Last year saw a significant improvement in affordability for first home buyers, allowing more of them to realise their dream of home ownership.
The improvement in affordability in 2024 was driven by three factors: declining mortgage interest rates, rising incomes and relatively flat house prices at the bottom of the market.
On their own, each of those factors may not have been that significant, but taken together they had a noticeable impact on affordability.
Prices flat at the bottom of the market
Interest.co.nz tracks the Real Estate Institute of New Zealand's lower quartile selling price each month.
That is the price point at which 25% of sales are below and 75% are above, representing the bottom end of the market that's the most affordable.
The lower quartile price typically bounces around, either up or down by a few thousand dollars each month. But over the course of 2024 it was remarkably flat, remaining between $570,000 and $607,500.
That was little different from 2023, when the lower quartile price stayed within the range of $567,000 and $600,000.
That suggests relatively stable prices, giving buyers the confidence to take their time to find the property that best suits their needs, without the urgency caused by rapidly rising prices.
Mortgage rates slide
Buyers would have benefitted significantly from falling interest rates in 2024.
The average of the two-year fixed rates offered by the major banks declined from 6.98% in December 2023 to 5.53% in December 2024.
The national lower quartile selling price was $586,000 in December 2023, and the mortgage payments on a home purchased at that price with a 10% deposit would have been around $908 a week with the mortgage rate at 6.98%.
If the home had been purchased with a 20% deposit the payments would have been around $718 a week.
In December 2024, the lower quartile price was $599,000, and the mortgage payments on a house purchased at that price with a 10% deposit would have been around $805 a week. That's a saving of $103 a week compared to a year earlier, even though the purchase price had increased slightly.
If the home was purchased with a 20% deposit the mortgage payments would have been around $630 a week, making the buyer about $88 a week better off compared to a year earlier.
Rising wages
As well as benefiting from steady prices and lower interest rates, first home buyers would also have likely benefitted from modestly rising wages.
Interest.co.nz estimates the average after-tax pay for a couple aged 25-29 and both working full time would have been about $2064 a week in December 2023.
By December 2024 it is estimated their after-tax pay would have increased to $2128 a week, helped along by a tax cut in the middle of the year.
That left them with an extra $64 a week in their pockets compared to the end of 2023.
That extra money, combined with the cheaper mortgage payments meant someone buying a home at the lower quartile price with a 10% deposit, would have been $167 a week better off in December 2024 compared to December 2023, and $152 a week better off they purchased with a 20% deposit.
So although 2024 was a year of challenges on many fronts, the fundamentals of home home ownership were in buyers' favour last year.
The tables below show the main affordability measures for typical first home buyers with either a 10% or 20% deposit in all major urban districts in December 2024.
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55 Comments
I’ve realised DGM is a term used by people who can’t handle being wrong about anything - and then admitting they were wrong. Ie very low self confidence and almost no humility.
Instead of saying ‘wow I got it wrong those last few years and those I disagreed with weee right’ they have to belittle and ridicule those who were correct in order to avoid facing up to their own shortcomings.
(I don’t use either spruiker nor DGM terms as I don’t think they add anything to the quality of this forum - but each to their own as we each reap what we sow - ridiculing your enemy instead of showing them respect has a tendency to backfire in the long run as we all get things wrong are are never perfect in our views. I think this forum would be much better if both term were removed).
For example and to admit my own wrongs, I thought house prices were very expensive in 2015 and couldn’t imagine them getting to the extremes they did in the subsequent years to a peak in 2021. I was wrong. My views were not correct and those who were bullish at that time were right.
My views aren’t always right but I’m not going to call people DGMs or spruikers if I disagree with them and feel free to call me out and call me a hypocrite if I ever do going forward. Being wrong seems to be a good way to grow in humility as it is painful.
Yes. I feel like owning your failures or admitting when you are wrong is a very important skill but seems to be rapidly disappearing from society. I work hard to instill it in my kids, but it certainly doesn't seem like is as widely encouraged as when I was a kid?
Because we seem to be living in a period of time where people like to ‘own’ the dominant narrative (or propaganda) in matters and bend reality towards their own selfish interests by silencing or ridiculing their opponents that disagree with them (and risk ruining the selfish/self serving narrative they are creating) - instead of seeking what is honest and truthful by being open minded about things.
To admit you are wrong means giving your opponents the opportunity to say ‘see they were wrong so listen to me because I am always right’. Eg those who are bullish on property (for their of self serving financial interest) spend their time ridiculing anyone who risks destroying their narrative that house prices always go up or double every 10 years (so ‘be quick’) by calling them doom gloom merchants - and people are afraid of being seen in a negative light by others, even in the persist of the truth. It’s a sad indictment of where we are at as a society. Definitely not the society I remember 20+ years ago where seeking what was true and what was good was greater than focusing on creating propaganda or narratives that best suited your own selfish interests. Eg ‘I have a housing portfolio so anyone who wants my net worth to drop is a negative person and must be a doom gloom merchant’ - instead of asking ‘is having such expensive housing relative to our incomes a good thing for the people of our nation going forward and if not, how do we correct that’
Zwifter 'it's OK to shoot a 7 year old in the head' chief cheerleader has spoken.
The Spruiker camp can count this type of person as their ally
They are all complicit in trying to destroy Israel right down to the 7 year old throwing rocks that got shot in the head by the IDF.*
*Zwifter in the breakfast briefing.
"Weekly income after tax and based on the median rates of pay for couples aged 25-29 and assumes both work full time"
> So no babies/children during the prime childbearing years.
> If there are offspring then add the cost of childcare into the equation; assuming it is less cost than the gain from the additional salary.
Anyone else see a problem with this?
Hi Greg, is there anywhere I can download historical quartile level data for free?
Would be an interesting article looking at the different quarters and how they are performing, most articles talk mediums and averages, which hide a lot of distortions. many boomers would be interested in what's happening in the highest 2 quartiles, even the MAN in CHCH would probably be interested.
Compared with many trading markets, housing data here seems to be very very hard to get, what is the cheapest source of all sales per month across NZ?
This is the sort of article that helps put PDKs frustration with in economists into some sort of perspective. It ignores all the peripheral things, things that are really at the heart of affordability and sustainability as alluded to in comments above and concentrates really on affordability on a single given week.
Much like how we treat the environment.
$1/2m is rediculous for a bottom tier house, but it's "affordable" and that's all that counts.
I'm sure more than 1 person will want to call me a DGM but these figures don't exactly make it attractive to buy a home IMO. Ownership costs so much higher than renting, FHBs seem to not always realise most of their mortgage payments in the first few years are interest and they are only paying down their loans by very small %s. Add to this flat or falling house prices and a tendency to overpay to get on the ladder means they are not building up equity. I don't see it as sustainable.
So in Auckland half disposable income has to go on your mortgage - crazy - why young are better off starting off somewhere else as the numbers don't work in Auckland
In actual fact the numbers (income compared to house prices) in Auckland don't work for those at most stages in life
Be nice if RBNZ told us the deposit data for FHB (maybe they do and I'm too lazy to find the right series)?
Our bank told us only 20% deposit was available a a FHB 2 years ago - I wonder how that's changed?
C30 has < 11% of mortgage lending with <20% deposit. (By value, why can't they do by count, sheesh).
Edit:C31, 40% of FHB lending was LVR > 80%.
Interest.co.nz continues to show SBS term investment rates as if they were term deposits. They are preference shares that are much riskier. South Canterbury Finance preference shares were not bailed out. 5.35% is for 6 months is not a TD. Sorry for being off topic.
I've been saying this for a while but many more "experienced investors" here can't understand, even though they are the ones who benefited from the unaffordable increase in the 1st place. They are out of touch.
From 2018-2022 house prices were so unaffordable and lending so strict that it was not possible for many to buy a house to live in. Now we are in a position that a single income person can buy a lower quartile property with a DTI ratio of less than 5.
2 incomes... DTI ratios of 3. i get 2 incomes is not an ideal situation to rely on, but 1 income is more than manageable for moderately educated people with decent financial management.
I could understand there are exceptions to this. Just saying.
Those numbers do work, yes.
$1274 income vs $572 repayment/week.
What were the outgoings while saving that $110k deposit though, and how long to achieve? Assuming 30% saved after tax - 288 weeks, or almost 6 years. So, no children then.
Note 90k is top 13% income - so a little better - 1in 6 people. I will bet dollars to donuts a much lower % of young have that level of income (Note the figure given by interest equates to 64k without student loan repayments).
Annoyingly though, I searched on TradeMe for max 550k - and half the results do not match my max price criteria! Seems like a really easy thing to get right, so can only assume either TradeMe or sellers are desperate for listing views.
Things will always be the same in that a percentage will never be in a position financially or else they do not have the attitude or are able to do what it takes to buy a house. Too many over think it, you just get in and start paying a mortgage and in 10 years time its like wow, thank god I did that instead of renting.
There is a little thing called a banking cartel gate-keeping who gets to participate.
This article is speculative drivel about what it may take to get in, based on stats that have been pointed out time and again not to apply to the real world. But they won't update their FHB profile to match real FHBs.
[Edit: just remembered- didn't your parents give you a considerable sum towards your deposit?]
If things double from here debt be 5-600 billion and monthly interest 3-3.4 Bil, where will 3.4Bil a month come from Zwifty?
or do you not consider the required funding to expand this Ponzi anymore....
Incomes would have to increase at the same pace ie 7.2% per annum, how will the RBNZ hold inflation at 2% with incomes rising at 7%?
The Spruiker sickness is impacting your ability to model the required banking environment for a double to occur.
The more likely situation is that Property in NZ falls back towards OECD norms, its called reversion to the mean. Did you study Stats or Finance at Uni?
"Reversion to the mean" is a statistical concept that states that if a variable is significantly far from its average value (mean), it is likely to move closer to that average value in subsequent measurements, meaning extreme events tend to be followed by less extreme ones; essentially, a system will naturally return to its typical pattern after a deviation.
Exactly, the key driver that allowed annual house price growth of 7% with genre inflation and incomes growing around 2% was decades of falling interest rates.
If rates don’t fall mathematically that growth isn’t possible as the discounted future cash flows don’t add up in higher future prices. Certainly not 7% growth on a long term basis. It worked from 1980’s - 2020’s in the biggest drop in global interest rates seen in centuries or even thousands of year ( No exaggeration)
If you are living in a home and renting - you can afford a home as YOU are paying for it. The problems is you pay for it but don't get get legal title.
Sounds a rip off - of course it is.
The affordability to buy a home issue is based on tax and lending structures - not on one's income. If you can pay the rent you have the income.
Traditionally, but many rentals are currently well cash flow negative, landlords have been topping up because the capital gains have made it worthwhile. They believe that Capital gains will return, this belief structure we be well challenged over the coming decade as they continue to subsidize their renters lifestyle.
Without capital gains, topping up is dead money.
Its why investors are not snapping up bargains here. As The Comb says, they cannot make the numbers work.
Yes basing their strategy on an old model. These things work fine when a limited number of people have worked out the strategy. Once the masses pile in it continues for a while as a ponzi and then collapses. The smart money have moved on - if I knew to what I'd join them!
Clearly its not transferring their wealth into "productive" NZ Investment... to achieve "Growth, growth , growth"
Sometimes the best thing to be in is something that just holds its ground, and wait for opportunities, Buffet is reportedly high cash right now, though it will be in short term something. Treasuries are great as they could be lent or sold instantly as required due to liquidity.
Their are some some great funds such as
https://milfordasset.com/funds-performance/balanced-fund
10 Year Fund Return
118.78 %
as at 31 Dec 2024
(After fees and before tax)
Maybe someone has the numbers, but Milford has seemed pretty solid to me. I've often wondered what they invest in, mind.
My wife's KS is with them, and if I recall correctly, they were the only KS provider during the first 4 years of KS to achieve a positive return for their clients (over the GFC).
My girls are more likely to move from Auckland to Melbourne then out of AKL to an NZ Region....
Its no good pointing at the affordability of our regions if there are no aspirational jobs in these locations, they are cheaper then Auckland for that very reason. We cannot fix this , our kids will keep leaving and that action and removing themselves from the buying pool will in time set of the correct solution.
Today is a great day. Sold one house in Christchurch today. The tenant wanted to buy it we cut out the Real Estate Agent she got a 4brm home for 475k about 30k below valuation. She sent me a thankyou text saying how I helped her (single mum) and her kids realise their dream of owning their own home and helping them thru the process of it with time and paitence. There is always demand for homes in the no collar suburbs. Owned this one 5 years brought as a mortgagee sale brought it up to healhty homes standard so it provided a house to a tenant for 5 yrs an now a first home. Now I could have sat around bemoaning how bad things were how the govt needed to do this or the economy is going to do that or interest rates will do that. Or only evil people buy rentals etc etc. Maybe you that knock people like me need start backing up with action rather than wasting your life looking at a screen
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