Home ownership continued to become slightly less affordable for aspiring first home buyers in July, even though incomes are rising and prices declined at the bottom of the market.
The Real Estate Institute of New Zealand's national lower quartile selling price declined by $3000 last month, to $587,000 from $590,000 in June.
However, around the regions the price movements were mixed. Lower quartile prices declined in Northland, Auckland, Waikato, Hawke's Bay and the Wellington Region, rose in Manawatu/Whanganui, Taranaki, Nelson/Marlborough, Canterbury, Otago and Southland, and were unchanged in the Bay of Plenty.
At the same time incomes are on the rise, with interest.co.nz estimating the after-tax pay for a typical first home buying couple, based on median pay rates for 25-29 year-olds, would have increased by an average $5 a week in July.
The combination of a small increase in take home pay and slightly lower prices overall at the bottom of the market should have been beneficial for first home buyers. But unfortunately rising interest rates spoiled the party.
Although the Reserve Bank has kept the Official Cash Rate on hold for the time being, higher mortgage interest rates are still flowing into the market, with the average of the two year fixed rates offered by the major banks rising to 6.74% in July from 6.50% in June.
That pushed the mortgage payments on a home purchased at the national lower quartile price with a 20% deposit ($117,400) to a record $702 a week in July, the first time it has ever been above $700 a week.
That's equivalent to 35.6% of the take home pay of a typical first home buying couple, with 40% being the threshold for when mortgage payments are considered unaffordable.
However if the first home buyers only had a 10% deposit ($58,700) for the same home, the mortgage payments would jump to $889 a week, eating up 45.1% of take home pay for typical first home buyers, putting it squarely into unaffordable territory.
So the ability to raise a 20% deposit is probably the single biggest obstacle first home buyers on average incomes face to being able to afford a home of their own.
Even with a 20% deposit, first home buyers on average incomes would likely struggle to afford the mortgage payments on a lower quartile-priced home anywhere in the Auckland region or in Tauranga, on the Kapiti Coast or in Porirua because property prices are so high relative to incomes in those areas.
But there's one part of the country that stands out as easily the most unaffordable place to buy a home - Queenstown.
Queenstown's lower quartile selling price was $1,135,000 in July. That means even with a 20% deposit ($227,000) you would need a mortgage of $908,000 to buy a lower quartile-priced home in the town. And the mortgage payments on that would be $1357 a week, equivalent to 72.2% of the median take home pay for typical fist home buyers in the district.
The table below shows the main affordability measures for typical first home buyers with either 10% or 20% deposits in all main urban districts throughout the country in July.
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99 Comments
Go Orr and the OCR .
Screwing the poor since... forever
National promises to restore prescription fees.
Only universally, so they can target price relief to those who need it most, as opposed to giving rich pricks cheaper Viagra ;)
Have they released that as a policy? Or is that just a random comment they made?
Who can tell?
Hello Housemouse/Mofo. I knew you wouldn't be able to keep away.
HM used to be "Fritz" before that.
So obvious it is him. He spat the dummy but couldn't stay away. Now he is back to his motor mouth comments. Wish he would just disappear.
Well, now you can hide comments from any user you wish.
Anon_82 has written the code to do so here:
https://chrome.google.com/webstore/detail/interestconz-commenter-bl/kbf…
You have to use Chrome but it works great !
I'm really surprised at how well Queenie's economy has stood up given that things are so oppressive for the foot soldiers. I remember living in Vail in the 90s and got to live in the resort's worker accommodation for a few months. Was superb.
Slumlords, vanlifers making coffee for holiday makers, and lifties living in Hostels (e.g. Bothy) is a pretty loose description of an economy.
Also of note, the council CEO won't show the council the books, so I'm strongly in favour of QLDC getting Tauranga'd.
https://crux.org.nz/crux-news/100-plus-wanaka-ski-staff-find-housing-at…
https://crux.org.nz/crux-news/slumlord-earns-30000-a-month-cramming-30-…
https://www.odt.co.nz/regions/queenstown/bleak-reality-queenstowns-work…
https://crux.org.nz/crux-news/mayor-ceo-defend-refusal-to-allow-council…
This data (at least to me) shows that unless interest rates fall soon, we are looking at prices going even lower.
And then I look at the US 10 year yield, and it is taking out new highs in the past week, to levels not seen in the post GFC period (2007 when all of this low interest rate madness started - resulting in global asset bubbles).
So there is a real risk of interest rates breaking out even higher again. This isn't a forecast or a probability, but just a risk people should be aware of before loading up with a large amount of debt (it is also possible that rates may not drop in a meaningful way going forward - they may just keep on rising - but this isn't something many people talk about as the assumption is that they will fall like they have every time over the past 40 years that there has been an economic contraction...this time an economic contraction with few goods and services may produce even more inflation as any reduction in rates, sends prices higher)
So there is a real risk of interest rates breaking out even higher again. This isn't a forecast or a probability, but just a risk people should be aware of before loading up with a large amount of debt (it is also possible that rates may not drop in a meaningful way going forward
I'm the first to admit I am more likely more wrong than right. My current narrative fits along the lines of the increase in central bank balance sheets is the monetization of interest payments - debasing the currency to pay the interest. With money printing, they're going to have the interest rates down fast. Start with the U.S. If the trend of GDP growth is 1.75%, then inflation has to be down at that level at a similar level as debt is 100%+ of GDP - all GDP growth allocated to debt servicing.
The world doesn't function with rates at 1.5-2%. Basically they have to refi at <=1.5%. They have to kill inflation expectations. Powell needs headline inflation to go negative to be able to cut rates.
So what happens if NZ doesn't follow suit? TBH with you, I think the NZ bubble is possibly burst regardless of central bank actions.
Orr wil not want cheaper mortgages while inflation is high.
Even though his mates want them.
Verbosity gave you away Housemouse.
Seriously?! What are you adding to the conversation with this BS.
I would tend to agree with you Independent Observer, But the house affordability index has a very prescribed view of what the average aspiring first homebuyer is: double income, median salary, looking for the lower quartile house etc. In my observation the lower quartile houses are being purchased by less "average" buyers . The limited stock is being purchased by multi generational (and multi income) families, Couples with incomes far above the median income, Mum and Dad are laying out the deposit, returning kiwis who have saved big deposits by working the Ozzy mines, second homebuyers/investors, developers etc. This doesn't mean the house affordability index is incorrect. It is getting harder for the average kiwi to buy. It just doesn't mean that lower house prices will eventuate as non-average kiwis will take up the limited stock. The cost of building new houses keeps going up, Not a single new house in NZ is being built at the lower quartile range, immigration is up, rents are up. Supply and demand. I expect that house prices to plateau in nominal terms. Its already happened in many regions.
FHBs saving ~20k a year? Is that realistic? I don't know many around me who can do that, it's close to $1700 a month!
Thats why they are FHBs, instead of renters for life.
Can you develop? Aren't FHBs renting before buying their first home?
Temporary renters vs renters for life (or at least until they develop the motivation and ability to save, which could be decades away for some.)
Thats why they are FHBs, instead of renters for life.
Let's assume that all potential FHBs are capable of buying houses. That means the national business of 'renting propadee' essentially diminishes as a value proposition towards zero.
Sometimes the logic astounds me.
The optimal situation for the NZ property market is a never-ending, increasing stream of renters willing and able to pay increasing rents. It's neo-feudalism with a fantasy land dimension (serfs can only give up so many turnips before they all die of malnutrition).
Most potential FHBs are capable of buying houses, at a price that the market dictates in the absence of distortions such as interest only mortgages, equity leveraged deposits, tax credits to renters and up until recently tax deductions to make the whole paper rich/cash poor investment stack up.
…or revolt…
Looking forward to the rent strikes...*my popcorn is ready*.
NZ is bleeding young kiwis, in a way it is a protest or revolt. Educate them then wave them off and import someone to replace. Everyone has different views but this is not healthy at all.
I'm not sure it will happen. People need a place to live. Had over 50 tenant applications in the first 24 hours when I recently listed a rental. If a tenant decided not to pay I am confident I can find another. I don't think the tenancy services has robust systems for removing squatters, but the shear competition for housing keeps tenants honest to their obligations. Rent strikes in other countries have resulted in short term squatting leading to short term homelessness before returning to business as usual (albeit with higher rents to cover the risk landlords now carry with an embedded squatter culture).
Affordability is unfortunately the least talked about consideration when it comes to our property market. It gets tokenism of a monthly number that doesn't get proactively dissected. Why? It doesn't matter one jot to the grey old white man brigade that supports Luxon and Co. We may not have corruption on the level of some 3rd world countries, but it's there.
We may not have corruption on the level of some 3rd world countries, but it's there.
Our corruption is arguably much bigger. It depends on how you frame it. The point is that the sheeple don't look at our own 'game of mates' as corruption. However, if they look at dictators with vast riches, they see corruption.
Yip I left working in Wellington (after being invovled with a few government agencies) and realised that our country was far more corrupt that we like to think. Actually it destroyed my faith in western democracy and that we had any hope of resolving the issues we were facing. i.e. I thought it was going to get worse before it got better, and from what I've witnessed in the years since leaving, I think I was probably right.
To call out corruption is implying that there’s some fundamental set of rights and wrongs. If only we lived in such a world…
In reality, there’s only things you can get away with, and things you can’t. As they say, men with morals miss out ;)
I'm liking this, without liking it.
The movie 'I care a lot' epitomizes your view. It's worth a watch.
I'm hoping it reflects that I think this analysis is accurate without liking that it's accurate. I'll give it a watch and see.
"It doesn't matter one jot to the grey old white man brigade that supports Luxon"
What about the grey old white woman brigade that supports Luxon?
or the the grey old white man brigade that supports Hipkins?
or the young white man brigade that supports Luxon?
or the grey old Maori brigade that supports Luxon?
or any other combination of the above?
Yvil, its ok to have a race based party full of maori. But its not ok to have a National party with a few white members amongst many indians,maori, chinese, samoan, ...
Its only a racial issue when Maori say it is.
Why bring Maori into this. I'm happy to be classed as Maori. What is race anyway, it's cultural and not genetic. So why be sensitive about culture, unless your not proud of where you come from. But yeah why bring Maori into a property comment section to talk about race, says more about who you are.
Yvil.. my comment was based on a video I saw recently of Luxon talking to a room. It was around interest deductibility and teaching Maori language. Unfortunately the demographic was almost exclusively white haired old men. I say it as I see it, although your point is correct.
Glad that you recognise that your original post is full of ageist, sexist and racist bias (quite a combo really!)
This irks me Yvil. If there is a room full of white old men, how are we supposed to describe it? If a political party has a main demographic, are we forbidden to mention it? Get a grip man.
Yvil, you're obviously a very restless human being who's now taken up sniping. Bali obviously didn't help......
There in Bali whooping it up next to the bar. Here on interest, the correcting grumpy old bar-stard.
TJ, "its not unusual to be spun by anyone".. mate the Gnats are more representative of the general NZ population than TPM or any other party
I'm early-30s and been to pre-election candidate meetings every election cycle. The demographic is always skewed old. (My wife and I call them "mushrooms" for all the white-(haired)-button-tops visible above the chairs.) Who else do you think has the time or inclination on a Thursday evening?
This poll doesn't go into race, but it does look like old men in general are significantly more likely to vote National than other groups - mostly at the expense of the Greens. 18-49 year old men nearly 5 times as likely to vote Green as 50+ men.
https://www.roymorgan.com/findings/9292-nz-national-voting-intention-ju…
Looks like 50+ women are the mainstay for Labour.
Yip. They vote like they drive....
Option 1, slow and methodical
2. Slow and all over the show.
3. Fast without to much thought.
4. Back seat passengers
As a 50+ woman it's nice to know I buck trends. Also, those driving options for women...are generalised male BS.
Old Beanie knows more than young Beanie did. I think. I can't really remember. What were we talking about 😖
Luxon doesnt resonate well with Women at all. God bothering, Abortion etc... An opinion piece I read today, he is perceived as untrustworthy, corporate speak, foot in mouth. Willis would rate better as the leader.
I don't give a s..t wether a leader is charismatic or got the gift of the garb. We had that last time with the big smile waving of hands the cliche phases like be kind BS etc. We're did that get us. Way up the s..t creek without a paddle. I want a PM who does what they say knocks a few heads together upsets people because you can't please everyone and a democracey is were by the majority rules. Well supposedly
But your a male, so you are a higher chance to vote National. Woman also get a vote as well and vote labour. They will have their opinion why, just like you expressed your opinion.
Coiin, you just about nailed it. Except we want them to only do what ws voted for. No post eledtion deals and non mandated policies
copy paste from wiki:
The tyranny of the majority (or tyranny of the masses) is an inherent weakness to majority rule in which the majority of an electorate pursues exclusively its own objectives at the expense of those of the minority factions.
Democracy is wrong in many ways, but is the best we got... and is not supposed to be that
Opinions are forgotten like yesterday's paper
You seen the latest poll today!
He just has to be liked more than that weasel called Hipkins AKA Arderns hatchet man of evil.
Apparently Hipkins has his mother up for auction!
As a woman I can confirm, greedy slimy closeted liar is my impression of him. As for Willis, well she isn't much better, just replace closeted with sickly sweet. But that's just my impression, I could be absolutely misreading then *coughs behind hand, hardly likely*.
Willis. A politician with a journalism degree. Doesn't need a point to argue, just be argumentative and shouty by nature.
Somehow nominated as spokesperson for finance, despite having Simeon Brown in National. An ex-banker who would rather be a spokesperson for transport. Quite bizarre how little relevance or experience one must have.
Some say the white haired males and females are Winston supporters. That is just pigeon holing. My old mum supports TPM and dad is greens
Things pretty much going as predicted so far. The election is on the horizon now.
My lot who spend time both on here but more so on Reditt reckon the first home buyer narrative is now very much 'wait'.
They are vastly more informed than the bank backed media, msm RE fantasy world that ma and pop landlord inhabit.
Eventually when you see your mates being used as cannon fodder, you become a bit less inclined to run to the front of the line for your turn.
Oh bless your hearts rustas and independent observer, your comments sum up my feelings to a Tee.
"Interest rates are to asset prices what gravity is to matter" ....to quote some W Buffett guy.
Its not that people don't want to buy, its that the math calculated correctly (CCCFA) stops them from doing so. The capital gain chasers thinking price will go back to the levels of 2% interest fueled la la land are in an impressive level of denial. Nationals narrative of bailing out the ponzi at the expense of the average kiwi is putting them at risk of losing the race. A race where the competitors are hobbling on one leg.
Bank profit and ponzi bail out to FHb'ers for the win. Not so much.....
the average of the two year fixed rates offered by the major banks rising to 6.74% in July
Getting closer to 7%
Greg - would it be possible to have interest.co.nz's Affordability Reports in CSV or spreadsheet format? I'd love to see it graphed and the changes over time. It's one of the best recurring metrics out there for actual affordability.
Seconded
hmm, what can you buy with 595,000 in Lower Hutt? I wonder.
This
4/97 Whites Line East, Waiwhetu, Lower Hutt, Wellington (trademe.co.nz)
People need to stop equating a FHB home with a stand-alone 3 bed house. Most FHB, unless they have kids, should be focusing on homes no bigger than 80m2 to 100m2, 2 beds and close to public transport. i.e Townhouses, units, apartments or small fixer upper houses.
Your comment is really annoying. Why should FHB's settle for less than the last generations ? The reality is that is an overpriced dog box, and most housing in this godforsaken country is in a similar vein.
One reason for looking at different property options than a generation ago is that NZ now has 5m people, not 3m. And Auckland population has doubled so fundamentally different - more congestion, less land etc. Another is the harsh reality of climate change, so greater use of public transport is needed - although I wonder if we actually used more a generation ago when people used cars less (cars and petrol were both relatively more expensive), students and people working in cities used buses, and kids went to school on foot, bike or bus….
I don’t think you can reasonably housing to always stay the same. We need to adapt but the key issue is putting decent policies in place to make the right changes happen
Because the last generations are all NIMBY's and pulled the ladder up behind them. They also made so much money from leveraging, tax free capital gains, that they no longer needed to downsize in retirement, and simply live out their retirement years in the family 4-bed home in prime schooling and commuting neighborhoods.
As cities grow, significant density increases are required on good transportation routes and close to the CBD. Or you end up with urban sprawl like AKL which is no good for anyone.
Sure, but they average age of FHBs now is ~35. At that age, you're either not having kids, you've got kids, or you're going to have kids very shortly. Most FHBs now simply don't have the time to buy a small house as their first home and then move up the ladder to kid-suitable housing.
At 35 years old - most boomers had 2 or 3 kids ranging from 10 to 15 years old, a house that was either mortgage free or a mortgage of less than $50k.
1 bedroom and the blurb extols one of its benefits as “zoned for popular schools”. Seems a bit optimistic.
It's hilarious and sad at the same time. Let's slowly convert all property around schools to high density by building a bunch of 1 bedroom apartments.
Each family member gets an adjacent apartment. Start them young, sign them up to a 64 year mortgage when the child turns 1. First 15 years at $10 per week (pocket money rates) and let the interest accumulate against the principal. The moment they turn 16 *bam* sorry off to fill the shortage of carers at the rest home you have a mortgage to service.
Bang on starrider. It's like comparing NZ house prices with UKs and say a 3brm dble garage on a full section here is the same price as a two room bedsit in the UK apples to oranges. And yes alot of FHBs don't want a big lawn or garden to look after or a big house to clean
Majority of homes in the UK are 3 bedroom semi detached or terraced housing with a modest back garden. Much, much better than the crap we are building in Auckland - 2 bedroom crap with no outdoor spaces in many cases.
And we wonder why we have an under population crisis! Nobody can afford housing and nobody has enough room for kids. Late stage capitalism shooting itself in the foot.
That's hilarious. Did you even read the listing? One bedroom. Yet it boasts being close to schools, what the hell? I guess if you're a pedophile it might appeal?
- One bedroom
- Modern bathroom
- Open plan living
- Easy care courtyard
- Fee simple title
- Central location
one bedroom is not an issue. the fee simple is.
The expression cut your coat according to your cloth comes to mind. One can start at the 80-100m2 and progress upwards later in life so I don't buy I must have what the last generation had straight away when the last generation invariably started off small.
shoots of green everywhere........
Don't worry, the lawnmower is going to be topped up by the next OCR increase.
Repeating to often? ... banned
since when do you make the rules
Its the ridiculous price of houses in NZ - not the 20% dep required - that is the "single biggest obstacle" to first home buyers affording their own home.
When in NZ going to wake up to the incredible damage the draconian urban containment policies are causing to society here.
Its tha pathetic saving skills of the new generation...
Lolĺies and i phones
And when did the older generation save $150k over 7 years for their deposit - oh wait, they didn't.
I pointed out long ago that if you convert the relevant deposit requirements to hours worked, the current generation[s] have to save 4x for their deposit than their forebears entire house took to pay off!
The older generations were in such a rush they took out 3 mortgages at ridiculous interest rates to buy a house in their early 20's. Rather than saving hard back when term deposit rates were 15%+ and the whole house could be bought for (in income ratio terms) what a house deposit is these days.
Yet they have the gall to claim young people today are frivolous. Maybe it's to distract from their embarrassing financial recklessness that was only saved by reducing interest rates over the last 30 - 40 years.
300k over 5 mate!
My two years in work, twenty two year old parents bought their first place for $15000 in 1980. I an experienced electrical fitter and ex-wife, PHD works for government, took 6 years to save $180000 for a forty five percent deposit on a equivalent, if not lesser, house.
If housing had tracked inflation we could have bought the house twice with our deposit alone.
Just stop with we it hard too in regards to buying a house, Boomers. Not having a go at you, everyone and every generation has their own challenges , but housing, a pretty basic need, is objectively harder to obtain for a first time buyer than in the past, much harder.
Thanks for the example. Clearly highlights the speculative damage.
Or rampant inflation, and ripoff rent for their speculord. Oh well still managed to save for a ticket to relocate another medical degree to Aussie. Meanwhile everyone is moaning about a failing medical system.
Someone is pathetic. Depends on perspective I guess.
NZ house average house price to income 10.8 . UK is 13.8 Canada is worst and I read somewhere Aus is getting up there. So it just ain't little old NZ
Someone is winning everywhere. Oh yeah...bank profit.
I bought a house UK, this is absolutely not true. My house was 3 to 1 of my income. I was contracting and if it was 13, then I would have a house I would never be able to afford, plus I would be rolling in cash after I sold it. Even contracting, house repayments were difficult and I'm certainly not rolling in cash.
Well you know what they* say:
"When home affordability decreases, record cost of living increases, and interest rates are high, during a recession, home prices HAVE TO increase by 5% to 10% per year"
*A generic spruiker
Greg Niness,
Does that table assume that incomes are the same across regions or is it calculated for each region in your calculations?
Its a good thing for FHBs that they cant afford insanely priced houses.
I disagree with the statement in the headline.
The deposit is a barrier, no doubt, being able to save enough to establish such a deposit in the current economy is undoubtedly difficult - given the ever increasing cost of living.
However, the main impediment for first home buyers is the obtaining of a mortgage, which the deposit is just one factor. The bigger hurdle is the repayment rate forecast which is now likely based on interest rates 2%+ the current offers - which mean's it's quickly approaching 10% for some banks.
Combine the two and obtaining a mortgage for a first home buyer is nothing short of impossible without a lottery win or support from family.
If you're a first home buyer, probably renting at present, and having all your outgoings going up month by month - how can you a) save enough for said deposit and b) present to the bank that you can afford 10% interest rates going forward?
Just as it is in Aussie, the only thing propping up the housing market at present is immigration.
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