By Greg Ninness
Housing became more affordable for first home buyers in many parts of the country including Auckland last month, as falling prices more than offset rising mortgage interest rates.
According to interest.co.nz’s Home Loan Affordability Reports, lower quartile selling prices peaked at record highs in November and then fell back in December in Auckland, Waikato/Bay of Plenty, Hawke's Bay, Manawatu/Whanganui, Taranaki, Nelson/Marlborough, Canterbury/Westland and Southland.
But lower quartile prices kept rising to set new records in December in Northland, Wellington, and Otago.
The lower quartile price also rose in Central Otago/Lakes in December, but remained below the record high that was set in September last year.
The Home Loan Affordability Reports track the monthly changes in the REINZ’s lower quartile residential property prices, mortgage interest rates and incomes in each region and the impact these would have on how much of their weekly income typical first home buying couples would have to put towards mortgage payments to buy a home at the latest lower quartile selling price. (Click on the links in the box below for the individual reports for each region).
| Separate Home Loan Affordability Reports are available for each of the following regions and cities (click to view). |
| Northland Regional |
| Whangarei |
| Auckland Regional |
| Rodney |
| North Shore |
| Auckland Central |
| Waitakere |
| Manukau |
| Papakura/Franklin |
| Waikato/Bay of Plenty Regional |
| Hamilton |
| Tauranga |
| Rotorua |
| Hawke's Bay/Gisborne Regional |
| Gisborne |
| Napier |
| Hastings |
| Wairarapa |
| Taranaki Regional |
| New Plymouth |
| Manawatu/Wanganui Regional |
| Palmerston North |
| Wanganui |
| Wellington Regional |
| Wellington City |
| Hutt Valley |
| Kapiti |
| Porirua |
| Nelson/Marlborough Regional |
| Nelson |
| Canterbury Regional |
| Christchurch |
| Timaru |
| Central Otago/Lakes Regional |
| Queenstown |
| Otago Regional |
| Dunedin |
| Southland Regional |
| Invercargill |
| All of New Zealand |
The reports show that the average of the two year fixed mortgage rates charged by the major banks has risen in each of the last three months, rising from 4.42% in September to 4.58% in December.
Offsetting interest rate rises
Although the falls in lower quartile prices were relatively modest, when combined with a modest allowance for rising incomes they were enough to more than offset the effect of the rise in interest rates in December, making mortgage payments slightly more affordable.
The biggest fall in the lower quartile selling price last month was in Nelson/Marlborough where it declined by $15,700, or 4.2%, falling from $374,100 in November to $358,400 in December.
Other regions to post declines were Southland -$14,000, Taranaki -$13,500, Manawatu/Whanganui -$11,000, Auckland -$10,800, Canterbury/Westland -$9700, Waikato/Bay of Plenty -$3700 and Hawke's Bay -$1500.
The biggest increase in the REINZ’s lower quartile price last month was in Central Otago Lakes where it climbed by $34,600, or 7.6%, from $455,400 in November to $490,000 in December.
However big swings in lower quartile prices are not uncommon in Central Otago Lakes where they can be volatile due to the type of properties in the area and relatively low sales numbers compared to other regions.
Also posting gains in lower quartile prices from November to December were Wellington +$33,600, Otago +$13,300 and Northland +$6300.
Small drop in mortgage payments
Unfortunately, while the fall in lower quartile prices will be welcome news for first home buyers in the affected regions, the differences they would make to mortgage payments are small.
In Auckland, the $10,800 drop in the lower quartile price would only result in mortgage payments dropping by $6.55 a week and in Waikato/Bay of Plenty where the lower quartile price dropped by $3700, mortgage payments would have reduced by just $1.79 a week.
And a fall in prices for a single month does not make a trend.
With a lower quartile price that’s still above $700,000 and mortgage payments on that coming in at almost $750 a week at current interest rates, Auckland remains seriously unaffordable for typical first home buyers.
The small dip in prices that occurred in Auckland last month would need to turn into a sustained and substantial correction before it would start taking housing in our largest city back into affordable territory for typical first home buyers.
69 Comments
Buy now before February before house prices rise again. 70,000 immigrants are going to buy in a frenzy as they have been holding back since October.
Remember last year this time in January when houses sat on the market at a lower price. Houses Auckland will never be cheaper buy now.
Hopefully the massive reduction in outflow of Chinese capital will alleviate this somewhat though, especially since it's reduced to around 2% of the September 2016 record (http://www.interest.co.nz/news/85591/demographia-ranks-nz-affordability…). Other than this, more intervention to reduce speculation will also help.
I work with many recent immigrants in the IT industry and most don't have a hope of buying a house in Auckland.
Lets face it cheap loans to investors here and overseas forced house prices up and now that interest rates are on the rise the house prices will go in the opposite direction.
Is that the same "alternative fact' as supplied by the Trump press officer. Sir Ted.
We can import inflation in other ways, besides distorting the facts.
We can milk the system, besides upping the price of milk.
We can "thank" the system, till the cows come home.
The people I feel sorry for are not the speculators, nor the Real Estate brigade.
Falsifying the facts is easy. Deniability is paramount. Yanks and Chinese and a lot more besides are all falsifying their agendas.
We used to call it "Lying' when I was a lad.
Or is that just "Paranoia" in this wonderland, we all inhabit today.
Spot on Ted, apart from a few minor typo's which I've corrected for you. Hope you don't mind, I left the subtle Chinglish intact.
"Sell now before February, before house prices drop again. 70,000 immigrants are going to sell in a frenzy and they have been holding back since October. Remember last year this time in January when houses sat on the market at a lower price. Houses Auckland will never be dearer, sell now."
Ted,
In a funny sort of a way,I am Almost beginning to like you. You sell property,so all you are doing is talking up your market. That's what sales people do.
It's not your business to worry about the potential consequences of an obscenely overpriced market;the ever increasing risk of a major correction,falling rates of home ownership in younger generations,an increasing inability to attract employees across a wide range;teachers,nurses,etc.
I wonder if there is a level beyond which even you would be concerned? Since a multiple of 10 is fine by you,might 15 make you uneasy,or how about 20? I would love to know.
In reply to Ted Stanton. 1) 70000 immigrants do not equate to 70000 families looking for homes. 2) Most new immigrants will be renting. Most do not buy immediately - not until they are familiar with the suburbs and NZ property rules etc. 3) Someone has pointed out that you've operated under at least 6-7 pseudonyms. It seems obvious that you are on these forums to whip up irrational buying frenzy (for the gullible readers) to meet your personal agenda. Please stop that - it's very unethical and unprofessional.
Interest rates are but one factor in this equation .
Slowing inward migration , Chinese currency controls , stupidly high building prices and a likely increase in land availability in Auckland (from the Unitary plan) will all help bring things back to earth ........... hopefully with a soft landing
I do wonder about the combination of increasing interest rates from our main banks getting a credit rating downgrade with a cooling of the market. There's a risk of a further credit rating downgrade if the banks carry on lending the way they are.
If we hit 6% sometime next year I bet there will be an increase in defaults.
My forecast dictator is, floating rates will be over 6% before the end of June.I'm not analyst but in my role I'm in touch with the resi and commercial construction industry players and their feedback is the property market isgoing further negative . The external pressures of an unstable monetary scene tells me we need to hold onto our hats because it will get ugly!
Last time 6% was typical people where struggling to meet lending conditions when the first LVR requirements were implemented. I'd be surprised to see banks push the interest rate that high that quickly. They'd put downward pressure on house prices.
My calculations are that 6.5% will be enough to choke the life out of the economy with the massive amount of debt that's accumulated in recent times.
Don't be surprised if you see floating rates remain near static. It's not a forgone conclusion inflation will continue to head into the 'agreed band'. As the banks increase the 'fixed' rates, the RBNZ may have to lower or keep the ocr as is for quite some time.
I think you will see odd things in the housing market where one house in a street is going below average while a similar house on the same street is listed higher - this may be due to the banks encouraging its stressed accounts to sell.
What will be interesting is how many accounts are currently being re-categorized as 'stressed'.
There were a range of factors that led to the housing crisis in Auckland particularly. But some of those factors will continue, including very high building materials market due to a lack of competition. Lack of land, high compliance costs when getting a consent and building etc.
We have heard the Currency Controls over and over again in the past... won't make any difference.
Only way to sort things out is sort out the demand as well as the supply.
Stamp duty on Non-Citizen buyers and Investors. Make it 15% so they feel it. Proceeds will help fund the Sewage and public transport problem Auckland has.
Message to all First Time Buyers and local Property Investors - DO NOT BUY until the property market has bottomed out! I would strongly advise waiting for a few months until the dust has settled.
It is very obvious that the Foreign Investors have been effectively frozen and this could go on for quite some time possibly even years due to the Trump effect. So there is no point in you paying over the odds for over inflated property prices. Do yourselves a favour and WAIT.
Message to all First Time Buyers is to weigh up all advice and then make a decision.
If you are able to afford to buy a house that fits your needs and are able to find something at a fair price, then now might be the best time to buy.
There is a risk that house prices will continue to increase from Feb/March, and also banks offering you lending now may not offer you lending in a few months time.
It is obvious there are plenty of people on this site stating for years prices will fall etc etc, and it still hasn't happened. In fact, the opposite, prices have gone up, and new lending restrictions now make it near impossible for people to borrow to buy.
Odds are, some regions you will see house prices continuing to increase are Hawkes Bay, Tauranga, north of Auckland....
Based on your advice, you will have to wait to buy for a long time - it's looking like it is going to take 100 days+ for the administration just to fill all the various positions that need filling.
What will be interesting is if a foreign power decides to have a go at Trump/US, thereby doing Trump a favour as it will galvanize support from the American people....
As for China, China still has many mouths to feed regardless what the US buy or do not buy from China.
If relations resolve with Russia, then this will be a positive for NZ trade to Russia.
Hobo are you a Real Estate Agent? Everyone knows what's happening with the markets at the moment and why China has had to enforce it's Capital Flight restrictions, this could go on for years.
And as for Mortgage rates, they'll have to come down. That's what happened during the last economic crash.
Go look at the UK mortgage rates as an example they're very low.
And the Chinese banks that are here such as HSBC etc... are going to keep their rates low due to wanting to maintain foreign capital.
I hope first home buyers don't risk taking advice to wait and then find they can never buy a home. I bet there must be many who did even a few years back, and now wish they ignored the advice and had bought.
If I thought prices were going to fall, I will be the first to post on it.
To make it clear to some on this site, the following will need to happen for significant drop in prices in Auckland: 1. Government policy to fund building of significant number of houses not seen since the 1950's plus provide funding to the council to put in the required infrastructure to support it. 2. Government policy to curb demand from international buyers, such as the Vancouver tax etc, and lower immigration numbers etc other than those to assist new housing 3. Auckland council opening up vast amounts of land and streamlining consent processes e.g. people can buy pre-consented plans.
Will it happen? No.
Well at least Ted was honest when I asked him if he was a RE.
Zachary if you worked in say; IT, Building, Creative industries, Tourism or any of the Export industries you would be very worried (As I am) about the clearly out of control housing market sending our dollar (NZD) sky high! With the negative impact that has on vital industries.
And no I don't believe that it's silly to ask what someone's profession so you can see where they're coming from in regards to their point of view. Even as a NZ Property Investor you should be worried about the property market being pushed to breaking point and risking a down turn. But most of your comments centre around pushing to keep high spending going and trying to discredit any reasonable discussion that the market could be changing both here and globally. That's why we think you're an RE.
CJ099, I think my view is very similar to hobo's in that I was looking for data but not really seeing anything that was conclusive. I also think there are good reasons for the high prices. I was really interested to see if foreign buyers were still purchasing properties in Vancouver and was surprised to see the numbers beginning to climb again there. Also prices seemed to be climbing in Toronto. I wasn't really trying to "discredit any reasonable discussion" I was only challenging any claim that implied the bubble had burst as the data wasn't showing it.
(I work in IT)
I probably wasn't that clear. What I was surprised about was that in Vancouver foreign buyers were moving back into the market not that prices had gone up there. Toronto was showing price rises and now by the looks of it Sydney. I think I was responding to the assertion that foreigners had fled the market and in all major cities prices were dropping.
CJ099, I have already provided the link in another thread but here it is again:
Foreign buyers trickling back to Metro Vancouver
The graphs at the bottom show a steady increase in the foreign buyers as each month passes since the introduction of the tax.
Keep in mind that I am not doing this to be contrary. I have enormous faith in the English speaking West and this data confirms that people are still willing to buy into it even after a high and discriminatory tax.
CJ099, not a real estate agent, have not been, and will never be. (nothing against RE agents, I just know I don't have a strong constitution to be one...)
Would I like prices in Auckland to come down or at the very least drop in respect to inflation? Yes, as I would like my children and their children... to own property one day too.
I see the same things you do, but I must be interpreting it differently - maybe we are betting against each other.
In regards to mortgage rates, I think they will continue to rise and may even force the RBNZ to relax its policy for LVR for the regions, but they are stubborn to do so.
Do I think the current Governor will resign at end of term, yes, but not sure if the replacement will take a different position or implement anything to resolve current housing crisis - we all know who's job that is.
So, until I see something significant with housing in decreasing demand, and improving supply, then my position will remain the same, which is, popular areas of Auckland and other popular regions will continue to rise in price.
That's good to know Hobo, where you're coming from point of view wise. Basically I think were on the same page probably just looking at things from slightly different angles. Just I would really like to see NZ have a much better hold on the housing market rather than just let the extremely greedy RE's sell this land quite literally from under Kiwi's feet, sending property prices through the stratosphere.
This is really bad for so many reasons, a lot of we've already listed.
@Sleepydog: It's different in that China has now really had to enforce Capital Controls after the Trump election.
Among other requirements, China's SAFE (State Administration of Foreign Exchange) said all buyers of foreign exchange must now sign a pledge that they won’t use their $50,000 quotas for offshore property investment. Violators will be added to a government watch list, denied access to foreign currency for three years and subjected to money-laundering investigations.
Here you go Sleepydog this will tell you what's currently going on: China’s Army of Global Homebuyers Is Suddenly Short on Cash
https://www.bloomberg.com/news/articles/2017-01-26/world-s-biggest-real…
If you're waiting to buy in Auckland for prices to drop, I would wait a few more months. It took at least six months for property prices to drop after the Global Financial Crisis in 2008 in the UK for example.
99% Negative comments on Family Housing whilst the 1% who are Positive about Family Housing with valid facts are blocked from making comments.
I emphasise Family Housing because most houses have families living in them paying mortgages with children to bring up and these are the people you are against?
No Balance just negativity and No free speech.
Paying for a family, mortgage, student loans and car loans is beyond a lot of family incomes. I've been looking through a lot of trademe listings and there seem to be a lot of motivated sellers that are elderly and rentals. I don't think there's a lot of families that could afford a 6-8 bedroom house as their first home.
I think Ted just needs to pump and dump to cash out.
Greg - I look forward to your next right up around April 2017 which doesn't relate to the market at a traditionally slow point and especially straight after Xmas/NY holidays and a recent LVR change. Once everyone is back to the land of the living, found ways around the system on finance and looking at their investor purchase or new home buy resolution for 2017 then it will be interesting to see where the numbers are really going...
Sadly I don't think prices will slump massively. Demand is just too high and too many people locked out but trying to get in. Developers can't keep up with demand and investors will be back. Am happy it's more affordable though. Have looked into it long and hard and held off buying but conclude that now is a good time to buy and lock in a 5 year fixed rates before interest rates head up again. Apparently Auckland is going to keep growing the same population size as Hamilton every 2 years and that is not going to slow.
Seems like everyone these days likes to hear the house prices will drop, and so do I, no body really knows for sure. Despite the previous figures and facts, this is all temporary, the prices may continue dropping a few percent more but that will change, it will bounce back up and even more, ever since time whenever the prices have dropped in property they have come back with higher figures. Whenever you can afford to buy is a good time, you wont loose out if you don't decide to sell right away.
Contrast Jacinda Ardens (Labour) addressing of the Auckland housing affordability issue with David Seymours (National lite.. sorry ACT) boldly entitled herald piece “Kiwi politicians need to have ‘guts’ to address housing affordability”
I have to admit I was intrigued when I clicked on the link but my intrigue quickly turned to despair. Pure speculation on my part but I think this is how the interview went…
Interviewer: David that’s a courageous stance for someone of your political persuasion. What in your opinion is driving house prices in Auckland?
Seymour: Well there are two sides to any macroeconomic pricing model “supply and supply” In this case we believe that supply is driving Auckland house prices so we’re focused on increasing supply….
Interviewer: Umm okay but what about demand, interest rates and foreign capit……
Seymour: Yes it’s complicated and now you’re getting confused. Regarding Auckland it’s just supply. Do you understand?
Interviewer: I think so, Supply.. However, there’s a tremendous amount of evidence to suggest that foreign..
Seymour: supply, supply, supply. Moreover, supply supply combine to mean that supply drives supply. Notwithstanding supply, sypply and supply SUPPLY!. Okay, I think I’ve made myself clear.
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