By Bernard Hickey
Home loan affordability improved in February and early March to its best levels in 7 years as flat to falling house prices in many areas and a large reduction in floating mortgage rates after the February 22 earthquake boosted home buyers’ purchasing power, the Roost Home Loan Affordability report shows.
The ongoing benefits of last year’s income tax cuts for those on higher incomes boosted affordability to its best levels since March 2004, which was just before house prices surged. The Reserve Bank’s 0.5% cut in the Official Cash Rate has been passed on quickly to new floating mortgage borrowers.
However, there are renewed signs of a two-speed housing market where prices of more expensive homes in Auckland are firmer than entry level and investment properties in the outer suburbs and in provincial cities, where prices are weaker and buyers are in a stronger position.
“The interest rate cuts this month have significantly improved the outlook for home buyers,” said Rhonda Maxwell, spokeswoman for mortgage broking group Roost Home Loans.
“Affordability for young couples is now at levels not seen since the middle of last decade, which is encouraging many to look at buying their first homes ,” Maxwell said.
A young couple earning the median wage can afford to buy a first quartile priced house with 21.6% of their disposable income required to service an 80% mortgage. This is down from 21.9% in December and down from a June 2007 high of 35.1%.
The national median house price rose to NZ$350,000 in February from NZ$340,000 in January, but the first quartile house price was flat at NZ$245,000. Prices outside of central 
Auckland and Wellington are flat to falling.
The Roost Home Loan Affordability report measures affordability nationally and regionally for individual income earners and households, taking into account median house prices, interest rates and incomes.
The Roost Home Loan Affordability measure for all of New Zealand showed the proportion of a single median after tax income needed to service an 80% mortgage on a median house to 51.7% in early March after the Reserve Bank rate cut, improving from 54% at the end of February and 52.7% at the end of January.
Affordability improved in central Auckland, Hamilton, Rotorua and Kapiti Coast because of lower house prices, but worsened somewhat in West Auckland and South Auckland due to higher prices. Queenstown reclaimed the mantle as the most expensive city in the country after a rise in its median house price. Wanganui took the top spot as the most affordable city from Invercargill.
Affordability has been improving since December 2009 as house prices have flattened out and interest rates have fallen, the monthly measure calculated by interest.co.nz in association with Roost found.
Most home owners are still on fixed mortgages, but more new borrowers are choosing to float, given floating rates at around 5.75% are cheaper than average longer term fixed rates at around 6.2%. The Home Loan Affordability reports are now using the floating rate as most new mortgages are now floating rather than fixed. Home loan affordability hit its worst level of 83.4% in March 2008 just after house prices peaked and 2 year mortgage rates were close to 10%.
Affordability is difficult in Auckland, Wellington, Hamilton and Tauranga for those on a single median income, but homebuyers in smaller provincial cities will find home ownership much more affordable. Households with two incomes are also in a stronger position, particularly those bidding for homes priced in the lower quartile.
Affordability for households with more than one income improved in January because of the fall in the median house price. This measure of a ‘standard typical household' found the proportion of after tax income needed to service the mortgage on a median house was to 35.4% at the end of February from 35.7% in December.
This measure assumes one median male income, half a median female income aged 30-35 and a 5 year old child that receives Working-for-Families benefits. Any level over 40% is considered unaffordable for a household, whereas any level closer to 30% has coincided with increased buyer demand in the past.
The survey’s measure of a ‘standard first-home-buyer household' found the proportion of after tax income needed to service the mortgage on a first quartile home fell to 21.6% in February from 21.9% in December.
This measure assumes a first home buyer household includes a median male income and a median female income aged 25-29 with no children. Any level over 30% is considered unaffordable in the longer term for such a household, while any level closer to 20% is seen as attractive and coinciding with strong demand.
Question and Answers about the report
How does interest.co.nz work out these numbers?
Interest.co.nz gathers data from Statistics New Zealand and IRD on wages in each region, data from the Real Estate Institute from each region each month, and data from banks and non-banks on interest rates. It has calculated home loan affordability going back to the beginning of 2002.
How is this survey different from the Massey University survey of affordability?
The Massey study is only done quarterly rather than monthly and uses an index of Home affordability rather than actually measuring home loan affordability. It uses an index rather than the actual measure of the proportion of after tax pay needed to service an 80% mortgage on a median home. The exact composition and meaning of the index is not detailed.
Why use a single median income rather than household income?
It’s true that most homebuyers are using a combination of one or more full or part time incomes to service their mortgage. Each household is different and may be using incomes from different sources. The best measure of average national household income is calculated officially once in every three years by Statistics New Zealand. Interest.co.nz chose to use the median income data series from IRD and Statistics NZ because it can be measured monthly and can be drilled down by region and by age. We do include a chart showing how many median incomes are required to keep mortgage payments at 40% of take home pay. It is currently around 2 median incomes.
Why is home loan affordability important?
It is a useful way to work out if a housing market is overvalued. It’s clear house prices stopped rising when the national affordability ratio rose above 80% or 2 median incomes to service the average home loan. It’s a way of comparing affordability of housing markets with a national average and comparing housing values from one year to the next. For example, the affordability ratio in 2002 before the housing boom really took off was around 41%.
Refer to our Median Multiple reports for a reconciliation of this report to the internationally comparable benchmarks, by city.
Details of our household profiles, the data sources, and the methods used, are set out in the Notes section of this report, below.
Full regional reports are available below:
- New Zealand (159kb .pdf)
- Northland (159kb .pdf)
- Whangarei (159kb .pdf)
- Auckland region (159kb .pdf)
- Auckland Central (159kb .pdf)
- Auckland North Shore (159kb .pdf)
- Auckland South(159kb .pdf)
- Auckland West(159kb .pdf)
- Waikato and Bay of Plenty (159kb .pdf)
- Hamilton (159kb .pdf)
- Tauranga (159kb .pdf)
- Rotorua (159kb .pdf)
- Hawkes Bay and Gisborne (159kb .pdf)
- Napier (159kb .pdf)
- Hastings (159kb .pdf)
- Gisborne (159kb .pdf)
- Taranaki (159kb .pdf)
- New Plymouth (159kb .pdf)
- Manawatu and Wanganui(159kb .pdf)
- Palmerston North(159kb .pdf)
- Wanganui(159kb .pdf)
- Wellington region (159kb .pdf)
- Wellington City (159kb .pdf)
- Wellington Hutt Valley(159kb .pdf)
- Porirua (159kb .pdf)
- Kapiti Coast (159kb .pdf)
- Nelson and Marlborough (159kb .pdf)
- Nelson (159kb .pdf)
- Canterbury (156kb .pdf)
- Christchurch (156kb .pdf)
- Timaru (156kb .pdf)
- Central Otago Lakes (159kb .pdf)
- Queenstown (159kb .pdf)
- Otago (159kb .pdf)
- Dunedin (159kb .pdf)
- Southland (159kb .pdf)
- Invercargill (159kb .pdf)
| Regional home loan affordability comparison: | ||||||
| mortgage payment as a % of weekly take-home pay | ||||||
|
Feb-11
|
Jan-11
|
Feb-10
|
Feb-09
|
Feb-08
|
Feb-07
|
|
| New Zealand |
54.0%
|
52.7%
|
63.6%
|
54.1%
|
80.4%
|
74.8%
|
| Northland |
55.5%
|
54.1%
|
61.6%
|
54.6%
|
73.6%
|
74.9%
|
| - Whangarei |
46.1%
|
40.4%
|
50.6%
|
46.9%
|
77.4%
|
68.5%
|
| Auckland |
67.9%
|
66.0%
|
78.0%
|
65.1%
|
95.0%
|
89.5%
|
| - Central |
67.3%
|
71.6%
|
82.9%
|
67.9%
|
94.4%
|
93.2%
|
| - North Shore |
73.3%
|
72.9%
|
85.1%
|
71.3%
|
107.1%
|
96.7%
|
| - South |
69.4%
|
68.8%
|
79.8%
|
68.8%
|
92.6%
|
91.0%
|
| - West |
59.5%
|
56.7%
|
70.8%
|
57.0%
|
83.9%
|
79.6%
|
| Waikato/BOP |
50.8%
|
52.1%
|
62.3%
|
55.1%
|
83.8%
|
73.1%
|
| - Hamilton |
52.4%
|
54.7%
|
62.6%
|
55.5%
|
88.5%
|
76.0%
|
| - Tauranga |
56.0%
|
54.9%
|
70.7%
|
61.0%
|
90.0%
|
82.6%
|
| - Rotorua |
41.3%
|
44.1%
|
47.8%
|
44.6%
|
65.7%
|
54.3%
|
| Hawkes Bay |
49.6%
|
47.3%
|
58.7%
|
48.7%
|
71.9%
|
67.9%
|
| - Napier |
54.3%
|
47.0%
|
67.7%
|
56.3%
|
81.0%
|
73.5%
|
| - Hastings |
50.5%
|
50.8%
|
56.3%
|
46.1%
|
67.9%
|
67.7%
|
| - Gisborne |
45.0%
|
39.5%
|
70.2%
|
50.2%
|
76.5%
|
68.4%
|
| Manawatu/Wanganui |
39.8%
|
38.2%
|
46.1%
|
40.8%
|
58.5%
|
54.1%
|
| - Palmerston North |
42.8%
|
42.2%
|
48.9%
|
41.8%
|
62.4%
|
62.7%
|
| - Wanganui |
38.2%
|
30.2%
|
41.9%
|
37.1%
|
47.0%
|
49.6%
|
| Taranaki |
47.6%
|
45.9%
|
56.3%
|
46.1%
|
68.9%
|
64.7%
|
| - New Plymouth |
53.1%
|
52.5%
|
69.4%
|
48.6%
|
82.7%
|
79.0%
|
| Wellington region |
58.2%
|
53.0%
|
65.9%
|
56.9%
|
83.0%
|
76.7%
|
| - City |
63.6%
|
56.0%
|
74.6%
|
61.1%
|
88.8%
|
84.6%
|
| - Hutt Valley |
50.4%
|
46.6%
|
51.2%
|
52.2%
|
73.0%
|
65.8%
|
| - Porirua |
62.2%
|
54.3%
|
74.1%
|
55.7%
|
80.8%
|
73.5%
|
| - Kapiti Coast |
52.3%
|
59.3%
|
65.1%
|
59.1%
|
78.5%
|
72.5%
|
| Nelson/Marlborough |
56.0%
|
54.2%
|
66.1%
|
58.1%
|
91.9%
|
76.3%
|
| - Nelson |
57.5%
|
56.2%
|
70.5%
|
57.4%
|
89.4%
|
72.7%
|
| Canterbury/Westland |
46.2%
|
48.0%
|
57.4%
|
49.0%
|
79.2%
|
69.3%
|
| - Christchurch |
54.6%
|
54.5%
|
65.4%
|
53.1%
|
84.8%
|
75.2%
|
| - Timaru |
38.0%
|
42.1%
|
44.7%
|
37.3%
|
57.8%
|
51.6%
|
| Central Otago Lakes |
73.1%
|
67.9%
|
86.3%
|
75.1%
|
132.6%
|
106.1%
|
| - Queenstown |
95.5%
|
81.8%
|
103.1%
|
89.2%
|
142.0%
|
134.7%
|
| Otago |
39.5%
|
34.6%
|
44.0%
|
39.4%
|
59.6%
|
55.4%
|
| - Dunedin |
44.1%
|
40.2%
|
50.1%
|
44.3%
|
64.8%
|
63.4%
|
| Southland |
34.5%
|
29.8%
|
36.9%
|
31.7%
|
52.6%
|
40.3%
|
| - Invercargill |
38.7%
|
34.3%
|
39.9%
|
34.1%
|
56.8%
|
44.7%
|
No chart with that title exists.
84 Comments
Despite all the best efforts of the gloomsters the housing market remains basically steady- a remarkable achievement under the circumstances
Where are all the "30% drop in prices" whiners now?
What has happened to all the "collapse of the housing market" predictions?
Gone.
Sunk without a trace.
The smuggeroos in their little rented boxes will yet rue the day that they missed the boat .
Soon enough you will see that the property investors day in the sun has returned- much to the chagrin - not to mention cost- of the whinging class.
Serves them right.
Best affordability in 7 years yet sales volume at record never before seen lows, how unattractive is property becoming in debt heavy NZ?
Tax changes plus banks tightening (even more to come in future as more restictions on short term whole sale funding).
USA looking at another leg down in property prices after very low sales volume recently.
NZ and USA are being grouped together with there high debt levels
NZ private debt the big issue. Private debt directly related to property investment. Absolutely no way prices can increase much if at all in next 5 years, there is no boat leaving so dont worry about missing it.
But stick to your emotive salespitch BigDaddy, just because you fell for it doesnt mean everyone else will
Bernard's "Bill Shock" is just around the corner for the housing market. Also called the Minsky Moment; when people sudddenly, and collectively (that's the 'bad bit'!), realise that they can't afford what they have bought ~ regardless of the fact that it may appear 'more affordable' to others . The Big Cars are the first to go; look at all those in 6 litre and Italian transporters heading for the auctioneers hammer this, and last, weekend. Half price bargains there ! And that's just around the corner for the New Zealand property market... Half price? We'll be lucky if it's 'only' that much of a haircut......."The letter box', BigDaddy, is all that many are going to be left with after the debts have been repaid.
The dirty big blowflies in this cream happen to be the need for two incomes and let's not forget the fact that as soon as the election is over...the ocr will be heading higher and quickly...and what will that do for employment and for the cost of mortgages as the floating rates float up up and awayyyyy.
The regions other than Chch, and that is now in doubt, will be hardest hit.
Welcome to the other side of the Labour govt period of fake growth...all built on cheap credit...leaving behind a stonking pile of debt...and even with the RBNZ doing it's imprudent best to pork activity for the election with cheap dosh...we are still certain to have to live with a recession and falling property values for many years to come...not the one or two that the govt suggest...we are talking 5 years minimum and most likely ten years of recession.
And that was the good news....if the Arab world spits the dummy as seems to be the case right now...what price oil....and with japan having to go after the coal and oil to generate power to compensate for the lost output...what will that do to the NZ economy which runs on imported fuel.
Let's not forget, Bernanke has used his mouse to fake an equities bubble and bash down the value of the Dollar...leading to imported inflation in NZ...made worse by Bollard opting to pork "confidence" with cheap dosh in the run up to the election....the lower the Kiwi falls the worse it gets.
Historically, only Dad worked and paid for the mortgage, living costs etc. If Dad lost his job and could'nt find another then they were stuffed. Now mum and Dad both work, one income for living and one for the mortgage. If either lose their job they are stuffed, more risky now because there are two jobs on the line.
Small point "mortgage payment as a % of weekly take-home pay". I am wondering what it would be if the take-home-pay is calculated on the region. Take Auckland for example; the take-home pay for Auckland is about 18-20% higher than the NZ average.
I know this because I did some works recently on the average weekly income for NZ wide, Auckland and Wellington.
Hi Chairman,
the regional figures do use the local median pay. Click on the regional figures. Auckland region uses a figure of $832/week against $787 for the country as a whole. Northland on $711/week, for example, is in line with your estimate (18 - 20%)
However statistics NZ has quoted the national median wage at $527/week. Presumably half the population are living under bridges somewhere. How can you afford to buy a house on that? Or even be a defacto buyer by renting?
It was never going to suddenly drop by 30%. That would have finished us off as a country because of the huge amount of debt used to puff up the prices. With inflation prices have dropped in real terms by about 15% to date. That gradual drop will continue for some years yet as people struggle with their basic food and energy cost increases. One can only imagine the strain on household budgets if interest rates increase at the end of this year as predicted lately. In the last two weeks I have seen several valuations and agreements for residential properties. In every case the purchase price is well below the valuation figures for the same property. Valuers are out of touch. You cannot look back at historical figures as prices continue to fall month by month. The buyers are certainly in the box seat.
Don't be so smug CM. For some time now I have been predicting the death of high property prices by a thousand cuts. As each month goes by prices would drop little by little and for the foreseeable future as people struggle with the rising costs of living. And only central Auckland might be protected in some way from those falls.But what I am seeing now in some provincial areas is the vendors starting to blink and those cuts are getting a bit deaper suddenly. Prices of houses have to continue to fall as our daily costs of living continue to go up and wages do not keep pace. How the heck dreamers like you expect the average New Zealander who is struggling to survive fiscally to suddenly go to the bank and get bigger loans and push up house values is beyond common sense and reality.
Have you not read the article you are commenting on!! The cost to service a mortgage is much lower now than it was 3 years ago - so yes food and gas may have gone up, but mortgage repayments have gone down significantly. If you could afford it in 2007, you can afford it now (unless you have lost your job)
In my line of work we are getting 2-3 clients every week applying for early release of funds due to hardship. We have to examine their situation and assess whether it is genuine hardship, and about 80% of the time it is. Without fail, every genuine case has negative equity in their home and are in mortgage arrears. Not one case is from a renter. Co-incidence?
In the line of work I am in I talk to renters and people who own their home. Not one owns it without a mortgage, and a majority of cases that I speak to people are selling their homes to pay their mortgage back and other debts, or are going bankrupt. More and more people are selling their homes at a loss and taking the hit.
It is quite surprising how many people think that quite soon we will be back in a high growth high interest environment. Much more likely in my view is that at the first sign of global growth there will be another food and energy shock, and the RBNZ will be forced to keep interest rates in check.
Of course, we might not even get to the global growth phase. Sovereign default, massive global populace unrest etc etc are also quite possible. NZ might seem to be immune to these events for a while, but we're just a cork in the ocean, and will get tossed around.
The one huge positive for us is that Chinese parents have put NZ milk products at the top of their must have list.
And they will be less likely to want Japanese milk product John. But that will not erradicate the mountain of debt in this economy. The idea that farmers are going to rush into town and splurge...creating 170ooo new jobs...was always a great big load of BS from BE.
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"This is brilliant! Housing affordability best in 7 years,
Might be more affordable than 7 years ago (and only due to low interest rates), but doesn't actually make it affordable. It still takes 54% (standard buyer) of take home pay to pay the mortgage on a median priced home (New Zealand region) which is about the same as Jan 05 and above 40% is considered unaffordable which it has been since at least Jan 02.
Auckland is still unaffordable and has been for almost a decade for both a standard buyer and a standard household.
and GDP better than expected"
Wow! A whole 0.2% and that's without half of the data. Whoop, whoop!
Ok. So how does this work? I could go out and buy a property anywhere in Auckland, this afternoon, for cash. I choose not too, because is see it as mispriced. I rent, because it make fiancial sense for me to do so. Is whatever I set my sights on this afternoon, unaffordable? Property in desirable areas is not by definition, unaffordable. It may be unattainable; but that is a supply/demand matter; not an affordability item.
Ah! So you're saying it's a meaningless technical term. Otherwise, what does it matter if it's 30%, 50% or 5000% 'unaffordable'. As half the areas will 'always' be 'unaffordable' ( the nice spots, I guess?) and half will be 'affordable' even at 5000% over current statistics? If you're not saying that. Then at what point is it that even the 'affordable' houses can't be bought and paid for by anyone? You know, when the average houses are listed at $5mio and the average wage is $50k? Or where...? Where's that 'point'?
Why would prices stabilise when the cost of living is rising so rapidly as it currently is. People will have less money for mortgages so prices will continue to drop. Stability is a dream when so many New Zealanders are just not coping with their basic daily costs.
yes costs of living increase - which is why when the price of fuel goes up you take the train to work, and when passionfruit are $27kg you get kiwifruit for 99c. don't go thinking prices will drop because you live beyond your means in other areas. By the way, rent is another cost of living, but unless you fancy living under a bridge you best get this into your head so when your rent goes up you don't go out and stock up on caviar. i.e. you will just have to learn to budget more wisely for it... as your choice is not to sacrfice even more than this for the stability of home ownership.
President of Property
We are now and have been for a while, very much a "two speed market" with parts of Auckland, Wellington, Tauranga and the Queenstown area holding prices, largely because of demand and vendors/purchasers trading amongst themselves.
However the rest of the country has been steadily sliding into the abyss.
The above reflects the change in society, that is happening in the Western World .... the huge transfer of wealth from the majority to the ever decreasing (therefore more wealthier) elite.
All you "free marketers" will say that this is great, but the more you strangle the "little guy" the less of the $$$ will be coming your way .... you can not have it both ways.
Just noticed something quite profound while driving along Khyber Pass Rd in Auckland yesterday .... the Freemasons is virtually next door to the EMA ??? deduce what you will.....
"the more you strangle the "little guy" the less of the $$$ will be coming your way .... you can not have it both ways."
I don't know about that. Look at those Middle Eastern countries - $2 a day for most of them, while the Great One installs a shower in his super yacht that squirts out champagne.
Its a bit of a stretch to say the rich are doing OK because of being taxed less. I'm doing OK as I have made the right decisions to put me where I am today. Not because the government recently let me keep a bit more of the money I earn.
So much rich bashing goes on when there should be rich worshipping. How about a thanks for propping this country up and putting food on other peoples tables.
Improved affordability is good news but housing is still unrealistically unaffordable for many of those who want to be in their own home.
The fact that 2 incomes is now also essential to meet the repayments for most, indicates an obvious fall in living standards.
WFF gets knocked by some on this forum, but it's needed by families, due partly to the unaffordability of housing still.
"WFF gets knocked by some on this forum, but it's needed by families, due partly to the unaffordability of housing still"
Mostly agree with your comment but I think WFF may have partly assisted in fueling the unaffordability further. WFF may have influenced the decision to buy thereby creating extra demand.
So it's gone up a gross 8.75% in 4 years? About 2% p.a. compounded in the bank would have done better than that! And weren't rates about 9% for Term Deposits back in 2007? Oh, I forget....It's all about the "leverage", isn't it! Don't forget, though.....it can work in both directions.....
Ah, property! "Everything you have today; Everything you had, tomorrow" As Chris_J notes...Who knows what it will be worth...tomorrow...
" Pre earthquake GV was $129,000 for land and that probably reflects a fair market value (2007 market price would've been $150,000ish)...... it sold with just one bid ( yesterday)... at auction at just $30,000. ... It could however turn out to be a great investment if anything ever does get sorted."
I heard my name mentioned.
Actually it sold today at $30,000. In 2007 it would have sold for around $255-275,000 (because it had a house on it), maybe $150,00ish if it were land only at that time. I assume the owner reached an acceptable settlement with the insurer, but it was only a 120m2 house which I can't imagine an insurer would want to pay more than $200,000 to replace so I only hope that it worked out ok for the previous owner.
(I imagine that finding their home about half a metre lower on one side than the other one morning was enough of a motivation to take whatever money they could get).
Of course if this happened to you without insurance (thinking most of the value was in the land), you would be rather unhappy.
Your guess, Chris_J, or perhaps your knowledge. Do you think the sale price sets a 'market value' for that parcel of land? I know it has restituon rights, but to what extent? $30k? Because it wouldn't make sense for the EQC ,or whoever, to pay-out fortuitous gains to a new buyer,caveat emptor etc. I accept it's a market risk for the purcaser. But do we, the poor downtrodden taxper, have to front up for commercial risk taking ~ again! ( buyer today @ $30k sells for $130k after EQC and pockets the diff.?)
Perhaps that is market value for damaged land, but undamaged land is selling no less than it was in August last year. So since EQC are liable to make good the land (the EQC land claim was included in the sale) the new owner must either be paid enough to buy an equivalent undamaged piece of land (which would cost at least $130k) or have the site fixed (which may cost a total $30m (who knows?) for that particular river loop, perhaps more than the cost of simply paying everyone for their land).
So the previous owner knowingly gave away a fair chunk of their equity, however as they were going to a retirement home, I imagine that they preferred certainty and some cash to waiting perhaps 5 years to have an outcome.
The only risk for the buyer is that EQC stuff around (which they will) and then decide to fix the land and take until 2020 to actually do so, by which time ChCh will have a population of 75,000 and NZ will have had 9 straight years of recession a population of 3.6m (most of whom will be part time criminals) and the Government be virtually bankrupt with bond yields at 42%PA and GDP back at 1993 levels.
Or an I being optimistic?
Good luck to the successful buyer. They might have just made an easy $100,000?
One final point. EQC would have saved money had they just bought this land today at $30,000. If they need to provide another site under the insurance claim, they will spend more than quadruple the amount, if they do in the unlikely event fix the land, they can sell it or offer it to someone who has land that won't get fixed.
Get real POP. How many places in NZ have trains that take people to where they work? And on time and at an affordable price. Petrol could keep going up, food certainly will as always and power price increases/insurance premium increases have been signalled. People tell me their wages/salaries are not going up. You figure. How do people borrow what they have traditionally borrowed during the mid 2000's. And some at the top end might soon lose their entitlement to WFF as the government tightens the screws on spending. Property cannot prosper in such an enviroment. Prices will continue to fall and property will become more affordable as time goes by. Buyers are aware of this and are being very cautious.
Coincidentally it's also been the easiest time to fly to the Moon for 18 years since it was the closest it's been since 1993.........!
The property industrial complex is trying hard to keep the spin going. WFF was certainly a nice little Labour vote buying scheme and indirect prop to the property 'boom' but National can't pull the plug on the gravy train now or do anything else that might affect the banks collateral for that matter.
The sooner we get all these schemes, rorts and subsidies off the table and direct investment into creating real export $ earning businesses, technologies and people the better for NZ. The Public sector needs to trim some of that well paid, credit fueled, boom time bureaucracy as well. We can't afford it.
It's a failure of leadership that they simply can't get their head around this concept and take any action (ten years ago would have been preferable). -But I bet some global investors are $alivating at getting their hands on some handy assets when we're maxed out and on the ropes......I hear it's the fashionable thing to do these days?
it must be depressing for people like you who bought over priced shit boxes that are dropping in value by the month. And other than in parts of Auckland good tenants are getting scarce as the brightest and most ambitious head off to Australia to earn some decent wages. 2007/2008 was the time to sell and bank the profits. If you didn't do that just watch and weep as the values drop and the tenants kick them to death and pay the rent when it suits them.
Wasn't there supposd to be 'huge demand' for property there, and " a bonanza for vendors' as a result of the floods? A bit like Christchurch....
SK I don't have to worry about my finances as I only have the house I live in and the proceeds of the sale of my business and my rentals in the bank and boy has the market gone back since 2007. When you take 15% off what I achieved then it does add up. Bank deposits and dividends off some solid shares sure beats rent if you want to sleep well at night.
Hi,
I wouldnt do it.....right now the risk of deflation in property is pretty high and on going....we may if we are lucky see no outright collapse like the USA.....instead like Japan 20 years of losing a few % a year........I would quite easily think a 40% drop is very probable....its just how fast.
APart from that, yes paying down as fast as you can saves a lot of money....
regards
@ ex agent | 24 Mar 11, 3:57pm
hi ex agent, now that you mentioned it. I am actually heading off to Australia at the end of April for a new job and decent salary. And I have dozen of interest for my 3 br central Auckland house for over $1000/week rental and tenant willing to sign up for 2 years and more. So I am not that depressed - I am happy and sleeping every well !
FYI, I had several offers for the house and if I sell I would make roughly 50% profit from what I paid in 2006.. but I decided to keep it.
wow 50% profit! That's incredible... so if my maths is correct, the property market has gone up by about 7% since 2006... yours has gone up by 50%, surely a smart investor like you would quickly flick your house. Purchase a similar house (cash of course) in the same area that is only up 7%, then buy another similar house same area etc... pay 43% of the mortgage and then get $2000 a week on rent and use that to pay off the second house? All this while you're making hundreds of thousands of dollars across the ditch! And with house prices going up up up! You'll own 2 houses for the price of one that are worth millions and millions of dollars! You are a lucky luck fellow indeed...
Pretty much the words from Portugal 2 years ago; when their interbank 2 year rate was ....2.75%. Yesterday it was close to 11%...that's what untennable national debt ( Portugal = New Zealand in aggregate), and a rating downgrade can do. So, Yes! Get your Term Deposits on...but keep them for a short run...maybe we are in for a downgrade...? ( NB: NZ does not have the Eurozone to fall back on for bail-out help. We are on our own...)
ex agent, in a few years time one of us will be proved right (or wrong) and one of us will need to see a shrink... Well at least my fee to see a shrink will be paid under Medicare and your might be on a long waiting list under public health!
In the mean time keep smiling 'cos you are getting a massive 2-3% bank interest...
5 to 5.5% locked in for sometime and only tax to pay. Then the dividends from FBU, ABA ,EBO and alike. No rates insurance and maintenance and interest and tax if you make a fraction of a per cent profit from the rent and prices are dropping and tenants are not always reliable and good payers..Dah.
EA, you are contracdicting yourself. As you stated, you are paying tax on your bank interest and dividends are already taxed. It's no different from paying tax on the rent profit !
And on my rental, any loss I can offset against my personal tax - for you if the bank fold, can you claim the loss amount as loss income..????? we used to rent our central wellington home when we moved to Auckland, same tenant for five years and never miss a payment... Not all tenants are bad like you say. My opinion: crappy house = crappy tenants... don't paint all pictures with the same brush! and it's still location location location (you should know as an ex agent!!!!)
muppet!
But I am paying tax on say 5 to 7% with no expenses. You are either paying tax on a measely sum after all your expenses or you are into negative gearing where you only get back your tax rate from Inland Reveune and the remaining 67% say goes down a big black from which it never comes out. In other words the return on your investment is terrible if you are paying tax on it or if you are into negative gearing you are only getting part of your loss back from Inland Revenue and the rest disappears if there is no capital gain and that is a real risk. Also you have to beat inflation before you cover any losses. No need to be personal and call me a muppett. I have been relatively successful and retired earlier than most with a comfortable income.
Re Westminster:
New York real estate has been unaffordable for 200 years, and it will always will be that way.
New York residential property is an incredibly complex topic. This simple sentence by Westminster bears no resemblance to the reality of the New York market now or ever. Today New York has huge percentage of rent controlled property. This came into being because of perceived unaffordability. People say that it actually lead to shortages of property, which lead to greater need for rent control. And still no not enough residentail property development. In the not too distant past New York was filled with slum housing whether or not they were cheap is debatable. Whatever. It is probably not a good idea for those on the right to look to America as a beacon of Adam Smith defined 'free markets' or much else that would be relevant for New Zealand.
Why is home loan affordability important?
It is a useful way to work out if a housing market is overvalued.
It is interesting that housing affordability is implied to be a factor of interest rates and income rather than the actual cost of the property. New Zealanders are simply paying way too much for housing. All of the growth( what little there has been) in the ecomony has been eaten by interest payments offshore. Our surpluses are being consumed by others not us because we have allowed them to control our debt rather than manage it ourselves.
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