Home loan affordability improved nationally in December because of a fall in house prices, but remains very difficult in Auckland Central and Auckland’s North Shore, which are now both more expensive than Queenstown for the first time in the monthly Roost Home Loan Affordability report.
Median house prices fell in Auckland’s most expensive areas, but not as much as the slide in Queenstown prices in December. Interest rates were stable nationally and a marginal rise in disposable income helped improve standard home loan affordability across the nation to its best level since May 2009 and back to levels previously seen in June 2004.
The result underlined emerging 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 weakening and buyers have the upper hand.
“First home buyers in cheaper areas and cities are in the strongest position they’ve been in since the end of 2004,” said Margaret Smith, spokeswoman for mortgage broking group Roost Home Loans.
“Affordability for young couples has improved strongly over the last year as interest rates have stayed low and after-tax incomes have risen in the wake of tax cuts,” Smith said.
A young couple earning the median wage can afford to buy a first quartile priced house with 23.0% of their disposable income required to service an 80% mortgage. This is down from 23.6% in November and down from a June 2007 high of 35.1%. First home buyer household affordability is at its best levels since February 2005.
The national median house price fell to NZ$352,000 in December from NZ$360,000 in November, although there was a slight rebound in activity late in the year, particularly in the wealthier suburbs in central Auckland where after income tax incomes rose most because of the October 1 tax cuts. The first quartile house price also fell to NZ$245,250.
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 improved to 55.5% in December from 56.8% in November.
Affordability improved marginally in central Auckland and on the North Shore of Auckland, but did not improve as much as Queenstown where the median house price fell to NZ$429,000 from NZ$480,000.
Affordability improved in Invercargill after the median house price fell to NZ$180,000 from NZ$195,000, meaning it remained the most affordable city in New Zealand, although only just ahead of Wanganui, where affordability improved dramatically after a slump in the median house price to NZ$175,000 from NZ$189,500. Incomes are marginally higher in Invercargill.
Affordability nationally 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 6.2% are cheaper than average longer term fixed rates at around 6.6%. However, the gap has closed over recent months as fixed rates have fallen from 7.25% last year, making the fixed vs floating decision more evenly balanced.
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, 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 improved in December because of a rise in take-home pay and the fall in 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 fell to 37.5% from 38.5% in October.
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 23.0% in December from 23.6% in November.
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 of home loan affodability for typical buyers 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 | ||||||
|
Dec-10
|
Nov-10
|
Dec-09
|
Dec-08
|
Dec-07
|
Dec-06
|
|
| New Zealand |
55.5%
|
56.8%
|
63.0%
|
60.0%
|
81.3%
|
72.9%
|
| Northland |
51.4%
|
53.9%
|
59.1%
|
62.5%
|
85.7%
|
69.4%
|
| - Whangarei |
45.0%
|
47.1%
|
50.4%
|
50.7%
|
71.5%
|
62.3%
|
| Auckland |
67.6%
|
71.0%
|
77.6%
|
75.7%
|
101.3%
|
86.9%
|
| - Central |
75.9%
|
79.5%
|
85.8%
|
77.7%
|
104.3%
|
97.5%
|
| - North Shore |
74.8%
|
75.3%
|
80.5%
|
76.6%
|
102.9%
|
93.1%
|
| - South |
69.8%
|
71.2%
|
78.7%
|
77.3%
|
100.7%
|
81.8%
|
| - West |
54.9%
|
60.4%
|
69.3%
|
68.2%
|
85.0%
|
72.4%
|
| Waikato/BOP |
52.7%
|
53.5%
|
59.6%
|
58.7%
|
82.2%
|
70.0%
|
| - Hamilton |
54.9%
|
54.5%
|
65.5%
|
60.7%
|
82.2%
|
72.9%
|
| - Tauranga |
65.9%
|
57.1%
|
65.2%
|
71.2%
|
91.1%
|
83.2%
|
| - Rotorua |
37.1%
|
44.8%
|
40.4%
|
44.6%
|
62.4%
|
57.3%
|
| Hawkes Bay |
50.4%
|
47.7%
|
57.1%
|
53.8%
|
72.0%
|
62.8%
|
| - Napier |
55.5%
|
50.9%
|
61.5%
|
58.9%
|
79.6%
|
73.0%
|
| - Hastings |
51.3%
|
48.7%
|
60.4%
|
52.7%
|
72.7%
|
60.8%
|
| - Gisborne |
43.5%
|
51.4%
|
54.7%
|
53.7%
|
72.7%
|
58.4%
|
| Manawatu/Wanganui |
37.6%
|
39.9%
|
43.8%
|
44.1%
|
62.9%
|
51.9%
|
| - Palmerston North |
41.6%
|
44.5%
|
47.2%
|
46.1%
|
63.2%
|
57.8%
|
| - Wanganui |
32.6%
|
35.4%
|
42.8%
|
34.2%
|
53.5%
|
46.7%
|
| Taranaki |
45.8%
|
45.4%
|
53.3%
|
51.4%
|
67.0%
|
65.1%
|
| - New Plymouth |
56.5%
|
50.6%
|
64.9%
|
56.0%
|
75.3%
|
77.2%
|
| Wellington region |
58.4%
|
58.5%
|
64.9%
|
62.6%
|
81.0%
|
74.7%
|
| - City |
64.6%
|
66.3%
|
69.8%
|
66.6%
|
88.3%
|
79.5%
|
| - Hutt Valley |
52.0%
|
53.0%
|
57.2%
|
57.3%
|
70.1%
|
65.4%
|
| - Porirua |
63.1%
|
61.0%
|
63.4%
|
67.5%
|
80.2%
|
76.3%
|
| - Kapiti Coast |
57.1%
|
57.2%
|
60.7%
|
59.4%
|
80.4%
|
76.8%
|
| Nelson/Marlborough |
56.9%
|
57.6%
|
66.6%
|
60.2%
|
87.4%
|
77.8%
|
| - Nelson |
57.4%
|
59.3%
|
68.8%
|
54.0%
|
81.0%
|
74.6%
|
| Canterbury/Westland |
49.5%
|
49.9%
|
57.7%
|
56.3%
|
77.2%
|
67.0%
|
| - Christchurch |
58.1%
|
54.4%
|
64.0%
|
61.2%
|
83.0%
|
75.1%
|
| - Timaru |
38.4%
|
37.2%
|
43.4%
|
40.1%
|
61.6%
|
56.2%
|
| Central Otago Lakes |
68.1%
|
71.8%
|
82.0%
|
84.1%
|
106.9%
|
100.6%
|
| - Queenstown |
73.0%
|
81.9%
|
91.2%
|
88.1%
|
137.1%
|
135.5%
|
| Otago |
40.0%
|
39.2%
|
43.6%
|
45.2%
|
63.8%
|
54.5%
|
| - Dunedin |
45.6%
|
43.3%
|
49.5%
|
51.5%
|
69.6%
|
60.9%
|
| Southland |
31.5%
|
32.4%
|
35.1%
|
32.8%
|
49.4%
|
36.1%
|
| - Invercargill |
32.4%
|
35.2%
|
37.9%
|
31.5%
|
53.0%
|
40.9%
|
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