New Zealand has a property market of two halves - Auckland and everywhere else, according to the latest AMP360 First Home Buyer Affordability Report.
Housing remains affordable for first home buyers everywhere but Auckland, where it is severely unaffordable, the report has found.
The report found that first home buying affordability improved slightly in April compared to March, driven mainly by declines in lower quartile selling prices in many regions.
However the improvement was so small that home buyers were unlikely to have noticed the difference.
The report defines housing as being affordable when mortgage payments are less than 40% of take home pay. If mortgage payments take up 40% or more of take home pay, they are considered unaffordable.
At the national level, the mortgage payments on a lower quartile priced home would have taken up 24.74% of typical first home buyers' take home pay, down from 25.32% in March and well within affordable levels.
That improvement was mainly a result of the national lower quartile selling price dropping from $308,500 in March to $303,000 in April.
The mortgage payments on lower quartile priced homes remained under the 40% of take home pay threshold in all regions of the country except Auckland in April, ranging from 11.03% in Southland to 34.45% in Central Otago/Lakes.
In Wellington the mortgage payments would have eaten up 25.44% of take home pay and in Canterbury it was 29.34%.
In other regions: Northland 23.8%; Waikato/Bay of Plenty 21.28%; Hawkes Bay 18.93%; Manawatu/Wanganui 13.37%; Taranaki 18.09%; Nelson/Marlborough 26.61%; Otago 17.54%.
Auckland in a class of its own
However Auckland was in a class of its own, with the mortgage payments on a lower quartile priced home taking up 50.2% of typical first home buyers' take home pay in April. Other costs associated with home ownership such as rates, insurance and maintenance would be on top of that.
That was down from 50.58% in March mainly as the result of a small drop in the lower quartile selling price in the region, from the all time high of $587,200 in March to $584,500 in April.
The report shows that unaffordability is a relatively recent phenomenon in Auckland, where housing was still affordable for first home buyers less than two years ago.
In July 2013 the mortgage payments on a lower quartile priced house in Auckland would have taken up just 38.72% of a typical first home buying couple's after tax pay, which was still below the 40% affordability threshold.
But in August 2013 it jumped to 40.08% and then kept trending up until it passed the 50% mark in March this year.
Over the same period, the lower quartile selling price in Auckland increased by $140,500 (32%), from $444,000 in July to 2013 to $584,500 in April this year.
That would have pushed the mortgage payments on a lower quartile priced home from $597.18 a week in July 2013 to $785.26 a week in April this year, an increase of $188.08 a week (+31.5%).
However the median take home pay of an Auckland working couple aged 25-29, has only increased by $52.02 (3.5% ) a week during that time, up from $1489.01 a week in July 2013 to $1541.03 in April this year.
The bottom line is that the Auckland house prices and the resulting increases in mortgage payments have vastly outpaced the growth in the household incomes of first home buyers.
Auckland housing is now beyond the reach of first home buyers on a median income.
By comparison, the mortgage payments on a lower quartile priced home in Wellington would have increased from $395.75 a week in July 2013 to $410.69 in April this year, an increase of $14.94 a week (3.8%).
In Canterbury, the mortgage payments would have gone from $383.71 to $458.58 over the same period, an increase of $74.87 a week (+19.5%).
The AMP360 First Home Buyer Affordability Report tracks changes in mortgage interest rates and the REINZ's lower quartile selling prices in each region of the country, and the median after-tax income of first home buyers (defined at a working couple aged 25-29) in each region.
It then works out how much of a first home buying couple's weekly income would be taken up by mortgage payments on a lower quartile priced home.
11 Comments
Yes , in a Herald OP ED on Friday 15 May Auckland City's Chief Economist had the audacity to blame everyone else for this housing crisis , saying Auckland council was IN NO WAY TO BLAME WHATSOEVER !!!!
He blamed :-
Auckland residents for opposing densification
The NZ Immigration service for allowing everyone in
The treasury and RBNZ for making cheap money available
For congestion , he blames Irresponsible opponents of Auckland Transport plans , people who would not use public transport ( which is now so expensive its cheaper to use your own car )
Sadly , we are one of the worlds most liveable cities , but it will be for millionaires only
Yep. All hui and no dui in New Zealand. Our inhabitants need to wake up and realise we are poor.
Instead we think spending things on such things as world cups will 'put us on the world map'. "give the masses a circus"
What will actually put us on the world map is buckling done and getting something done.
We won't get anything done when we have a whole lot of people trying to micro-manage businesses/builders.....if the public servants and every other interfering Ninny were made to step aside and even be prosecuted for impeding the basic right to shelters then dui it would be.
Dead wrong. Our home loan affordability threshhold has always been 40% of take home pay. It has never been 30% in the eight plus years we have been doing this research.
Others sometimes refer to a 'traditional' 33% but that is of gross, before tax, before WfF credits.
Take-home pay is after tax, including WfF tax credits (if any).
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.