By Bernard Hickey
Continued low interest rates and slight increases in after tax income helped improve first buyer affordability in June to its best levels since late 2004, Roost Home Loan Affordability report shows.
The prices of cheaper homes remained flat, helping affordability for younger double income households in most parts of the country.
Central Auckland affordability remains difficult as prices remain firm, but record low interest rates continue to keep affordability at its best levels in 7 years in most other parts of the country. Invercargill is the most affordable city in the country, while Queenstown is the least affordable.
Floating mortgage rates are at multi-decade lows, although home buyers are increasingly viewing the prospect of higher interest rates later year as the Reserve Bank tries to contain inflation in a recovering economy. Some banks continue to offer rate and fee discounts to try to boost weak loan growth .
“Banks are competing hard for first home buyers and investors alike,” said Rhonda Maxwell, spokeswoman for mortgage broking group Roost Home Loans.
Banks are offering loan to value ratios of up to 90 and 95% and are discounting establishment and legal fees in competitive situations, Maxwell said.
“Home loan affordability ratios are the best we’ve seen in seven years, but the interest rate outlook is beginning to change,” Maxwell said. “Now is the time home buyers can get the most out of advice from a mortgage broker,” she said .
Stronger than expected growth and inflation figures in the last week have prompted economists to bring forward their forecasts for the Reserve Bank’s first cash rate hike to October or December from January.
A young couple earning the median wage could afford to buy a first quartile priced house in June, with 21.0% of their disposable income required to service an 80% mortgage. This is down from 21.1% in May and down from a June 2007 high of 35.1%. It is at its best levels since November 2004.
The national median house price rose to NZ$360,000 in June from NZ$350,000 in May and is just off a record high of NZ$365,000 in March. The first quartile house price edged up to NZ$249,000 from NZ$248,750 in May.
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 income was 52.6% in June from 51.3% in May. The worst level of affordability was 83.4% seen at the peak of the house price boom in March 2008 when 2 year mortgage rates were close to 10%.
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 shows.
More than 50% of home owners are now on floating mortgages and most 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 use the floating rate.
Affordability is difficult in Auckland, Wellington, Christchurch, 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 deteriorated slightly because higher incomes were outweighed by the effects of a small rise in median house prices. This measure of a ‘standard typical household' found the proportion of after tax income needed to service the mortgage on a median house was 34.6% at the end of June, up from 34.6% 33.8% in May and a record high of 54% in November 2007.
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 21.0% in June from 21.1% in May and a record high of 34.9% in November 2007.
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.
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 | ||||||
|
Jun-11
|
May-11
|
Jun-10
|
Jun-09
|
Jun-08
|
Jun-07
|
|
| New Zealand |
52.6%
|
51.3%
|
63.2%
|
56.3%
|
77.7%
|
82.6%
|
| Northland |
52.0%
|
46.1%
|
55.7%
|
57.0%
|
75.5%
|
80.9%
|
| - Whangarei |
43.6%
|
43.0%
|
51.9%
|
50.3%
|
68.2%
|
78.5%
|
| Auckland |
63.9%
|
64.5%
|
75.7%
|
68.2%
|
93.1%
|
98.7%
|
| - Central |
68.1%
|
69.2%
|
80.0%
|
70.8%
|
98.1%
|
105.2%
|
| - North Shore |
68.8%
|
70.3%
|
86.1%
|
73.6%
|
101.0%
|
106.4%
|
| - South |
65.7%
|
67.0%
|
75.7%
|
73.2%
|
96.0%
|
100.1%
|
| - West |
57.6%
|
53.8%
|
67.5%
|
58.9%
|
73.8%
|
87.0%
|
| Waikato/BOP |
49.0%
|
49.0%
|
61.6%
|
56.7%
|
76.5%
|
81.6%
|
| - Hamilton |
49.0%
|
51.6%
|
67.2%
|
58.9%
|
76.2%
|
87.4%
|
| - Tauranga |
56.3%
|
53.3%
|
65.5%
|
67.7%
|
88.5%
|
96.2%
|
| - Rotorua |
40.1%
|
38.8%
|
52.5%
|
43.9%
|
60.4%
|
63.0%
|
| Hawkes Bay |
41.8%
|
44.3%
|
57.8%
|
52.4%
|
66.7%
|
71.2%
|
| - Napier |
45.9%
|
47.3%
|
63.7%
|
58.1%
|
72.9%
|
80.7%
|
| - Hastings |
42.1%
|
43.9%
|
57.8%
|
45.8%
|
62.6%
|
67.3%
|
| - Gisborne |
51.9%
|
43.5%
|
60.1%
|
44.0%
|
60.1%
|
74.7%
|
| Manawatu/Wanganui |
36.3%
|
36.4%
|
42.6%
|
40.1%
|
53.2%
|
64.6%
|
| - Palmerston North |
41.5%
|
40.8%
|
50.7%
|
45.8%
|
54.6%
|
70.3%
|
| - Wanganui |
30.5%
|
24.1%
|
39.1%
|
34.0%
|
40.9%
|
56.3%
|
| Taranaki |
40.2%
|
40.4%
|
55.4%
|
49.1%
|
63.5%
|
69.1%
|
| - New Plymouth |
45.8%
|
47.5%
|
58.4%
|
57.6%
|
70.3%
|
85.4%
|
| Wellington region |
51.2%
|
50.7%
|
67.1%
|
57.5%
|
77.5%
|
82.8%
|
| - City |
53.8%
|
55.4%
|
72.0%
|
69.7%
|
75.4%
|
84.9%
|
| - Hutt Valley |
44.6%
|
44.7%
|
58.2%
|
48.1%
|
65.1%
|
73.0%
|
| - Porirua |
52.4%
|
52.0%
|
72.2%
|
59.8%
|
78.8%
|
86.7%
|
| - Kapiti Coast |
53.3%
|
48.4%
|
59.4%
|
59.4%
|
76.4%
|
86.9%
|
| Nelson/Marlborough |
51.6%
|
52.9%
|
68.5%
|
61.4%
|
83.9%
|
87.5%
|
| - Nelson |
52.9%
|
53.8%
|
64.2%
|
64.7%
|
84.4%
|
79.8%
|
| Canterbury/Westland |
45.2%
|
46.6%
|
60.4%
|
50.6%
|
70.7%
|
75.6%
|
| - Christchurch |
51.0%
|
53.5%
|
66.4%
|
55.2%
|
76.1%
|
86.0%
|
| - Timaru |
38.7%
|
39.9%
|
44.8%
|
45.0%
|
49.3%
|
58.6%
|
| Central Otago Lakes |
68.5%
|
63.8%
|
80.9%
|
79.1%
|
126.8%
|
107.7%
|
| - Queenstown |
84.5%
|
79.3%
|
97.5%
|
82.9%
|
139.4%
|
111.1%
|
| Otago |
35.4%
|
37.3%
|
44.4%
|
39.5%
|
55.5%
|
59.0%
|
| - Dunedin |
39.9%
|
42.6%
|
50.9%
|
43.5%
|
63.1%
|
64.7%
|
| Southland |
28.5%
|
28.0%
|
32.8%
|
34.6%
|
45.6%
|
46.3%
|
| - Invercargill |
30.1%
|
30.4%
|
37.8%
|
35.7%
|
47.5%
|
50.6%
|
No chart with that title exists.
(May Household affordability figure corrected)
28 Comments
A colleague told my wife,yesterday, "We've put the price of our house up by $100k" . The house has been on the market for ages, and when asked why the price was going up the reply was " Because we can't afford to buy another one unless we get that now". Amasing! But I'm guessing that they've 'eaten' through their equity.
Some people must have the money - isn't it true every house on the street is owned by someone?? There are quite a number of mansions in posh suburbs like Remuera, Herne Bay and Parnell...surely they are owned by people who have the money? I suppose each to their own.
Yes,; Bank Owned. And for those that say their Title Deed lists them as owners ( it says proprietors, from memory), ownership is ' the exclusive right to a property'. If you have a mortgage, you do not have 'exclusive right'. Otherwise you would be able to sell your $500k property for one dollar or a million; your choice. If you have a mortgage, the bank can stop the sale if it doesn't like it. So who has the owneship rights to a mortgaged property - THE BANK!
In this game the banks have won. It is the banks that decide on govt fiscal policy and Bollard dances to the Stone Cutters music.
The end game was some time ago...now the banks hold the mortgage paper on enough property to ensure they get to farm the economy for the rest of time...any sign that people are able to save and pay down debt..the banks use the media and with govt help they pork the property bubble a bit more...boost the game another time...lure more suckers into mortgage debt..pretty soon they will control the valuation measures by which they are 'allowed' to lend...what a friggin joke.
By these means the banks are operating to keep their platform of revenue..their livestock happen to be mug Kiwi...their farm manager is Bollard and they have a host of idiot helpers in the beehive.
Wolly,
Just over 50% of all properties have mortgages on them which hasn't changed much over last 30 / 40 years or so when you take into account banks are now the primerly home lender with demise of Lawyers nominee companies, building societies etc.
The rules of game changed 2/3 years ago with bank's balance sheet growth bugger all and likely to be like that for some time.
Interest margin income has always been main source of income from banks but as a percentage of total income has been reducing over time alongside their margins. Other fee income is now just as important as interest margin income.
This means mortgage clients aren't subsidising other parts of banks operations like is was in past .
In any event Banks need income to pay interest to savers
Most families grow, meaning they have to upgrade/expand their homes either through renovation or moving to a bigger house. For some people their kids reach the age where they have to attend college and some parents are trying to do their best to get into their preferred school zones...
On aggregate, New Zealand familys are shrinking, not growing. We are aging, and family units are being created later; smaller, if at all. Aging singletons are re-coupling, so as not to spend the remainig time alone, and share the costs etc.Downsizing is becoming more the norm, than upgrading.
Tell me about it. We bought our first home (standard 3bed/1bath bungalow) for the two of us...and 18 months later ended up having 4 kids in 4 1/2 years. And yet, we didn't "upgrade" as soon as we'd have liked as prices had gone up by a lot. In the meantime, we were relegated to the conservatory for 2 years...
Most NZ homes are at least 3 bedrooms, so although it's not ideal, it's OK for most average-sized families. As for the school zones, I think if one's child is going to do well, they're going to do well regardless of the school they go to.
Please correct me if I am wrong...aren't most houses in Auckland over 200 sqm?? I have seen quite a few houses with over 400 sqm floor area, with one mansion measuring 700 sqm. All the houses in the Stonefields quarry in Mt Wellington, including the terrace houses are all over 200 sqm with double-lockup garaging and internal access. 90 sqm for a single professional / young couple perhaps? I reckon we need at least 120 sqm for a couple and a toddler.
I find the modern obsession with large houses rather repulsive.
We live in a 3 bedroom villa of around 105 sq. m. It is plenty big enough for two adults and 2 kids
Most state houses are around 85 sq. - 90 sq. m (3 bedrooms).
Its the modern ethos of bigger is better. The big big house with 3 big 4wDs on the driveway and a boat
I'd take a beautifully designed and efficient 3 bedroom townhouse circa 100 sq. m over a 4 bedroom 250 sq, m monster anyday
A family of 4 should be able to live in 110 sq. m comfortably. If we keep building 250 sq. m houses we are using more than double the resource for each house that we need to
But... But... But how do you demonstrate your superiority to your family, friends, neighbours, and colleagues, and to total strangers driving past your fine manor and vast estate? Everyone will think you're a loser if you don't have the biggest and flashest house on the street.
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