" can have unintended consequences. Besides this, NZ is no longer as attractive to foreigners due to our low wages/cost of living.
Retired Poppy - if NZ isn't attractive then why are we already getting back to pre-pandemic immigration levels?
The number of overseas workers coming to NZ could be back up to pre-pandemic levels by the beginning of next year
https://www.interest.co.nz/public-policy/118495/number-overseas-workers…
Why are house prices are still falling? Despite heavily discounted prices, sales volumes remain poor. How do you explain this? No sign of a turn around and forecasts of rising interest rates through next year too.
Cost of living.
Hold up Retired Poppy - can you address your statement around NZ not being attractive to immigrants? Clearly you're wrong on this...
...are you about to try and troll me? Why am I wrong?
Please explain :)
Please open your eyes and read. You should have abit more time to do that now you can't log into another account.
I invited you to counter argue with facts as to why NZ is attractive to foreigners? I am still waiting. Try and do it without allegations I have multiple accounts. Its sounds like you're desperate for a reason to troll.
Why are house prices not showing evidence of a floor? Please address the question with examples showing how immigration is addressing this. One article doesn't cut it.
Have you heard of the statement "One swallow does not a summer make" ?
No you didn't, you changed the subject, the question was:
by Nifty1 | 22nd Nov 22, 11:33am
Retired Poppy - if NZ isn't attractive then why are we already getting back to pre-pandemic immigration levels?
RP, why don't you answer his question?
by Retired-Poppy | 22nd Nov 22, 11:56am
...are you about to try and troll me? Why am I wrong?
Please explain :)
Again, if immigration is the suggested savior of the ailing housing market, I have already invited those who disagree to argue otherwise and prove me wrong.
All I'm getting in return is "Oooooh we've got Retired Poppy trapped"
I guess you'd have a point if we knew most migrants moved to places they weren't attracted to.
Maybe its a silly assumption they move to places that appeal to them.
All I'm getting in return is "Oooooh we've got Retired Poppy trapped"
All we're hearing is you making unqualified statements then trying to deflect rather than man up.
Oh here we go....
All I'm getting is unqualified assertions that its already happened when the key word here is "could"
You talk a big game kid
Are you agitated by my continued presence? I got quite a response. I sense quite a lot of pent up anger.
Nifty1, Pa1nter and HW2 have quite an axe to grind. Its only one very blunt axe :)
You're making yourself look abit silly Retired Poppy...
You wish....
How many times do you edit your comments too... I'll probably have a look later tonight and your original comments will read completely different. If you're going to do that, atleast have the decency to let others know it's been edited.
"I'll probably have a look later tonight and your original comments will read completely different"
You do love to stretch the truth
Agreed, I do sometimes edit my posts and I will be mindful how much this upsets you.
Edited - (18 times)
While we are at it, is there any other pent up issues either you or your other alias's want to get of your chests? I'm all ears.
I'm all ears. [Retired-Poppy]
Rather, you're all crap - which is abundantly clear from your barrage of misleading and deceptive comments above.
TTP
Wondering when you'd show 🤡
Spruikers are all ruffled today 🐔🐔 by the Crash Crusader
You make no sense - you say I've stretched the truth by calling you out for editing your comments multiple times...in the same comment you then admit to editing your comments & then later edit the same comment multiple times - x13...
Can't keep up with you RP, good luck out there...
Dp
He literally just disproved your assertion by showing immigration flows running contrary to your statement.
older folk are typically more focused on talking and not good at listening
I see multiple daily posts on several FB van websites for people coming to NZ on working holidays or for the summer for 3months on tourist visas, all looking to buy a van and travel the country. Young folk still want to come to NZ for this, or simply to see the country it seems, and they all know from all of the travel blogs that travelling around in a van is the cheapest way to do it due to the cost of accomodation here. Gone are the days of the $1k van..sigh
Because NZ is a significantly nicer and safer place than many of the godawful places the immigrants are coming from.
It’s all relative.
Yes, and most of these migrants wont be buying a house in NZ, they will be working as hard as they can to send money back home.
True, but they still need to live in a house, meaning increasing rental demand.
Many will be living in vans, we will be able to gauge this subjectively by the number of them, in all the freedom camping spots around the country.
Haha not an immigrant and I live in a van, but freedom living seems to be more and more outlawed.
The best way to live in many regards, and you're right. It became a problem when numbers of rental vans as well as purchased vans overran many towns and cities and folk were cooking breakfast in their PJ's in the middle of the city for all to see. However the less you can rely on a system and the more self-sufficient you can be, the better. Only downside is relying on petrol or diesel. I'd love to live off grid someday with a homemade water turbine and powerbank.
Why does everyone assume that every immigrant arrives in this country with absolutely no money ?
Are many people really assuming that? I certainly am not.
But it’s one thing to come with say 20k, another to come with 200k and a job that pays enough to service a mortgage.
Yes, we've seen our fair share of foreign speculation and money laundering in recent decades, that's for sure.
BUT... can these worker's actually afford to buy house's..or will they underpin the rental market..
NZ is very attractive comparing to many places around the world.
NZer are taking everything for granted.
USA, Canada , Australia and New Zealand.
The real reason for loosening immigration settings and allow more migrants into NZ, is to satisfy the huge need to fill jobs, it's not to "prop up house prices". But yes, theses immigrants need to live somewhere, so yes it will have some effect on mostly rentals and maybe a little on house prices.
or rather ... immigration to counter the huge flaw in our system that results in producing a poor local product.
Is it to fill jobs or increase competition in the labour market (especially the lower waged), thereby reducing wage inflation?
Isn't it also known that immigration does contribute to the rental market and therefore house prices? Imagine if fast track residency wasn't offered to existing visitors? They were all prepared to continue on their merry way returning home or to other pastures. And 'the markets' would have to adjust but it seems we don't want that. One has to wonder who's serving whom? The free market gets a lot of props.
Or is it to boost GDP, knowing that all the GDP increases we've had don't seem to make any significant improvements to our problems?
It can all be spun to suit the narrative but it's still just status quo, is it not?
But it mostly only affects rentals - of which the politicians own plenty.
Need that cashflow asap, man!
Very few of the immigrants will be able to buy.
Depends, are they bringing six parents per couple with them? That's up to six life-times of earnings, where tax has been paid somewhere else (if at all) they may well be able to bring with them to throw at a generational living situation.
And good on them, IMO - I'd be chuffed to have parents to help with childcare and spending time with grandkids so Mum and Dad can keep working. But the reality is that the price of admission to that game for a big enough house and income that isn't out in the sticks is now beyond what most Kiwis can afford to cover on locally earned wages. That's where it gets wonky.
What's the flow on effect if there's more demand on rentals - there will be higher rents... more people will hold onto their investments properties, more people will look to purchase new investment properties, more will look to buy instead of rent...
Australia is far ahead of us in terms of post covid immigration. You can see for yourself the impact on rents. https://www.macrobusiness.com.au/wp-content/uploads/2022/11/Capture-250…
This is what people don't understand. Most of our immigrants have an excellent work ethic but are dirt poor. The exception being the ones that come in under the high net worth visa categories.
They are more likely to band together/pull in family money to buy something though.
A minority will. Trivial impact
True HM, but they still need to live somewhere, so the demand on rentals is going to rise.
Yep. But it’s not going to be very meaningful in terms of returns
Immigrants who can’t afford to buy will fill rentals and put the pressure on rent for the next ten years and we are going to run into rental supply shortage again in demand areas.
The government will be facing big problems supplying accommodations.
On the other hand the rich immigrants will arrive and buy up 2 or 3 properties with cash and start a small business or work a part time job.
Not correct - Labour is handing out mostly residency visas with their new "fast track" residency application process and automatic residency visas for jobs on the green list. Only those on temporary work visas cant buy due to the foreign buyer ban, those on residency visas can.
That’s true enough. All this super inflated housing values is well and good but it don’t earn anything. That is you can’t ship ‘em off shore, earn export dollars. Oh, but hey, let’s bring the market here, that immigration tap is really handy now that you think about it.
Next thing you know we'll have a party of and for the exclusively self-interested campaigning on tax cuts for property speculators, supporting NIMBYism to constrain supply, and retaining landlord welfare subsidies.
Yep, we are ramping up immigration - but please, in these economic times, let in people that want to make NZ their "forever" home and not just "do the minimum" here, then head to Aussie ASAP ...another case of a "feebly weak" government in this country. While this is why Aussie changed the laws in 2001 for NZ'ers going there to live and work...here is an excerpt from: About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/
Prior to 2001, New Zealand citizens in Australia on SCVs could access social security and obtain Australian citizenship without first becoming permanent residents. In February 2001, Australia entered into a new bilateral social security arrangement with New Zealand and amended citizenship laws for New Zealand citizens. Under these changes, all New Zealand citizens who arrived in Australia after 26 February 2001 and who want to access certain social security payments, obtain citizenship or sponsor family members for permanent residence may only do so after applying for, and being granted, permanent residence through the migration program.
At least the Aussies don't get walked over and have known this since 2001.
Although the RBNZ says otherwise, the likely introduction of DTI next year will make it even harder as well. Whatever way you look at it, it's only going to get harder to buy, not easier.
They should whack on a reducing DTI now, while sales are low. Limit of 7, reducing by 0.5 per 3 months, down to 3.5).
While they're at, reducing the maximum length of a mortgage gradually back to 20 years would also have a significant effect.
They should, but they are going to put in a DTI at 7 and never touch it again, and pretend they've done something effective.
The only thing this government has done that is effective, economically at least, is deliver the complete opposite to all that aspirational ideology and hard promises, that the PM elect spouted about during her electioneering 2017.
Ireland put in an "effective" DTI, and now have to raise it.
From 3.5x to 4x? I'd say that would be quite effective here.
Chaosinflesh, could you please explain how a DTI of 3.5 and a reducing mortgage term of maximum 20 years is going to help FHB buy their first house? (That's what this article is about)
As a potential FHB, I either have to get richer or house prices need to come down. Investors/homeowners won’t do so willingly, so putting such borrowing limitations would help (in my opinion).
The problem isn’t that FHB can’t borrow enough, it’s that house prices are too high.
@Happy M - I don't think the DTI will help you at all - you will be restricted in what you can borrow. Existing investors and homeowners already have their borrowings and the DTI is unlikely to apply retrospectively. It will become more difficult for you.
You know very well how it works, but I'll humour you, Yvil.
First, it gives FHB extra leverage over all but the most cashed up 'investors' -> as those relying on rental yield to cover the mortgage have a lower cap from the DTI (since most peoples income > rent, they can borrow more for a mortgage than the leveraged landlord they are paying rent to). But it doesn't prevent you having a rental property - if you have say, already paid off your home or have an income advantage. But it gets rid of the parasites who want to just leverage their current equity to put a deposit on a house, then leech of someone else's work to pay off their 'asset' - with the bare minimum responsibility too, if you please.
It also restricts prices to sane amounts, aligned with incomes, rather than OCR/LVR tomfoolery.
Restricting the length of the mortgage has a similar effect, but for all involved: as it pushes up the principal portion of loan repayments, as opposed to the interest - and is inherently more stable than the OCR in that effect.
Of course, I'd like to see interest-only mortgages for residential property banned outright.
Will all of this cause house prices to crash? Absolutely. Is that a problem for the majority of NZ? Not at all - in fact, given the recent changes to tenancy law, it works in most people's favour.
Now that we are long past the days of "show up, hold the land, and it's yours", we need to face the fact that houses are homes, first and foremost. The rules that allow those who came before to mooch of the next generations labour need to be dismantled, so that all who need may have opportunity.
And I'm not saying this for my benefit - as I've stated before, we aren't buying here. But there have been serious social consequences caused by rampant bank-fueled greed in this country, and simply reducing the cost of everyone's housing arrangements would be an excellent way by which to start addressing these.
Your post sounds wonderful, especially from an ethical point of view, but in your anger, you're confusing what you would like to happen, with economic reality, when the recession hits, only the well off will be able to get a mortgage and FHB will struggle even more. Not what you want to hear, not fair but reality!
You should read the article above especially:
The national mortgage affordability measure has been above 40% and therefore unaffordable for people on average wages, since house prices peaked in November last year, and it is continuing to rise, meaning unaffordability is getting worse.
Yvil, you seem to be confusing what's happening with affordability now in a recessionary environment without DTIs and restrictions on mortgage length with what would be likely to happen if there were a DTI of 3.5 - 4 and a restriction on mortgage length. Do you actually think that OP is wrong about the fact that such measures would actually increase affordability? If so, why?
The funny thing is we've created this 'economic reality' so by all accounts we can create a new reality.
It doesn't seem like we're willing to though.
Disingenuous as usual Yvil. You conveniently ignore what affordably looks for investors, who are the competition for FHB. With rising rates, reinstated LVR limits, shrinking equity and reliance on IO terms, affordability looks considerably worse than it does for a FHB
This is being borne out in the numbers with FHB taking an increased share of the market
I find you guys posts astonishing! Do you not read the article before commenting on it? It literally states:
The national mortgage affordability measure has been above 40% and therefore unaffordable for people on average wages, since house prices peaked in November last year, and it is continuing to rise, meaning unaffordability is getting worse.
Yet you guys say, no, no, no, what is happening now is beneficial to FHB's, your denial of Greg Niness' article is beyond belief
Investors being choked out of the market bad for FHBs? Not at all, and if you cannot see that, one would suggest you are in denial.
All the FHBs have to do now is wait, and enter when they're happy to.
Because, news flash: no one has to buy a house, but sometimes people have to sell one!
So if FHB can't afford current prices, and Investor affordability is hit even harder by rising rates, who is going to buy at these prices? Which is why we are seeing very low sales and falling house prices.
In previous years when affordability was stretched for FHBers, investors would use their equity and relative advantage in a low rate environment, to take an outsized share of the market. With falling equity, higher rates, phasing out of interest deductibility means that is no longer happening. So investors are increasingly selling, and taking a lower share of the market and we are seeing prices adjust to what FHBers can afford.
I never said current prices were affordable for FHB, but the all signs point to an ongoing adjustment that will ultimately be to the benefit of a potential FHB.
Is that explanation simple enough for you?
You nailed it.
Exactly what the country and fhb needs. Cheaper houses.
They've considered affordability from the perspective of the price, and not the price from the perspective of affordability.
They've assumed fixed price, therefore affordability is getting worse. Where in reality, affordability doesn't really change, and it's price that moves (if you could afford $1000/week last month and your circumstances haven't changed, you can afford $1000/week this month - excusing of course the effect of inflation on your desire to eat, etc.).
Prices will fall. People who find their mortgages are now 'unaffordable' simply overpaid. A bit harsh, perhaps, but true nevertheless.
"They've considered affordability from the perspective of the price, and not the price from the perspective of affordability."
That's a beauty, straight from the textbook of Jacinda's rhetoric!
Young people. Pah!!!!
Should've been born 50 years ago. That’d give them some gumption.
Yup its there own fault for being born in an era where house prices are 8x the medium income instead of the 3x it traditionally was. All they do is complain, complain, complain. They never take any responsibility for there actions. I'm over them complaining about their moldy rentals.
They just need to be grateful and knuckle down to pay the taxes that fund their landlords' rental yield and price subsidies, and their universal benefits for having been born earlier. Stand on their own two - feet just like the generations that paid no university fees and received affordable housing supply funded from their forebears' taxes.
How's the Government going to try and spin this leading up the the elections... I guess many assume falling house prices is immediately a great outcome for FHB's though so it might not be that hard...
Will need to bring in some international spin doctor gurus and have a few workshops.
They will be scrambling for the same old excuses.
What a clusterf#%^
I'm sure the PM can ask her old buddy Klaus for macro-spin tips
I suggest you listen to our PM & Megan Wood discuss the housing market.They literally dribble Labour talking points, blame national & in general change the topic. Its actually entertaining.
Both masters of spin. Get them in to the Black Caps.
This is great news for FTB, very bad news for anyone who is about to be forced to sell a rental in this FTB locations etc..... The bid is now a long way down think 40% off peak
Great news? Only if prices fall another 20%
It's not great news because FHB's can't afford to buy... It's great news for investors and/or companies that will be picking optimal properties for returns.
Exactly and interest rates could go another 1% higher
Only investors who can buy with cash.
Investors main advantage over the past decade has been the ability to use equity as a deposit, and the use Interest only terms in low interest rate environment to outbid FHB (who struggle to save a deposit and generally use principle and interest terms).
Falling prices lowers the deposit required for first home buyers and at the same time reduces the equity available to investors.
Rising interest rates hits investors much harder than FHBers. Just look at the DTI and IO stats to see why
The affordability measure produced just tells us house prices have further to fall
"Falling prices lowers .... the equity available to investors."
Exactly.
If this was a liquid market and every house in the country sold today, I wonder what the median price would be. Whatever all the buyers collectively could pay. And with each sale less than the previous, the next sold is less again and the one after that is valued lower - dampening buying power of that owner yet again and so the next one needs to be lower still to be affordable to them - lowering the value of the next and the next and the next.
The last house sold today would sell to the person with the lowest buying power of them all - what would that make the value of the NZ housing stock?
I'm not suggesting that's where we're going, but this demand destruction caused by unaffordability, and supply spike due to untimely exits - the support of the housing market won't be found until well after a large u-turn in affordability. As things are getting worse, only suggests there is a ways to go yet...
Great news for deep pockets buying up more houses, more bad news for FHB.
The system is designed this way.
Small Kev, have you read the story about Taleb's turkey?
Remember too that the 40% affordability threshold is based on the total income - not disposable income - of a full-time working couple.
In Auckland, even with a 20% deposit, fully half of the household income is going towards mortgage payments. If one of them gets sick, gets pregnant, gets made redundant, gets caught dicking the neighbour, or any one of the million other lemons life could possibly hand them, there is absolutely no room to move. They will not be able to continue paying the mortgage if they cease to be a full-time working couple.
I had to recheck your gross vs nett income comment and found this in the article.
The national, combined, median after-tax pay for couples aged 25-29 was $1835 a week in October, which meant the mortgage payments would have been eating up 46% of their take home pay, putting it well into unaffordable territory.
Not trying to be a train spotter……
Perhaps we have all underestimated the resilience of the housing market? There is a shortage of premium stock, few listings and some knock-out sales. Yes, the speccy new build end is probably a little soft but wage rises and huge capital gains mean many are still loaded. One for the "housing doesn't double every 10 years" club, try 3.8* in 10 years. https://www.oneroof.co.nz/news/woman-pays-717m-to-demolish-house-on-one… This house just sold now for $9.3m.
High end is never affected, but that’s a tiny part of the market.
do you have a job or some other interest ?
Plenty of free time this morning as I have been waiting in A&E for 3 hours, behind a queue of immigrants, many of them with elderly parents….
You doing ok?
Played a bit of touch rugby, and fell awkwardly. Fractured rib. Took 3.5 hours to see a doctor, then another hour for x ray and doctor follow up.
got some codeine :)
Was that the masters tourney? Hope the drugs do their thing, ribs are a long heal, try not too laugh!
Hahaha
whoops
I need to stop reading the comments on this website so I don’t laugh.
4.5hours doesn't sound too bad. You'd have easily been waiting for 6-12hours in Wellington hospital under the same circumstances
got some codeine [HouseMouse]
So you'll be even more constipated than usual.
TTP
Better watch out Tim. If Yvil was a consistent hall monitor he would interrogate you about how "constructive" your post is.
I could overdose on it and still talk multiple times more sense than you.
Bit of a nasty flu going around, could be just me but all the vaxxed people I know are getting it.
I just tested positive for Covid today for the 2nd time, luckily it's not the flu.
I had Covid earlier in the year, and then the flu recently. Give me Covid any day of the week at this rate ... I've never felt as ill as I did with that flu that's going around.
Same here. Had COVID in March - 2-3 days of tossy-turny nights, then back to my garage gym, no probs.
Got a cold 6 weeks later - was twice as bad and lasted 3 times longer.
Isn't covid a strain of flu?
Somebody left a positive test on the table at the food court yesterday.
It was hilarious. Boomers were having kittens. 😂
The blue biro mic drop
I hope it is not too bad this time around, there is certainly a wave of infections at the moment.
Given up worrying about Covid, still have not had it and in fact beginning to think the whole thing is a hoax. No vax, no Covid who would have guessed. Maybe you needed to take the vax so it wrecked your immune system so it was easier to catch.
Are you absolutely sure that your IQ is 125?
Can you even count that high?
The 125 got me to the decision of not taking the one way vax ticket in the first place and no regrets. Fully expecting the the long term effects of the vax to be negative, it already has been for many people and that will be suppressed of course and will never appear in the MSM.
Agree that house value have not fallen as much as it should have by now.
few listings
Pay attention, read some news, and trademe announced that Oct saw aRecord number of new listings since records began.....
"The problem is all inside your head," she said to me
"The answer is easy if you take it a plunge
I'd like to help you in your struggle to be loaded
There must be fifty ways to get your mortgage"
She said, "It's really not my habit to intrude
Furthermore, I hope my meaning won't be lost or misconstrued
But I'll repeat myself at the risk of being crude"
There must be fifty ways to get your mortgage
Fifty ways to get your mortgage..
Credit to Paul Simon.
"Fifty ways to lose your deposit"
Wonderful lyrics! Thank you, Chairman Moa (and Paul Simon).
Easily the best post I've read here this year.
Well done!
TTP
I guess we've all got ourselves sorted for Wednesday.
We've been given loads of lead time; media discussions/alerts galore - nearly a year of it, and now it all boils down to tomorrow.
Because from the look of it, what the RBNZ announces, on its final review of the year, in going to make the property sector go " Boom!" The only question to be decided is "Which way?".
It is kind of amazing how much stock gets put into individual RBNZ announcements, like they're a finishing move in a professional wrestling bout.
Give em a .75 from the top rope, finish him!
As per latest media reports and experts, most buyer in this market are FHB and if even they are screwed than.....
FHB are screwed either way so let the show begin and FHB will be happy to wait till value falls to level that is on par with wages.
More than FHB, it is speculators who should be worried and all experts and real estate lobbyist should stop shedding crocodile tears for FHB as speculators need that sympathy more than FHB, for now.
It's refreshing reading the comments section without having to endlessly go through the same copied and pasted posts.
One of your best posts
Ha-ha :)
The national mortgage affordability measure has been above 40% and therefore unaffordable for people on average wages, since house prices peaked in November last year, and it is continuing to rise, meaning unaffordability is getting worse.
This is despite prices dropping and incomes rising! Many people did not understand this when they were cheering on house price drops. It's unfortunately only going to get worse from here.
I think there will be a sweet spot in about 12 months time for some FHBs to buy, once prices are down further and interest rate rises have stopped and may have reversed.
lol
you should change your pseudonym to " I Reckon "
Thanks for the really constructive comment. Wonderfully intelligent and meaningful.
neigh
The opposite of your continued banal offerings then ? 😊
Perhaps you could do something constructive instead of living on this forum 24/7 .
HM, I thought you were with me about NZ hitting a bad recession in the second half of 2023 ? This will mean job losses and pain, you can't buy a "less expensive house" with no income or a single income for FHB !
Spot on Yvil, people want this spectacular market crash and then think they'll buy... if that happened majority of people won't be in a position to buy.
spot on, thats why massive crashes happen, things have to get real cheap then banks dont worry about lending again. if house prices halve a FTBers deposit almost doubles realitive to buying now.......... hence the FOOP
There is always a buyer if the price gets right, I am a bach buyer .. at the right price.
Yep bad recession coming. But I still don’t see unemployment rising above 5-6%. Which of course means the vast majority of people still have jobs. So what’s the issue with what I said?
It’s only a big issue if unemployment goes to 8-10% plus.
of course certain sectors will experience significant job loss. So FHBs in areas such as architecture, urban planning, residential building and trades, property and real estate will need to be careful.
When you are stretched to the max, its not just unemployment that will send you to the wall, its underemployment. When companies start cutting the overtime, the bonuses, the number of hours worked, etc. You can still have a serious reduction in income without losing your job.
Both comments are true hence the possibilty of bad outcomes in places like Queenstown where many FTBers are tradies making good money... for now
By FTBs I'm assuming you're meaning FHBs...
A valid point for some sectors and jobs, sure.
But again it’s still going to be the minority affected. But it won’t be insignificant.
I would argue people didn't understand the math's (or the implications) on the way up and don't understand the math's (or the implications) on the way down.
I have an Engineeruing degree, its full of maths, but this market stopped making mathematical sense about 2015.
In 2005 I was getting 5.8% yield on a Ponsonby villa..... 10% deposit, 25 year mortgage fixed at 5.85% for 5 years. Yes we where UNDERVALUED.
it's easy to work out changes ie more or less affoprable, but the market is SO FAR AWAY from affordable vs traditional measures..
Interesting what must happen as Interest rates move back up towards more traditional levels...
It's true that many won't have to sell but those who must sell MUST FIND a buyer.
The Market exists to find that meeting point we call price, vs value, and this news (and coming OCR increase ,what ever it is 50 or 75 or 100 its at least another 1/2 a % higher interest) just moved the FTBers bid lower, you don't have to have an engineering degree to understand that.
Bang on. It really is that simple.
I had to show a guy with an engineering degree how to mount a BBQ on a charter boat. He was really upset because when he tried, he said it was broken. I said it wasn't, and he said 'look I've got an engineering degree'. Elon Musk has one too, and he's lost about 100 billion dollars of other peoples money this year. I'm happy to have engineers about to fix things and whatnot, but it's not a scarlet scar of born genius. Oh, and never question an engineer's abilities if you want your laptop fixed.
I flatted with an American dude at university. He was doing a Masters in Science. I had a heated argument with him once when he seemed convinced that me chopping potatoes in to smaller pieces would not cook them quicker…
That sounds like a waste of bandwidth.....
Was it the chopping that made them cook faster or the (heated) argument?
Just to be overly pedantic, and because your post made me question it - Wikipedia states that Elon Musk did a BA majoring in Physics and a BSC majoring in Economics. No BE Degree specifically.
There are engineering degrees and engineering degrees. Ask a Civil Engineer to spec a bearing for a machine and they'll probably look at ya like you are speaking greek. Ask a Mechatronics guy about anything Hydrology related and you'll likely get the same. Software Engineers and chemical process ditto.
Exactly, I got a Metallurgy Degree and then did finance, can't do any of it I build Forecasting Systems from large Data-sources, but doesn't give me much practical knowledge. Now I'm trying to build a business shipping stuff around the world & wing foil plus understand half the conversations on here, I'm struggling at that. The hardest are the people who don't want affordable houses and debt to be 3 DTI. Degrees mean nothing to me some people understand stuff, some don't as you can see from these conversations, especially when invested interest takes over.
I hold an engineering degree and don't know how to mount a BBQ on a boat.
Um, close enough to fresh catch yet far enough from water?
Need to defer to somebody who cares about fishing.
It only stopped making sense in 2015?
I have a business degree and was an accountant, lots of math there too and it stopped making sense almost 10 years earlier. Of course it depends whether one is looking at their own personal situation or is viewing the collective consequences.
I think if price fall drastically it will be good for FHB but yes it will get worse from here for speculators and that too not for genuine investors.
Time for reset.
House price falls haven't made affordability worse, it's the interest rate rises that have.
Time to save a 20% deposit in Auckland is down an entire year (from 10 to 9 years) compared to last year. That's a big win for affordability.
Those that bought a year ago would be paying even higher payments than shown here as the purchase price and loan size would have been higher. While the headline figures may be worse those buying now are going to have a much easier time than those that bought a year ago.
Report from a year ago:
https://www.interest.co.nz/property/113312/prices-bottom-end-aucklands-…
By the time house price’s have completed the journey down FHB will begin with far less debt. The people and investors who decide to buy when rates were dropped to emergency levels enabling them to borrow more than they could afford will soon be in deep water as mortgage costs skyrocket and no chance of selling without losing at least 20% of original price. The trouble is if they wait 20% could turn into 40% loss very quickly over coming months.
I still fear some hare brained government intervention. Some spew about poor mum and dad investors and their retirement ra ra ra…. Our leaders lack any real imagination of ideas to keep the country wealthy without unregulated housing speculation. I really hope I’m proven wrong…
Meanwhile in the USA
In October, a shocking 37% of real estate agents struggled to pay office rent -- a 10% increase from the prior month, according to Yahoo, citing a new report via Redfin. The figure could worsen as the housing market rapidly cools via the Fed-induced demand side crunch.
The unprecedented explosion in mortgage rates and freezing of the housing market is terrible news for all those newly minted agents during the pandemic. Mounting financial hardships and slumping deal flow, with the inability to service office rent, could result in many leaving the industry, perhaps, returning to their old bartending jobs.
lots of worst ever stats etc in this as well....
A Shocking 37% Of Real Estate Agents Couldn't Afford October Office Rent | ZeroHedge
in order to determine whether overseas workers would have any appreciable affect on house prices I wonder what proportion would be in a position to purchase a house here? Perhaps none immediately as they are on work visas. Then what proportion would get residency after 2 years. Even then would they have the resources. They probably just increase demand for rentals. Interesting question though.
Labour is handing out Skilled Migrant Resident Visas and Straight to Residence Visas. Hardly anyone needs to wait 2 years.
https://www.immigration.govt.nz/new-zealand-visas/options/live-permanen…
Thanks for the link. Will be interesting to see if house sales pick up due to this cohort.
We need their skills no matter the cost I would say
Fly away young people, come back when you've built up some equity in a game you can win. The world welcomes young Kiwis with open arms.
Heaps of them coming in this side of the Tasman. Many came unprepared and I've seen lots of postings on facebook looking for accomodations!
Why buy it for $849 a week (plus rates, insurance, maintenance) when you can rent it for $450 a week?
True, plus little prospects of capital gains in the future
The house price falls are lagging the increased costs. This just means house prices have further fall (even if there are no further rate rises).
House price’s will need to continue crashing for FHB to purchase home, no rush as will take them 9.5 years to save for a deposit in Auckland anyway. I think over next 12 months the fall of 40% to 50% will be seen from top of market last year, but if downturn that is happening around the world continues it will be far greater crash.
It's interesting that 2003/2004 was when house price inflation started to deviate significantly upwards.
WFF introduced and capitalised into property. Boomers capitalising equity in their family home into rental property. The higher tax rate saw many jumping into negative gearing and family trusts. Overseas money looking for safety after .com bust etc and new wealth from China?
This idea that mortgage affordability by virtue of interest rates equals housing affordability is a strange one. One can't help but think that we're being fooled into this belief. I purchased a home once, $240k 100% financed at 7.5% and 2 times household income. What made it affordable? The interest rate, the size of the mortgage, the DTI or price to income?
What galls me though is this belief that house prices to the moon is really making us any richer or wealthier. It's feeding a financial system that is ultimately becoming a burden on economies and society.
As I have said before, the roots of this debacle are in that 2001-2006 period.
Along with what you rightly mentioned (WFF etc) we also had large scale immigration from the UK post-9/11 (both English people and returning kiwi expats). At the time NZ property was comparatively cheap, especially with the exchange rate of the day.
Another factor was the ridiculously restrictive planning rules of the time, which Aunty Helen did jack-all about (despite plenty of advice -I know, because I was giving some of that advice from a government ministry)
Yeah I bought in 2000 with no thoughts of capital gains. Around the same time a lot of West Auckland vineyards were becoming residential subdivisions and the negative gearing and tax free gains were being heavily promoted by property development/management companies.
Might've been great for housing supply at the time but it wasn't hard to see that creating a Residential Property Investment Industry would create some serious issues. If it wasn't a thing would WFF etc been funnelled that way? Foreign Investment Fund tax policies didn't help either but at least the intent was to encourage investment in the local sharemarket. So much for economics being a social science when it can't foresee the majority are driven by fear and greed.
The real issue is going forward though. Is it going to be rinse and repeat or can we be more creative and think outside the box of 'economics'?
What galls me though is this belief that house prices to the moon is really making us any richer or wealthier.
Hasn't made the country overall wealthier or better, but it certainly has enabled some to live beyond their means by saddling following generations with ever more debt.
Greg is it possible to see a graph of mortgage payments as a percent of take-home pay over time eg since 2004 to now? That would be fascinating.
Would like to know of the sales that are being achieved in the lower quartile who the sellers are and why they are selling.
I’d much rather buy a house today in Wellington than a year ago. Prices are down 20% in nominal terms, more like 28% in real terms. Interest rates are a short term factor, the amount of debt you take on is a long term issue. All those buyers are going to come off their fixed rates and have to pay the same high rate, just with a higher purchase rate.
Yep - difficult to "un-buy" if you bought at peak last year. If affordability is getting significantly worse despite nominal drops in price, then worse can be said for those who ticked up a large mortgage at the top and will at some point need to refix into these higher rates.
Affordability getting worse for all leveraged owners, investors and potential home owners. Interest rates are on their way up, so prices will need to come down to meet the market.
Not a lot of elastic left before the thing goes ping.
Exactly. But serviceability in the short term is still a major factor which is counting a large chunk of FHBs out. Even if we assume (a big assumption) that fixed interest rates will be down to around 4% in 2-3 years, getting to that point (in terms of getting bank approval) is the issue with rates currently at 6% plus.
If I was a FHB and was in the position of stretching myself to be able to buy in the next 12 months, and in a position that banks would give me a mortgage, I would be trying my best to buy, probably around mid to late 2023.
Unfortunately the proportion of FHBs who will be able to do this are in the minority. But if you are in that minority, worth thinking about. So buy mid 2023 at a low price (at least 20% below peak value), fix for say 12-18 months, live modestly and hope that rates are significantly lower by late 2024 (and all things being equal they should be).
Big day tomorrow with the new OCR announcement, Countdown had run out of toilet paper.
So the logic is, if you have already purchased in previous years then any debt is still affordable, ie the unaffordable is only the worst it has been if you are looking to buy now.
We are now going through something I previously described where the combination of the variables of price and interest is now at a high price and high interest, which is the worst immediate place to be to buy as your high-priced capital debt is fixed and you don't know how long the high-interest rates will be or will keep increasing by.
But if you can wait, then you should be able to buy at a lower price, and thus your deposit will be higher as a % so your debt will be lower even if you are paying higher interest costs, which should trend down over the time of your mortgage, of which you will be able to pay off quicker as inflation will also increase your wages.
What is happening is good news for a buyer, if you can wait.
Exactly.
But but…. high interest rates will help people afford more homes right? Thats what the people on this discussion board keeping telling me lmao
No surprise here As expected. Lower the interest rates back so you can allow FHB to have a shot at purchasing. FHB home ownership was at record levels when interest rates were lower.
-7
Patience.
As the asking prices continue to crater, houses will become more affordable.
+10
Keep dreaming Brock. You've been patient for the past 2 decades on this forum. Sooner or later, you gotta have a win right? Just like your besties Orr, Political Scientist Robertson, and Jacinda.
Please let me know what you've been smokin', wud like some of 'dat.
-7
This forum hasn't existed for two decades, nor are your heroes my "besties". You need to put more effort into appearing less dumb.
You are right about the 7 though. 7% is a certainty.
Calling someone dumb when they were the one trying to convince the world using divisive arguments on this comment board, posting for a very long time and got it wrong every single time.....hmm......definition of insanity? Oh well. You're bound to get something right. Keep at it!
NZ productivity at it's best!
-7
FOMO probably isn't the best financial or emotional reasoning for a FHB to be buying a home.
Oh look out guys, our resident e-thug has returned. I wonder what tale he's going to spin today?
You never left the country, never sold the first home you bought 2 years back. It's quite clear you're on here trashing high interest rates because you're reeling at the eyewatering interest costs on your mortgage, coupled with the loss of equity that you had hoped to leverage into investment properties.
-lol
My insurer told me that they have automatically raised the rebuild price of my insurance by 18% in the last year to reflect the increase in building costs. This is a 1-2 year old house. However the rebuild price is more than the actual market price of the house if I sold it, and that doesn't even include the land, due to house prices falling about 20% in my area.. So I can't see how new builds are going to decrease much in price. If developers can't sell them, then some are going to fold.
This would not be so much of a problem if banks offered interest rates that were fixed for the entire term of the mortgage. At least then there is certainty over repayments. But how can these people take out a mega mortgage, with the risk that interest rates could increase significantly , which will in turn decrease the market value of the house as it becomes less affordable based on repayments required..
Because they were going to sell for capital gains, after their peasant had paid their interest-only mortgage for them. And if things did get bad, then oh, well, they'll just sell and take the profit.
Except everyone else had the exact same idea. An awful lot of people in the "I'll hold for now, if it gets too bad I'll just sell" boat.
A significant amount of people trying to time an illiquid market.
It turns out that peasant farming is not as lucrative as people thought it would be.
Oh dear, how sad.
The crush at the exits will be epic.
Please update FHB stock photo. I'd suggest a couple in their late 40s with 4 wealthy looking parents hovering behind them at the auction.
Correct.
It will get a lot worse. First recent house buyers with mega mortgages will be under pressure with some forced sales. Then the investors who bought at the top will be scrambling to exit with many forced sales. Then recession hits with rising joblessness, High inflation + interest rates will continue for 3 to 5 years. The housing market will be decimated.
But wait there's more. Coastal/beach properties will plummet in value as the climate warms faster than current pessimistic expectations. Yes tipping points breached and still no real co2 or methane reduction action.
Kia Kaha
Looking to buy an apartment prefer inner city or mt eden / eden tearrace at heavy discount in next six months if any has cash offers pls text 0210 8536 721
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.