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Home loan affordability now worst since November 2010 as regional differences build; Porirua deteriorated most in 2012

Posted in Property
Home loan affordability improved marginally in most cities, but got worse in some major centres in 2012

Home loan affordability continues to get worse nationally and ended 2012 at its worst level since November 2010.

Interest rates remain low and are virtually unchanged, and the slow rise in take-home pay continues in almost all regions. But it is house prices that are driving the index.

Median house prices reached a record $389,000 at December according to REINZ data, up $34,000 in a year. First quartile house prices reached $270,000, also a record, but only up $15,000 over the year.

In cities where there is a good balance between housing supply and demand, we are not seeing prices rise fiercely. But in those urban centers where supply is constrained, affordability is worsening markedly as the cost of buying a house rises.

Nationally, affordability deteriorated by 3.6% in the year to December 2012. That is, it took 3.6% more of take home pay to afford the mortgage payments for a median priced house, according to the Roost home loan affordability report released today.

This means it cost $39.01 more per week in December 2012 than in December 2011 to make home loan payments on a median priced house.

Central Auckland, Manukau, Waitakere, Porirua, and Christchurch all deteriorated quickly over the year, with Porirua making the biggest move, getting worse by 9.5%.

Invercargill, the Kapiti Coast, Rotorua and Hastings all improved their affordability over 2012.

Advertised floating mortgage rates have been unchanged since March last year, but average 6 month and 1 year mortgage rates edged lower by about half a percent over the year. 

Median take-home pay for homebuyers in the 30-34 age group – which is after-tax pay – grew by $19.70 per week, almost $1,025 per year during 2012. It grew the most in Wellington City – by $25.07 per week – and the least in Gisborne of $18.63 per week.

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Mortgage choices involve making a significant financial decision so it often pays to get professional advice. A Roost mortgage broker can be contacted by following this link »
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For first home buyers – which in this Roost index are defined as a 25-29 year old who buys a first quartile home – the news is not as bad.

For these buyers outside of the ‘usual suspects’ in Auckland and Queenstown, there have been small improvements in affordability. However, Wanganui, Porirua and Nelson all found housing for first home buyers less affordable as 2012 ended. It was tough in Christchurch as well.

Any level over 40% is considered unaffordable, whereas any level closer to 30% has coincided with increased buyer demand in the past.

For working households, the situation is similar although bringing two incomes to the job of paying for a mortgage makes life considerably easier.

On this basis, 18 of 24 New Zealand cities have a household affordability index below 40% for couples in the 30-34 age group.  This household is assumed to have one 5 year old child. Couples in central Auckland, Manukau and Porirua all found it more expensive to pay a mortgage at the end of 2012 than at the beginning, although in almost all other centers the change was minor over the year.

For households in the 25-29 age group (which is assumed to have no children), every city except Queenstown ended the year with the cost of a mortgage lower than 40% of their take-home pay. There was only a marked deterioration in central Auckland; couples in almost all other centers found it no harder to pay the mortgage at the end of the year than at the beginning.

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.

Of the 24 cities we monitor, 17 of them had an index below 30% as at December 2012, six were between 30-40% and one (Queenstown) was above 40%.

First home buyer household affordability is measured by calculating the proportion of after tax pay needed by two young median income earners to service an 80% home loan on a first quartile priced house.

Regional home loan affordability comparison:      
mortgage payment as a % of weekly take-home pay      
 
Dec-12
Nov-12
Dec-11
Dec-10
Dec-09
Dec-08
New Zealand
56.0%
55.3%
52.5%
55.8%
65.2%
60.0%
Northland
48.3%
46.3%
46.8%
51.8%
61.7%
62.5%
- Whangarei
39.3%
38.5%
39.5%
45.2%
52.6%
50.7%
Auckland
73.3%
74.1%
68.1%
68.4%
80.6%
75.7%
- Central
83.3%
85.1%
75.6%
76.8%
89.2%
77.7%
- North Shore
75.6%
79.2%
74.2%
75.8%
83.7%
76.6%
- South
73.5%
70.6%
66.9%
70.9%
82.2%
77.3%
- West
64.4%
62.8%
59.6%
55.6%
72.1%
68.2%
Waikato/BOP
48.9%
48.8%
47.9%
53.5%
62.2%
58.7%
- Hamilton
51.6%
51.2%
53.2%
55.7%
68.3%
60.7%
- Tauranga
55.2%
54.3%
51.4%
66.8%
68.0%
71.2%
- Rotorua
32.3%
33.4%
38.4%
37.6%
42.1%
44.6%
Hawkes Bay
40.6%
44.1%
44.9%
51.2%
59.5%
53.8%
- Napier
49.8%
46.1%
48.7%
56.4%
64.1%
58.9%
- Hastings
39.9%
46.0%
46.1%
52.1%
62.9%
52.7%
- Gisborne
40.3%
45.0%
41.2%
44.1%
57.0%
53.7%
Manawatu/Wanganui
35.5%
35.1%
34.8%
37.5%
45.4%
44.1%
- Palmerston North
38.4%
40.4%
40.4%
41.3%
48.8%
46.1%
- Wanganui
31.6%
27.9%
29.2%
32.5%
44.3%
34.2%
Taranaki
43.0%
40.9%
45.0%
45.7%
55.2%
51.4%
- New Plymouth
48.6%
48.3%
47.4%
56.4%
67.2%
56.0%
Wellington region
54.3%
54.1%
53.0%
58.6%
67.0%
62.6%
- City
58.9%
60.3%
59.2%
65.0%
72.1%
66.6%
- Hutt Valley
47.7%
47.9%
49.8%
52.3%
59.0%
57.3%
- Porirua
61.5%
53.2%
51.9%
63.3%
65.4%
67.5%
- Kapiti Coast
48.4%
52.2%
53.1%
57.6%
63.0%
59.4%
Nelson/Marlborough
55.2%
51.0%
53.5%
57.1%
68.6%
60.2%
- Nelson
56.3%
52.6%
50.9%
57.6%
70.9%
54.0%
Canterbury/Westland
51.9%
51.1%
49.3%
50.4%
60.1%
56.3%
- Christchurch
59.2%
55.9%
54.5%
59.1%
66.7%
61.2%
- Timaru
40.8%
38.9%
41.9%
39.2%
45.3%
40.1%
Central Otago Lakes
70.9%
67.0%
70.6%
69.5%
85.6%
84.1%
- Queenstown
89.5%
75.2%
91.7%
74.6%
95.2%
88.1%
Otago
39.0%
40.7%
39.8%
40.8%
45.5%
45.2%
- Dunedin
43.3%
46.6%
44.5%
46.6%
51.6%
51.5%
Southland
28.9%
30.4%
31.0%
31.3%
35.7%
32.8%
- Invercargill
27.5%
36.1%
33.1%
32.2%
38.6%
31.5%

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)

 

 

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13 Comments

a 57 hectare property at

a 57 hectare property at huntly  recently sold for just over 100k.
Admittadley the property is a bit rough and includes thousands of old tyres but that is a steal.
Makes you wonder why other rural properties in ngaruawahia ,huntly ,te akau and waingaro
are so overpriced.

Didn't I see a sky programme

Didn't I see a sky programme on car tyres being used to build a house in France...no red tape...nice job in the end....if you missed it don't worry...sky repeat repeat repeat every sodding thing and then repeat them all again...what a scam.

Queenstown's figures are

Queenstown's figures are completely irrelevant given that the majority of homes in the area are either the holiday homes of persons from other regions or countries, or the homes of retirees.
 
Then also a good proportion of those that do work in the region are itinerant young people who are on temporary visas, add in the retirees and it's obvious why the incomes are so low.
 
Queenstown real estate is actually very affordable for anyone in a normal job.
 
At Jack's Point you can buy a 2 unit site for $169k.  Or if you don't mind a 30 minute drive to Frankton, a dead flat Kingston section will only set you back $70k.  For the budget conscious a freehold crib at Kingston may only set you back $145k.  Or a 2 bed freehold townhouse in Central Qwtn for $238k.  (Of course hotel suites under management go for under $100k if you are looking for one of those).  So for a normal 3 bdrm freehold standalone home there's lots of choice at Kingston for around $250k, or a 4 bed in Qtwn for $379k.
 
By my reckoning Qtwn's actually so much cheaper than Auckland, Wellington or Christchurch or even Dunedin for like for like properties.  It's just that Qtwn is filled with lots of really top end housing.
 
This is why these comparisons are just so meaningless...

"Central Auckland, Manukau,

"Central Auckland, Manukau, Waitakere, Porirua, and Christchurch all deteriorated quickly over the year, with Porirua making the biggest move, getting worse by 9.5%"
What the stats DONT show is some, if not all of these areas have been and are being targeted by speculators buying up run down or semi run down houses, spending a few 10K ....ADDED VALUE.... the flicking off a couple months later.
Approx 1/3 of all sales over the last couple years in most of these areas are re sales within several months with majority of increases of between 18K and 135K.

Well well well, remember the

Well well well, remember the comment on the thread the other day about NZ houses being actively sold in China
Today there is an article in the Herald about it with evidence
Time it was stopped or heavily controlled, it IS what is skewing house prices in this country, I do not care what anyone says, and I want to see balance redressed in the favour or NZers

Here here Raegun. Let's have

Here here Raegun.
Let's have the data for how many homes are owned by non NZ tax paying foreigners. And if the data doesn't exist, get some of those grossly over paid civil servants to get off their fat arses and collect the data.
At MINIMUM we should slap a significant capital gains tax on any profit they make. e.g. 50%. That should offer a disincentive for them to speculate at the expense of the average struggling Kiwi, who doesn't  own rental properties !!
Also as they don't vote, the present political parties can't use the usual RUBBISH comment of, 'it's political suicide'. As these parasites can't-Don't vote.
If housing is too expensive for locals of any country every thing possible should be done to rectify that.
We NEED a new political party aimed at solely helping Kiwi's have affordable homes. If advertised correctly it'd probably get 10% of the nations vote and thus be a significant force.
The average or poor of NZ unite !!!! Or comntinue to be sacrifised purely for the benefit of the top 1% of NZ
 

But, but, raegun, we still

But, but, raegun, we still need a billion a month to keep the ferals glued to their flat-screens, and Granny above ground.
 
And Johnny Foreigner is who we is a'borrering from.
 
So to turn around and say, well, buy all the T-bonds ya like, but lay off of our Houses, is a bit - searching to the right word here - HyperHypoCritical, shurely?

Fail to see how selling our

Fail to see how selling our houses to them will make a jot of difference. Try this for size, many of those foreigners are now landlords and how do we make up the diifference between paltry incomes and exhorbitant rents - well that goes straight into foreign hands
And I am fed up with the likes of you accusing everyone who is on struggle street of being a feral!!!
We should be looking after our own first!!!

In the past interest rates

In the past interest rates have risen to take too much money out of the economy, thus cooling inflation.   Right now we have 0.8% inflation, its negligable and might yet drop away even more.
The RB thinks inflation might rise later so are not dropping the OCR now. That may well prove a bad decision. Personally I'd rather drop it 0.5% now to keep the economy going than have to drop it even more say 1% once our economy has really gone into recession.  What I suspect will happen is the NZRB will never catch up....ie we will be well into deflation and then it will be too late.
So the Q has to be asked just when will inflation return? We are 4+ years into this and inflation is declining as a trend...any sign of inflation looks 2 years away with not much sign of wage increases.  So lets say in 2 years we with decent pay increases behind us we see that coming through into inflation....even then the RB is saying a OCR of 4% maybe 4.5% is the max it expects....hardly a huge worry.
regards
 

Exactly right Steven, the

Exactly right Steven, the crying shame is that the RBNZ will wait till the country is in recession as the numbers only report the past, so by the time the numbers roll in NZ is already in the hole.
 
Why no pro active activity, why always reactionary.