For first home buyers, August didn’t bring any affordability relief even though first quartile house prices fell on a national basis.
Prices for a house (actually a dwelling, so it may not be a stand-alone house) came in at $575,000 in August, down from $590,000 in July.
However, interest rates inched up. The base rate rose just five basis points to 6.79% for a fixed two year mortgage. However, for a first home buyer with only a 10% deposit, that effectively became a 7.99% rate after the low equity premiums are applied by banks. You need a 20% deposit to get the 6.79% rate. That rate was up from 5.35% just a year ago, so the cost of servicing a mortgage is rising quickly now.
And that shows up in the relationship between take-home pay and the mortgage payment.
Take-home pay rose 3.6% in the year to August. After tax, an average national household take-home pay is now $1975.17 a week. In Auckland it is worryingly little more than the national average, being $2,010.87 on the same basis in the Queen City.
But lower quartile house prices are significantly higher in Auckland, even if they hardly moved in August from July, at $799,000. (The zone in Auckland with the lowest August lower quartile house prices is Papakura at $710,000.)
With a 10% deposit, incurring premium interest costs, but on a falling national house price ($575,000), a new buyer would need to assign 44.3% of their take-home pay just to the mortgage. The rising interest rate essentially offsets the lower house price so this unaffordable level is unchanged in August from July. A year ago in August 2022, the ratio was 41.5%, still unaffordable but significantly less so.
That means a first home buyer in August 2023 now has to find an extra $54.94 a week from the household budget to make the mortgage payment than if they had bought the same house a year ago. That is $2,857 after tax extra, in a year.
But for all those costs, it only takes 2.94 years (153 weeks) to save a 10% deposit for an August 2023 purchase, little-changed from a year ago. In fact it has been like that since October 2020.
However, to save a 20% deposit (and get the much better interest rates and repayment levels) you would need to save hard for almost 300 weeks (5.74 years). No doubt you will need to rent a basic house, so much of your two-income-no-children household can be saved to achieve a minimum deposit. It has never been easy, but it is certainly harder now (2023) than any time since we started assessing home loan affordability in 2004.
These time-to-save numbers are the national average. It is significantly longer in Auckland – ‘significant’ being an understatement. Even in Auckland’s most ‘affordable’ zone (Papakura) the time to save is 3.56 years (185 weeks, seven months longer than the national average) but that then requires you to assign a massive 53.7% of your household take-home pay to pay the mortgage. That is severely unaffordable for the average household in the 30 year old cohort.
The tables below show the main affordability measures for typical first home buyers with either 10% or 20% deposits in all main urban districts throughout the country in August.
[* Greg Ninness is on vacation].
| AFFORDABILITY WITH 10% DEPOSITS | |||||||
| Weekly | |||||||
| LQ House | 10 % Dep | Time To Save |
Mort Req | Repayment | Take Home Pay |
Affordability | |
| Northland | 540,000 | 54,000 | 2.9 | 486,000 | 821.40 | 1,856.20 | 44.3% |
| Auckland | 799,000 | 79,900 | 4.0 | 719,100 | 1,215.36 | 2,010.87 | 60.4% |
| Waikato | 579,000 | 57,900 | 3.0 | 521,100 | 880.72 | 1,944.67 | 45.3% |
| Hawkes Bay | 540,000 | 54,000 | 2.9 | 486,000 | 821.40 | 1,889.16 | 43.5% |
| Manawatu/Wanganui | 425,000 | 42,500 | 2.2 | 382,500 | 646.47 | 1,911.85 | 33.8% |
| Taranaki | 461,500 | 46,150 | 2.4 | 415,350 | 701.99 | 1,911.85 | 36.7% |
| Wellington | 599,000 | 59,900 | 2.9 | 539,100 | 911.14 | 2,072.16 | 44.0% |
| Nelson/Marlborough | 590,000 | 59,000 | 3.1 | 531,000 | 897.45 | 1,893.78 | 47.4% |
| Canterbury/Westland | 520,000 | 52,000 | 2.7 | 468,000 | 790.98 | 1,952.47 | 40.5% |
| Bay of Plenty | 615,000 | 61,500 | 3.3 | 553,500 | 935.48 | 1,901.73 | 49.2% |
| Otago | 449,000 | 44,900 | 2.4 | 404,100 | 682.98 | 1,884.82 | 36.2% |
| Southland | 360,000 | 36,000 | 1.8 | 324,000 | 547.60 | 1,991.67 | 27.5% |
| New Zealand | 575,000 | 57,500 | 2.9 | 517,500 | 874.64 | 1,975.17 | 44.3% |
| ---------------------- | |||||||
| Auckland Central | 770,000 | 77,000 | 3.9 | 693,000 | 1,171.25 | 2,010.87 | 58.2% |
| Auckland North Shore | 970,000 | 97,000 | 4.9 | 873,000 | 1,475.47 | 2,010.87 | 73.4% |
| Auckland South | 764,000 | 76,400 | 3.8 | 687,600 | 1,162.13 | 2,010.87 | 57.8% |
| Auckland West | 755,000 | 75,500 | 3.8 | 679,500 | 1,148.44 | 2,010.87 | 57.1% |
| Tauranga | 690,000 | 69,000 | 3.7 | 621,000 | 1,049.56 | 1,882.07 | 55.8% |
| Wellington City | 700,000 | 70,000 | 3.0 | 630,000 | 1,064.78 | 2,351.27 | 45.3% |
| Wellington Hutt | 590,000 | 59,000 | 3.0 | 531,000 | 897.45 | 2,014.18 | 44.6% |
| Christchurch | 526,000 | 52,600 | 2.7 | 473,400 | 800.10 | 1,945.31 | 41.1% |
| Whangarei | 570,000 | 57,000 | 2.9 | 513,000 | 867.03 | 1,977.75 | 43.8% |
| Hamilton | 628,000 | 62,800 | 3.3 | 565,200 | 955.26 | 1,937.71 | 49.3% |
| Rotorua | 520,000 | 52,000 | 2.7 | 468,000 | 790.98 | 1,930.76 | 41.0% |
| Gisborne | 460,000 | 46,000 | 2.7 | 414,000 | 699.71 | 1,701.23 | 41.1% |
| Napier | 535,000 | 53,500 | 2.9 | 481,500 | 813.79 | 1,896.33 | 42.9% |
| Hastings | 520,000 | 52,000 | 2.8 | 468,000 | 790.98 | 1,889.16 | 41.9% |
| Palmerston North | 530,000 | 53,000 | 2.7 | 477,000 | 806.19 | 1,992.79 | 40.5% |
| Wanganui | 370,000 | 37,000 | 2.1 | 333,000 | 562.81 | 1,774.90 | 31.7% |
| New Plymouth | 530,000 | 53,000 | 2.8 | 477,000 | 806.19 | 1,883.52 | 42.8% |
| Porirua | 749,000 | 74,900 | 3.9 | 674,100 | 1,139.31 | 1,962.65 | 58.0% |
| Kapiti Coast | 595,000 | 59,500 | 3.3 | 535,500 | 905.06 | 1,846.70 | 49.0% |
| Nelson | 590,000 | 59,000 | 3.1 | 531,000 | 897.45 | 1,893.78 | 47.4% |
| Timaru | 413,000 | 41,300 | 2.3 | 371,700 | 628.22 | 1,787.65 | 35.1% |
| Queenstown | 980,000 | 98,000 | 5.3 | 882,000 | 1,490.69 | 1,884.82 | 79.1% |
| Dunedin | 460,000 | 46,000 | 2.6 | 414,000 | 699.71 | 1,769.58 | 39.5% |
| Invercargill | 360,000 | 36,000 | 1.9 | 324,000 | 547.60 | 1,903.34 | 28.8% |
| Wairarapa | 427,000 | 42,700 | 2.7 | 384,300 | 649.51 | 1,609.90 | 40.3% |
| Rodney | 895,000 | 89,500 | 4.5 | 805,500 | 1,361.39 | 2,010.87 | 67.7% |
| Papakura | 710,000 | 71,000 | 3.6 | 639,000 | 1,079.99 | 2,010.87 | 53.7% |
| Franklin | 810,000 | 81,000 | 4.1 | 729,000 | 1,232.10 | 2,010.87 | 61.3% |
| AFFORDABILITY WITH 20% DEPOSITS | |||||||
| Weekly | |||||||
| LQ House | 20 % Dep | Time To Save |
Mort Req | Repayment | Take Home Pay |
Affordability | |
| Northland | 540,000 | 108,000 | 5.7 | 432,000 | 648.60 | 1,856.20 | 34.9% |
| Auckland | 799,000 | 159,800 | 7.8 | 639,200 | 959.69 | 2,010.87 | 47.7% |
| Waikato | 579,000 | 115,800 | 5.9 | 463,200 | 695.45 | 1,944.67 | 35.8% |
| Hawkes Bay | 540,000 | 108,000 | 5.7 | 432,000 | 648.60 | 1,889.16 | 34.3% |
| Manawatu/Wanganui | 425,000 | 85,000 | 4.4 | 340,000 | 510.47 | 1,911.85 | 26.7% |
| Taranaki | 461,500 | 92,300 | 4.8 | 369,200 | 554.32 | 1,911.85 | 29.0% |
| Wellington | 599,000 | 119,800 | 5.7 | 479,200 | 719.47 | 2,072.16 | 34.7% |
| Nelson/Marlborough | 590,000 | 118,000 | 6.1 | 472,000 | 708.66 | 1,893.78 | 37.4% |
| Canterbury/Westland | 520,000 | 104,000 | 5.2 | 416,000 | 624.58 | 1,952.47 | 32.0% |
| Bay of Plenty | 615,000 | 123,000 | 6.4 | 492,000 | 738.69 | 1,901.73 | 38.8% |
| Otago | 449,000 | 89,800 | 4.7 | 359,200 | 539.30 | 1,884.82 | 28.6% |
| Southland | 360,000 | 72,000 | 3.6 | 288,000 | 432.40 | 1,991.67 | 21.7% |
| New Zealand | 575,000 | 115,000 | 5.7 | 460,000 | 690.64 | 1,975.17 | 35.0% |
| ---------------------- | |||||||
| Auckland Central | 770,000 | 154,000 | 7.6 | 616,000 | 924.86 | 2,010.87 | 46.0% |
| Auckland North Shore | 970,000 | 194,000 | 9.5 | 776,000 | 1,165.08 | 2,010.87 | 57.9% |
| Auckland South | 764,000 | 152,800 | 7.5 | 611,200 | 917.65 | 2,010.87 | 45.6% |
| Auckland West | 755,000 | 151,000 | 7.4 | 604,000 | 906.84 | 2,010.87 | 45.1% |
| Tauranga | 690,000 | 138,000 | 7.2 | 552,000 | 828.77 | 1,882.07 | 44.0% |
| Wellington City | 700,000 | 140,000 | 5.9 | 560,000 | 840.78 | 2,351.27 | 35.8% |
| Wellington Hutt | 590,000 | 118,000 | 5.8 | 472,000 | 708.66 | 2,014.18 | 35.2% |
| Christchurch | 526,000 | 105,200 | 5.3 | 420,800 | 631.79 | 1,945.31 | 32.5% |
| Whangarei | 570,000 | 114,000 | 5.7 | 456,000 | 684.64 | 1,977.75 | 34.6% |
| Hamilton | 628,000 | 125,600 | 6.4 | 502,400 | 754.30 | 1,937.71 | 38.9% |
| Rotorua | 520,000 | 104,000 | 5.3 | 416,000 | 624.58 | 1,930.76 | 32.3% |
| Gisborne | 460,000 | 92,000 | 5.3 | 368,000 | 552.51 | 1,701.23 | 32.5% |
| Napier | 535,000 | 107,000 | 5.6 | 428,000 | 642.60 | 1,896.33 | 33.9% |
| Hastings | 520,000 | 104,000 | 5.5 | 416,000 | 624.58 | 1,889.16 | 33.1% |
| Palmerston North | 530,000 | 106,000 | 5.2 | 424,000 | 636.59 | 1,992.79 | 31.9% |
| Wanganui | 370,000 | 74,000 | 4.1 | 296,000 | 444.41 | 1,774.90 | 25.0% |
| New Plymouth | 530,000 | 106,000 | 5.5 | 424,000 | 636.59 | 1,883.52 | 33.8% |
| Porirua | 749,000 | 149,800 | 7.5 | 599,200 | 899.64 | 1,962.65 | 45.8% |
| Kapiti Coast | 595,000 | 119,000 | 6.4 | 476,000 | 714.66 | 1,846.70 | 38.7% |
| Nelson | 590,000 | 118,000 | 6.1 | 472,000 | 708.66 | 1,893.78 | 37.4% |
| Timaru | 413,000 | 82,600 | 4.5 | 330,400 | 496.06 | 1,787.65 | 27.7% |
| Queenstown | 980,000 | 196,000 | 10.3 | 784,000 | 1,177.09 | 1,884.82 | 62.5% |
| Dunedin | 460,000 | 92,000 | 5.2 | 368,000 | 552.51 | 1,769.58 | 31.2% |
| Invercargill | 360,000 | 72,000 | 3.8 | 288,000 | 432.40 | 1,903.34 | 22.7% |
| Wairarapa | 427,000 | 85,400 | 5.2 | 341,600 | 512.88 | 1,609.90 | 31.9% |
| Rodney | 895,000 | 179,000 | 8.8 | 716,000 | 1,075.00 | 2,010.87 | 53.5% |
| Papakura | 710,000 | 142,000 | 7.0 | 568,000 | 852.79 | 2,010.87 | 42.4% |
| Franklin | 810,000 | 162,000 | 8.0 | 648,000 | 972.90 | 2,010.87 | 48.4% |
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