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Housing getting further out of reach for first home buyers as strong price rises cancel out the benefits of falling interest rates,’s latest Home Loan Affordability Reports show

Housing getting further out of reach for first home buyers as strong price rises cancel out the benefits of falling interest rates,’s latest Home Loan Affordability Reports show

The benefits of lower interest rates for first home buyers are being more than wiped out by rising prices at the lower end of the housing market, according to the latest figures from’s Home Loan Affordability Reports.

The reports show that mortgage interest rates have tumbled since the Reserve Bank slashed the Official Cash Rate (OCR) from 1.5% to 1.0% in August, with the average of the two year fixed mortgage rates offered by the major banks falling from 3.81% in July to 3.46% in October.

That should have helped aspiring first home buyers get into their own homes by reducing mortgage payments, but it appears that the fall in interest rates has simply helped to pump up house prices at the bottom end of the market, meaning first home buyers are likely worse off now than they were before mortgage rates were cut.

According to the Real Estate Institute of New Zealand (REINZ), the national lower quartile selling price (the price at which 25% of sales are below and 75% are .above, representing the bottom quarter of the market), has risen steadily from $401,900 in July to $437,500 in October.

According to the Home Loan Affordability Reports that has pushed the mortgage payments for a home purchased at the national lower quartile price from $351.31 a week in July to $372.64 a week in October, even though mortgage interest rates have declined over the same period.

That suggests first home buyers are probably worse off now than they were before the Reserve Bank slashed the OCR, because higher prices not only push up mortgage payments, reducing affordability, they also mean first home buyers will need to find a bigger deposit.

And that trend has been evident throughout most of the country.

The REINZ’s lower quartile selling price was higher in November than it was in July in all regions of the country except Nelson/Marlborough, and in most cases the increases were significant.

In Auckland where housing affordability pressures are greatest, the REINZ’s lower quartile price increased from $643,000 in July to $689,000 in November, the highest it has ever been.

Lower quartile prices also hit record highs in November in Waikato, Bay of Plenty, Hawke’s Bay, Manawatu/Whanganui, Wellington region, Otago and Southland.

The reports show that Queenstown remains the most unaffordable place in the country for first home buyers, with the mortgage payments on a lower quartile-priced home in the town eating up 48.7% of a typical first home buying couple’s take home pay each week, followed by Auckland’s North Shore where the mortgage payments on a lower quartile-priced home would consume 46% of typical first home buyers’ take home pay.

Whanganui is the most affordable centre for first home buyers, with the mortgage payments on a lower quartile-priced home there taking up just 13.3% of typical first home buyers’ take home pay followed by Invercargill at 14.8%.

Home Loan Affordability Reports for individual regions and major urban centres are available by clicking on the appropriate links in the box below.

The comment stream on this story is now closed.

Home Loan Affordability Reports are available for each of the following regions and cities (click to view).
Northland Region
Whangarei District
Auckland Region
Rodney District
North Shore District
Waitakere District
Central Auckland District
Manukau District
Papakura District
Franklin District
Waikato Region
Hamilton District
Bay of Plenty Region
Tauranga District
Rotorua District
Hawke's Bay Region
Napier District
Hastings District
Gisborne District
Taranaki Region
New Plymouth District
Manawatu/Whanganui Region
Palmerston North District
Whanganui District
Wellington Region
Masterton District
Kapiti District
Porirua District
Hutt Valley District
Wellington City
Nelson/Marlborough Region
Nelson City
Canterbury Region
Christchurch District
Timaru District
Otago Region
Dunedin District
Queenstown-Lakes District
Southland Region
Invercargill District
All New Zealand



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Are prices going up OR is the purchasing power of money going down? Smart people just wont hold the NZD, problem solved yo'll - buy Bitcoin.

Can you explain to me the fundamentals of bitcoin? What gives bitcoin its value? What's the underlying asset?

It's a mechanism by which we can track FOMO.

Read The Bitcoin Standard by Saifedean Ammous

It underlying value is it cant be destroyed/devalued/manipulated by central bank in the same way that the USD have been via their printing presses, and its not controlled by any global government or banking cartel. Yes you can create it via mining, but there is a maximum limit to what can be created/mined.

Is that "underlying value" really worth 641 kWh energy *per transaction*? We laugh at the idea of Rai stones (, yet they are much more effective then bitcoin.

Yes, to put that in context the fashion industry generates ten percent of all emissions. Censor free, government free money that can be sent across the world instantly virtually for free is worth that cost.

Bitcoins are also a fantastic way to launder money and invest in terrorism and child exploitation completely free of regulatory oversight, KYC, AML or other monitoring*
*I’m being sarcastic

Sure, it's just gets manipulated by the whales, fraudulent exchanges front-running orders, not to mention exchange owners doing a runner/say they got "hacked" and get away with millions :) Yes, there is maximum number that can be mined but I can fork bitcoin code to create BitStevo or you can create one named BitAverage, have a story to tell, get people to mine/buy/hodl and you've just taken a small marketshare. What is the difference between BitAverage and BitCoin then? Just name and hype :)

LOL. Show me a market thats not manipulated?! You don't think that the big 4 banks (or is that 5 now?) don't play with the currency markets? You don't think HFT front-run using paid-for order flow data?

Are you implying NZD has an underlying asset?

@ CourtJester - I'm not here to pontificate about Bitcoin. If you want to educate yourself, I'd suggest watching YouTube presentations by Andreas Antonopoulos [you clearly have internet access] or reading The Bitcoin Standard.

If you don't wish to educate yourself on distributed ledgers and currency .. I'd suggest viewing Bitcoin as gold crossed with e-mail.


There is no underlying value. It has no real-world utility (apart from black market transactions). It's a ponzi scheme that will eventually go to 0.

If that is the case then you should deposit funds on a margin exchange (say Bitmex) and place a short order. It doesn't even need to be leveraged. As the price of BTC falls your investment will go up in value.

Why take a risky position in an asset class that could well collapse, and take the exchanges with it when you could put you money elsewhere, in some thing with some fundamental value.

Simple. Risk reward. Many people invested in "safe" finance companies to get an extra 1-2% and lost it all. Invest in Auckland real estate over the last three years and you have bled cash flow and lost capital. Get a meth head tenant and its over. Stocks are doing great but in bubble mode so the risk is also large. With bitcoin you are buying into a bear market when prices are down and worst case scenario you lose 67% of your capital (you get a tax refund from the loss so not 100%). Best scenario is beyond 100% easily. Of course, it should be with a fairly small allocation of your income.

And who cares about the exchanges? Just store it on a wallet.

You said:"If that is the case then you should deposit funds on a margin exchange (say Bitmex) and place a short order. It doesn't even need to be leveraged. As the price of BTC falls your investment will go up in value."

You can store a short on a wallet?? How does the counterparty reconcile it, and how do you track them down?

Yes you can store a short on a wallet using tokenized derivatives. Currently only FTX does this.

But that is too complicated. If you didn't want to touch the crypto space you can still make shorts via USA security platforms - CME Futures or BAKKT. Essentially is a bet vs another trader who is waiting to take your bet. Fully regulated and government licensed. BAKKT is only by ICE that runs the NY stock exchange.

Certainly still seems to be going up in Wellington (we've recently lost a couple of tenders for 2 bedroom houses that sold for over 900k).

Inflation is low - government fiat money is holding its value surprisingly well.

Smart people just wont hold the NZD, problem solved yo'll - buy Bitcoin.

Dollar cost averaging into BTC over the past 7 years (say $100 per month) would have yielded an ROI far greater than what could you have achieved in the property bubble.

Looking at past ROIs of brand new investment vehicles doesn't really tell us much. You could say that your $6 investment into a certain powerball ticket last saturday would've made you $18 million...
Now let's talk about the ROIs of the other several thousand cryptocurrencies that were all the future of money...

- Buying Lotto tickets is different to dollar-cost averaging into BTC. The probabilities are completely different.

- BTC is not the "other several thousand cryptocurrencies" (by cryptocurrencies, you're referring to tokens).

I could point to many with extremely high ROIs - mostly early coins like Litecoin or Monero. But even some over the last year - say Chainlink or Binance. These are tokens and not considered "the future of money" but have other applications like utility or acting as securities. Altcoins compete with each other, not with Bitcoin. The main difference is that Bitcoin is 1) the first in that space and 2) the creator of Bitcoin is unknown, long gone and probably dead (with his one million coins still untouched)

Not just that, but you'd be up around 30% even if you had started dollar cost averaging at the 20k peak in 2017!


You mean to say that low interest rates do little to drive business and economic activity/growth (CPI inflation) but merely cause further asset price inflation.

Well I for one am shocked.

Business investment in plant, equipment and machinery for the year ended March 2019 was up 8.3 percent, according to Stats NZ . Is that little in terms of business activity growth?

Depends what you mean by activity I guess. Buying new plant is one thing, producing stuff with it might be more relevant. And there is always the question of whether it's just been put off so long that it had to be done because the old stuff was literally falling to bits.

On the flipside, maybe businesses are investing in tech/machinery that replaces certain tasks and therefore needs less labour?

To your point on unutilised plant and equipment, capacity utilisation in NZ is still running above our decade-long average. So unlikely that 1.1 billion dollars worth of productive assets recently brought on-line are going unutilised.

Further, if an equipment or machinery has been around for long, there's a high chance you could replace it with a higher spec one at the same or lower cost due to technological advancement. Therefore simply replacing worn-out assets should, in most cases, enhance business productivity.

The reports show that mortgage interest rates have tumbled since the Reserve Bank slashed the Official Cash Rate (OCR) from 1.5% to 1.0% in August, with the average of the two year fixed mortgage rates offered by the major banks falling from 3.81% in July to 3.46% in October.

That should have helped aspiring first home buyers get into their own homes by reducing mortgage payments, but it appears that the fall in interest rates has simply helped to pump up house prices at the bottom end of the market, meaning first home buyers are likely worse off now than they were before mortgage rates were cut.

Wealth effect or wealth illusion? The other therapeutic effect of lower-for-longer interest rates is the wealth effect. By driving up the value of future cash flows with lower rates of interest, all manner of assets – stock, bonds, and houses – increase in value and, thereby, can stimulate our marginal propensity to consume. More simply put, the imperative was to make rich people richer so as to encourage their consumption. It is not so hard to imagine negative side effects.
There are the obvious distributional effects between those who have assets and those who do not. Returning house prices in California to their 2005 levels may be good for those who own them, but what of those who don’t?
There are also harder-to-observe distributional consequences that flow from the impact of lower-for-longer interest rates on the value of our liabilities. This is most easily observed in pension funds.
Consider two pension funds, one with a positive funding ratio and one with a negative funding ratio. When we create a wealth effect on the asset side of their balance sheets we also drive up the value of their liabilities. Lower long-term interest rates increase the value of all future cash flows – both positive and negative. Other things being equal, each pension fund will end up approximately where they started, only more so.
The same is true for households but is much more ominous, given the inequality of wealth with which we began the experiment. Consider two households: one with savings and one without savings. Consider also not just their legally-defined liabilities, like mortgages and auto-loans, but also their future consumption expenditures, their liability to feed and clothe themselves in the future.
When the Fed engineered its experiment to promote the wealth effect, the family with savings experienced an increase in the present value of their assets and also an increase in the present value of their liabilities. Because our financial assets are traded in markets and because we receive mutual fund and retirement account statements, we promptly saw the change in the value of our assets. We are much slower to appreciate the change in the present value of our liabilities, particularly the value of our future consumption expenditures.
But just because we don’t trade our future consumption expenditures on the stock exchange does not mean that the conventions of finance do not apply. The family with savings likely ends up where they started, once we consider the necessity of revaluing their liabilities. They may more readily perceive a wealth effect but, ultimately, there is only a wealth illusion.
But what happened to the family without savings? There were no assets to go up in the value, so there is no wealth effect – real or perceived. But the value of their future consumption expenditures did go up in value. The present value of their current and expected standard of living went up but without a corresponding and offsetting increase in assets, because they don’t have any. There was no wealth effect, not even a wealth illusion, just a cruel hoax. Link

On the money Audaxes

we know the Capital ratios are coming in 2 weeks which will cause the banks to raise interest rates...

will be insetting to see what is done with the LVR's.. i think they should push it up for investors... if the RBNZ have any clue of how broken the housing market is...

Oh, the RBNZ knows. The more important question is, how big do they want to inflate the bubble? I guess no one wants to be "the RBNZ Governor who caused a crash"...

RBNZ is well aware of rise in house price and should not go to reduce LVR in fact should use more tools as interest rate may have to be dropped further but if they do - intentions are clear that looking for housing ponzi AGAIN to make NZ a Rock Star economy.

RBNZ knows market is broken.
Treasury knows market is broken.

Supply of housing is severely price inelastic due to excessive regulation at both Local and Central Government level.

The problem is RBNZ doesn't control the market it is broken in - the real economy.
Treasury can only 'advise' on how to fix the market it is broken in - the real economy.

Local and Central Government listen to this advice, decide it is contrary to their objectives and do precisely the opposite.

RBNZ does not control house price but if reducing interest rate can use other tools to control rising debts with rising house price.

Have you really bought into the banksters hollow words they will raise interest rates because of the increase in capital requirements?

Interest rates are a product of market supply and demand, rather than a cost plus enterprise. If demand is weak for mortgage rates at the current level, to stay in business these banksters will have to lower their rates. Correspondingly, if demand is strong for mortgage rates at the current level, these banksters probably have the opportunity to charge more.

Since mortgage growth has been fair at best, good luck to those banksters who want to charge more. Its unlikely they'll maintain their market share.

Double edged sword too. Find a bigger deposit with lower term deposit rates which are taxed non-inflation adjusted, so technically going backwards.

I bought my first home a little over 2 years ago with a 25% deposit and we're now sitting on 50% equity according to Core Logic's latest value (145% of 2017 CV). While it's no material use for us as owner occupiers aside from a mortgage top up, it shows that if we didn't buy when we did our mortgage could be 25% + higher.


Same here. Our house has gained over 80k since we bought the section. The only way that most people can realise the gain in a productive way is by using that equity to acquire a rental and therefore add fuel to the fire that is the housing market

Both of you need commensurate pay rises to deal with the higher present value cost of future liabilities that have matched the rise in asset values, as interest rates fell.

These two are fine, their assets have increased along with their liabilities. It's those that don't have any assets that need the pay rise, as their liabilities are still affected.

Housing market has gone nuts, all 4 round someone I know have sold in the last week or two. Get your selling price right and its now a multi-offer market. Really has turned around from a month or two ago.

Stop buying avocados, that will get them on the ladder.

Shhhhh.. you don't want to spook businesses confidence...

Lower rates means higher asset prices? No way! I mean it's only been happening for a decade or more...

Gosh, who knew? Applied mathematics works!

The politicians and bureaucrats will be pleased - their houses have gone up. They are so very, very, clever.

Yeah, Jacinda is a phoney. Just a middle class country gal in woke fancy dress

A sad trend.
Those potential FHB and others who have been posting ad nauseum of housing crashes or continuing leak and advocating that FHB hold off purchasing are sadly wrong.
For the Auckland market the drivers are meaning at worst a firming of prices the market with an upside seemingly more likely. Affordability has been an issue, and the short to medium term it is not going to get better. The mental block against negative or close to negative interest rates (for OCR and TDs) will mean that mortgage interest are most likely not going to fall much further, while other drivers - such as continuing high levels of immigration - will mean put upwards pressure on house prices.
I see the provincial markets slowing after a sustained period of high rates of increase. In provincial regions, if affordability has been a significant issue it is going to be a longish catch up time to change that.
Home ownership is a considerable challenge to FHB; unfortunately with the leverage of equity that housing provides, we are headed to that renting middle class poor.

Home ownership is a considerable challenge to FHB; unfortunately with the leverage of equity that housing provides, we are headed to that renting middle class poor

OK. Assume this is the new reality. A kind of neo-fedualism. What are the impacts on consumer spending that has the greatest impact on GDP? Stay the same? Get worse? Or get better as a new landlord class splashes out on fur coats?

Rather than concerned about the impact on GDP my concerns are more to do with values.
I am a product of what was once a largely egalitarian society in which some may have struggled, but there was the potential to have a quality of life and a degree of security. That security related to each having a feeling of social and economic security, having achievable aspirations, and including the intrinsic value and security of owning one's own home.
The "neo-fedualism" as you refer to undermines that. To me, maintaining those securities take precedence over any consideration of GDP.

Consumer spending comprises approx 60% of economic activity as measured by GDP. It's a necessary component of maintaining security and stability in society. The ruling elite believes that house prices underpin consumer spending. Based on what we see elsewhere, the relationship seems strong.

It is sad, like you've said.. to the point of, rather than waiting for that long term. We all with specific skills just have to leave this country, which only has 3 cancer centers treatment. Some of us decided to move out, leaving those here.. with more waiting list for care. Homeless, renters, property owners. Sadly, they are all on the same boat when it come to their last painful journey of terminal conditions. Wealth alone will never be comparable to own Health. We are seeing plenty of renting upper class Not poor, specialised skills, forever decreasing value of income because of this madness, decided to bail out from this country - You did not expect that did you? - it's no longer the screaming Nurses, Doctors, Teachers, Police, Pilot etc. Just FYI - But like you've said the high levels immigration will surely cover that up. Ehem, how many Gastroenterologist is there in that list?

If we keep bringing 50-60 k of immigrants into the country along with ultra low mortgage rates and the existing housing stock numbers are under water equals ............


Exactly. Interestingly the public voted for the 50-60 level to be lower. Not sure what party campaigned and achieved a mandate of pumping NZ full of people, in fact every election campaign someone campaigns directly against doing just that. Cue NZF.

This signifies the catch 22 of variables effect on each other that Auckland especially is showing.
1.Reduction in cost of servicing loan
2. Increase in stock available
3. Rise in lower quartile price.

Crux here is timing: when will the supply increase be sufficient to counteract the price rises that result from ore competition for the stock available.

This shows why market participants are currently confused as to direction: supply is not yet at a level where it acts as a depressant on price due to more choice for buyers. But you cannot, for any period of time, combine incompatible economic elements - something has to give. As supply continues to rise, my view is that this factor will become more important for buyers than the interest rate. When that takes effect, prices will fall at lower end. Question is, will builder-developers allow enough stock through at a greater pace, to effect price falls? Do they need the revenue? When they do (ie if and when rollover of debt repayments sees banks rise their interest rate) then prices will decline at lower quartile. This is what I expect from march 2020.

This is meant to be what NPS-UDC is doing, forcing high growth areas to provide enough zoned and infrastructure serviced land to have a competitive new housing market.

As it is in Auckland Watercare only has capacity for 55,000 new dwellings... that's less than 3 years supply.

Unless this increases to 7-10 you don't have enough competition in the raw land market to bring end house prices down. To see the effect of this simply look at Christchurch. Same compound growth rate between censuses as Auckland yet a competitive raw land market keeps prices down, and supply able to meet demand

For those with unique high skills, but trapped in this 'game' - sadly, just that.. get out, leave. Only options.
No matter how much you accumulated the deposit, up skills, to make both income in highest bracket territory - in the end? it's not worth it to donate all those efforts to the Banks. Life is too short to be in forever increases debt level, whilst the income won't match it. I felt sorry for all those Lotto winners, despite no initial tax on it. But their true money value, is just that.. meaningless value.

Except there's a similar effect occurring in major emigration spots.

I agree ,Ive been in Australia for 20 years and just come back to take care of my folks ,sure Sydney and Melbourne are nuts and prices are very similar to Auckland ;however ,costs of living are lower and wages are higher;but, places in Perth and Adelaide offer significantly lower housing costs and there are great spots close to the coast.

If you don't mind hotter weather ,taking more caution in entering the ocean and bush ,sharks, spiders and seeing the odd snake from time to time it certainly makes more sense from an economic perspective.

Most Kiwis in Australia would say they miss the their hunting,families and fishing in NZ ;but, when they lived and worked in NZ they said we lived from pay check to pay check and couldn't afford the lifestyle they now enjoy in Australia.

If it wasn't for my parents needing assistance in their old age ,i would have never come back,if your a FHB struggling to get a deposit together i feel for you and i see so many here who have very little buffer in their expenses and wages to compensate for a mild rise in interest rates or some economic curve ball etc.

Ive seen so many people plan for the epic retirement work very hard, sacrificed and then drop dead and then Ive seen people who haven't planned for retirement and struggled in their 80s.

Everybody's situation is different ,you just need to take a hard look at life and determine what you really want out of it.

So those in this bracket have to have saved another annual $135 per week; $7,000 to be able to put their 20% deposit down on the same house as the one available in July. Never mind the additional cost of $35,000, plus compound interest, over the term of their indebtedness. Fabulous! But, hang on, it's only another 20 bucks a week in mortgage payments. That's nothing!
Taken at face value - What a disaster. In the grand scheme of things - it hastens New Zealand going broke- if it isn't already.
At a national level, Asset Value increases in the absence of Productive Growth is a fools economics. It's not 'when' it fails that matters now, but "how bad will it be?"(It's like a Household at the individual level that has no employed members getting another credit card and maxing it out because the value of the house has gone up.One day....)

Absolutely correct, FHB are worse than than they were before interest rate cut as house price have moved up and any fall in last year or so has been recovered.

So now FHB will move into their new house (if are able to buy) with more debt to repay. Thanks to RBNZ and current government inaction.

with retail sales spiking, will be surprised if they dont push the lvrs for investors

Retail sales are spiking? Really? Any evidence you can point to?

OK. Seems interesting that consumer electronics is the largest driver of retail sales growth.

They should but will they ?

"No ****, Sherlock"

If there's one thing that has been shown over the last few years, it's that any interest rate decreases just get capitalised into the price of existing housing stock. A zero sum game if ever i saw one, and vastly increasing the riskiness of the current setup for new mortgage holders.

Bank credit at ever-lower cost (interest rates) effectively moves future prosperity into today; the money is spent and then we set about making the repayments.
Japan did this in the 1980s, which is why their economy has been pretty much flat-lining ever since.
The US, UK and Euro-zone did this in 2008.
China is doing the same thing today, and so are we.
The 'good times' have in effect been borrowed from an impoverished future that we are now about to head into.

Here is what has happened to "affordable" as a concept in Auckland City, for 6m block from April-September, in selected years:

Residential only sales under $700k April-Sept 2013: 1725
2015: 681
2016: 341
2017: 154
2018: 191
2019: 188

Apartments? Same comparison:

2013 (6m block, priced under $700k): 1162
2015: 1315
2016: 1371
2017: 629
2018: 749
2019: 570

Spring bloom? More like a nuclear winter.
Next time you are reading about wonderful marvellous auction clearance rates, bear in mind the bigger and REAL picture for FHB.

Residential sales for Auckland, 6m block April-Sept 2019, sales under $700k: 2466
In 2018 it was 2766
In 2017 it was 2447
In 2016 it was 3860
In 2015 it was 6673
In 2013 it was 10,351

Witness, the destruction of affordability in Auckland in 3 years.
This was of course caused by massive price rise due to excess buyer numbers form abroad.

Note: apartment sales under $700k dropped between the 6m block of 2016 and that of 2017, by 44.7%
The 2019 drop cf 2018 for same period for apartments is: 37% down.
Supply is rising but sales are not. What should we expect from that combination?

And some people want National back...

Thanks that gives me a better picture.

This was of course caused by massive price rise due to excess buyer numbers form abroad.

No, it wasn't. If it was due to foreign buyers it would have been the same all over the country. But the dramatic rises only occurred in some places -Auckland and Queenstown. These exceptional rises were due to extremely cheap credit meeting highly constricted supply. In Queenstown supply is constricted by mountains and lakes. In Auckland supply was constricted by the morons at Len Brown's Council. And to further prove the point, in late 2017 Auckland Council reversed its restrictive policies and flooded in new supply - prices in Auckland stabilised.

In answer to your question, Auckland land prices are currently sitting on a precipice with a base eroded by a flood of new supply.

Foreign buyers tend to stick with major cities and tourist spots though. If you were buying in a foreign country then would you buy in some small town that most people haven't heard of?

Yeah, Chinese , Indian and South African immigrants are queuing up for the provinces. Good grief.

Logically you would have to say prices must fall ;however, i remember that the Japanese in the eighties where on a spurge of buying and all of a sudden their were fire sales globally and a lot of Japanese investors lost a lot of money ,some say that the Chinese will do the same ;but,i lived in China for almost 5 years and the mindset is different they will happily see their investment plunge by 50% because they cant put their money anywhere else (i will let you read between the lines).
When i was in China i knew people who brought investment properties and had mortgages ;but,wouldn't rent them out if they couldn't get the rent price they wanted,they wouldn't say lets get someone to cover part of the costs ,it was the full rental they wanted or a loss of face,so the whole family would scrimp and save to pay a mortgage for an empty apartment.
If those investment properties were purchased by people who purchased via banks or lending institutions and they cant rent these properties at a price to cover mortgage costs we will would expect to see a price drop.
I know Kiwis who say they believe their property is worth x and stubbornly refuse to recognize market values.
I'm finding it more difficult to gauge the market outcome ,to me when i see wages vs purchase costs ,its insanity will our housing market limp along like a sick dog,fall or will it rise again,time will tell.


Grr. Low interest rates only help those with debt. I have no debt, but I want some, in the shape of my own house. Just can't seem to keep up with making my savings meet the deposit requirements. Each year I put another 10k into savings by not having a life outside of work. And each year the deposit required for a median house goes up by more than 10k. Getting sick of it.

Behold, across the shining sea, the land of opportunity they call Australia!

Auckland 12m sales to end of September 2019, under $700k, residential only: 4879
12m to end of December 2018: 5344
That is, the 12m sales series is in decline: DESPITE FALLING RATES, and has been deteriorating through 2019

12m sales series, as above in 2018, under $700k, to end of September 2018: 5238
12m to end of December 2017: 4808. That is, trend was improving all of 2018 up to end of September 18.

So, trend has worsened in 2019 and improved in 2018.
The trend is same for ALL residential sales also.

Interest rate cuts plainly, do not increase sales. And the reason, as Greg is inducing, is that increased number of potential buyers for too few properties of kind wanted, in area wanted, drives price up.

What are you trying to tell us? Is there a relationship between number of sales and prices? what is the relationship? which one is the cause and which one the effect (e.g. where prices decrease, more people buy, or it is more people buying that decreases prices)? what do you think the trend (slowing buying of houses) tells about prices? that the current increase is only temporary and that it will be reversed (because less number of sales must reduce prices?)

Higher prices means fewer buyers. Pretty plain I think.
More supply means lower prices because less competition for the stock on sale.
Crux, as I was trying to show, is when supply outweighs he impact of lower interest rates on the demand (ie more for people to buy, so less price pressure on what is on sale, per individual sale.

Hi mike you say that higher prices means fewer buyers. Can you tell me what effect does FOMO have on buyer demand? I agree that if more homes come on the market and stock increases that could lead to lower prices. However if prices are increasing then there is not enough supply even if there is more vendors. Once prices start to increase what effect does that have on buyers. Do they give up and walk away OR do they become more intense and active?

Prices haven't really been increasing in Auckland. The REINZ HPI for Auckland for October was negative in both 2019 and 2018.

"Higher prices means fewer buyers" MK has put the cart ahead of the horse again. Cause = more buyers, effect = higher prices, not the other way around

For potential owner occupier buyers:

1) In some geographical markets in NZ it is cheaper to rent than to buy.

2) In some other geographical markets in NZ it is cheaper to buy than to rent.

For those owner occupiers who don't know, for similar properties in the same area, just compare the cost of renting to the costs of ownership (mortgage payments, rates, insurance, maintenance, etc).

All potential owner occupier buyers (including FHB) in Auckland should read this report in order to make a fully informed decision. You are free to choose to ignore the report, however you are not free from the potential financial consequences of ignoring the report.

Note that the report is free from the financial interests of real estate agents, property mentors, property developers, economists who are employed by banks to promote bank lending, mortgage brokers who promote bank lending, etc, and others who have a vested interest in promoting property.

Credit to Fritz for sharing this.

Very interesting article and i agree with its content ;however , i don't think our political system has the spine to implement the recommendations and the costs to those who have purchased particularly at the end of property cycle hype would be significant.

Very much a situation of a possum caught in the spotlights.

Either way its going to be costly ,damned if we do ,damned if we don't ,we really have got ourselves in a pickle, i think we are to far down that rabbit hole.

Lessons from the US GFC 2008 / 2009

Cause of the housing and credit bubble in US

From the May 2010 FCIC interview with Warren Buffett, a reknowned investor and Chairman and CEO of Berkshire Hathaway

MR. BONDI: As I mentioned at the outset, we’re investigating the causes of the financial crisis. And I would like to get your opinion as to whether credit ratings and their apparent failure to predict accurately credit quality of structured finance products, like residential mortgage-backed securities and collateralized debt obligations, did that failure, or apparent failure, cause or contribute to the financial crisis?

MR. BUFFETT: It didn’t cause it, but there were a vast number of things that contributed to it. The basic cause, you know, embedded in psychology –- partly in psychology and partly in reality in a growing and finally pervasive belief that house prices couldn’t go down and everyone succumbed –- virtually everybody succumbed to that. But that’s –- the only way you get a bubble is when basically a very high percentage of the population buys into some originally sound premise and –- it’s quite interesting how that develops –- originally sound premise that becomes distorted as time passes and people forget the original sound premise and start focusing solely on the price action.

So every -– the media, investors, the mortgage bankers, the American public, me, my neighbor, rating agencies, Congress –- you name it -– people overwhelmingly came to believe that house prices could not fall significantly. And since it was biggest asset class in the country and it was the easiest class to borrow against, it created probably the biggest bubble in our history.

Have a thumbs up!

Owning may still be a good idea if it is slightly above the cost of renting.

"The REINZ’s lower quartile selling price was higher in November than it was in July in all regions of the country except Nelson/Marlborough, and in most cases the increases were significant."

I think Mike Kirk can provide an avalanche of data showing the opposite

or Cj099 who posted today: by CJ099 | 26th Nov 19, 10:25am
Auckland prices are getting more realistic, which is helping sales at least in the more affordable areas.

or RickStrauss: by RickStrauss | 26th Nov 19, 12:10pm
FYI, the REINZ HPI for October has been negative both October 2019 and 2018. So prices have been going down slowly

or theglc: by theglc | 26th Nov 19, 12:30pm
Ive been predicting a 20-25% correction in Akld for the last few years and I still think its coming... Some here are suggesting the market is picking up, but when the median & HPI are flat and sales volumes in the doldrums clearly it is not

What REINZ do NOT care to publish is a graph showing sales v prices in other cities around NZ.
But the info is available on the website. Sales are not falling in Auckland for bloody obvious reason: prices are not rising.
In all other major centres prices been continuing upwards since 2016 and sales have fallen.
The info I provide is not out of my head: REINZ provides it on website. It is simply NOT highlighted in their press releases.
Selectivity is uniform. People provide and focus on what they want you to know, and for a reason.
First lesson of social science: what are you NOT being told. Why?
It is called critical thinking.
The stats show a collapse in sales in Auckland for those wanting something below $700,000k.
You cannot are with that, it is a fact.
I know you are only bothered about prices.
prices are a function of: supply, demand and the intermediary - price of credit.
Try engaging with that argument, rather than issuing blanket sarcastic asides and treating everything REINZ prints like gospel ("all you need to know" as TV1 News likes to put it in its insidious idiocy)

What's the point, Yvil? Don't point out REINZ data if it is negative year on year?

Dang. How come those uneducated boomers saw this situation coming, should've listened to them.... oh well just sing the beat... ba-bom-ba-ba-bom, ba-ba-bom-ba-ba-bom
Da-dang-da-da-dang, da-dingy-dong-ding blue moon

As house price goes up so does it called FOMO?

What do you think are the necessary pre-conditions for FOMO? (which susequently results in panic buying by buyers)

"Housing getting further out of reach for first home buyers as strong price rises cancel out the benefits of falling interest rates"

To experts at : Everyone knows that FHB are being squeezed out .....What everone wants to know : what is the solution and what the RBNZ and the government should be doing to contain (Or should the current government too wait like national government till it gets out of control for Rock Star ecenomy).

This govt is full of misguided promises.

One thing the Government could do is lift the income caps on the First Home Loan and First Home Grant. I'm fortunate to be earning a little more than the $85000 but even I'm struggling to pull together the 20% deposit with the high cost of living and the year-on-year increases.

First time poster, long time reader. I really appreciate how highly engaged this community is - I've learnt so much! My partner and I (both mid 20s on approx 100k each) saved 200k for a house deposit. We began seriously looking at buying nearly 2 years ago. 2 years on and 6 building reports later, we still have no home. We want to buy on the North Shore, with a budget of $980,000. However, at this point (given the time and money we have expended) we are seriously considering other options (peer to peer lending, shares etc) to try and build our cash profile up and remove ourself from the most in demand first home buyers bracket.

If we are unlikely to be able to take advantage of any future capital gains (2 - 5 years) from a home on the North Shore and be locked into paying a $1100 weekly mortgage repayment over a 30 year loan, what alternative options are there? We want to take advantage of our Kiwisavers so unlikely to buy outside of Auckland as we can't move due to work. Is it worth saving more and finding a home at a higher price with the possibility of a home and income / downstairs unit? I wouldnt have a clue as to who to speak to about building our portfolio with that 200k. Where does one begin to look? Would we be crazy to still pursue a million dollar home on the Shore with the current state of the market?

Welcome youngfhb I hope you find the house of your dreams you're looking for. Have you read rich dad poor dad...a house is a liability because it takes money off you... different logic than what you might expect. I can certainly understand your frustration, doing due diligence and then missing out (at auction I presume). There was a piece I read recently which dealt with this subject of avoiding and limiting due diligence costs. Certainly look for the home you want but perhaps go for something modest. Depending on the cost and the amount of deposit you need, you may have some funds left for making cost effective improvements or to use for investments in either shares or to leverage an investment property. There will be people who poopoo investment properties but that is how we started in property. It is possible to go wrong in property but if you make sensible moves you will find that you should be richly rewarded.

I don't think there's anything wrong with looking to buy a first home on the Shore in this market. That's assuming you're doing it for the "right reasons", i.e. you're looking for a place to call your own, set down roots, and just generally enjoy in a way that you can't with a rental. Of course you need to go into it with your eyes open. It's possible the market may dip over the next few years so you need to be OK with riding that out if it happens.

Maybe you just need to be a little more patient and/or set your sights a little lower. Still need to be happy with what you buy of course. If you do buy, make sure you have capacity to wipe out some of the principal on the mortgage in the first couple of years. Have a clear (and realistic) target in mind and agreed upon with your partner.

I'd caution against the home + income route unless you have some real expertise in that area. I have no clue about peer to peer lending but it sounds a bit flaky :-). Shares can be good but more of a medium term option. Picking stocks is somewhat risky and not for everyone. Managed funds are a safer option but watch out for fees. I myself plan on putting some money into the low fees funds run by Simplicity in the near future.

As you're probably realized by now, it's a battleground out there. Good luck.

Hi YoungFHB,

Welcome to the forums! I too have been reading these forums for awhile, and it's really good to hear from others who are in a similar position (I'm a future FHB). As I'm looking to purchase within the next 1-2 next years, I'm just adding what I can to my cash deposit7. Ideally, as CN said above, you want your mortgage repayments + expenses to be less than your rent (can be equal or just over your rent payments, that is ok too), so look at it from a cashflow point of view. I have no idea about peer to peer lending, and shares (unless they are growth companies) are generally better suited for the long-term. Keep persisting and you'll get there!

Good luck!

You don't need mortgage payments to be less than rent. Just the interest component - or rather, the interest that would be paid on a 100% mortgage. Principle payments add to your wealth so are like savings. Yes, add expenses (rates, insurance, maintenance), then you have a good financial comparison. Now take a longer term view and consider the likelihood of rents rising faster than expenses, and consider the value of intangibles like security of tenure, freedom to make improvements, etc.

Regarding North Shore property prices, the key question is do you expect median property prices to fall more than 11.2% from current levels?

Using median house prices and median rental yields, this is the approximate level where a renter and a property owner would have the same equity value in 10 years from today, and assumes you are buying a property at the median price in North Shore.

1) if you expect property prices in the area to fall less than 11.2% from current levels, then it is better to buy than rent.
2) if you expect property prices in the area to fall more than 11.2%, then it is better to rent for the time being and wait to buy.

If property prices fall by 11.2% from current levels and an owner occupier decides to buy at that price, then that purchaser will potentially be 49% better off in 10 years time, than a buyer at current price levels.

You should do your own calculations on a rent vs buy calculator so as to tailor the calculation for your own personal circumstances (such as particular property assumptions regarding rates, insurance, maintenance, interest rates, as well as future growth in those expenses).

Work out the the change in property prices that would be necessary, where a renter and buyer owner occupier at current price levels would the same after say 5-10 years and then you can assess the probability of that price change occurring. By looking at the numbers in this way, the question becomes what chance is there that scenario happens? Is it high, medium or low?

The rent vs buy decision - a real life example

Person 1:
In 2016, were going to buy a 3 bedroom home in Meadowbank for $970K. That same house on is now valued at $900K. The interest we would have been paying on that mortgage was considerably higher than our rent.

Anecdotally, if we'd bought that home, the home value would be circa $70K less than when we purchase. (now feel for the other couple that won the auction). We'd have paid off little to no principal & we'd have spent far more on interest than rent. So in 2 years, we'd have been circa $100K down. I'm liking our renting & growing equity situation. Far more than owning said house and currently watching equity diminish.

Prices aren't going up right now. We're not paying interest to banks for the sake of it. Growing equity. And are ready to act when the time is right.

Person 2:

FYI, here is a rent vs buy comparison based on the above numbers. All potential owner-occupiers should be doing a similar calculation.

A) Buy 3BRM house in Meadowbank at $970,000
1) equity deposit 20% = $194,000, mortgage of 80% = $776,000
2) rates and insurance ownership costs of say $3,880 per year
3) P&I payments based on 30 year term at 4.5% interest rate is $47,640 per annum
a) in year 1, annual interest cost $34,920, principal repayments $12,720
b) in year 2, the split is annual interest cost $34,348, principal repayments $13,292)
So at end of year 2, mortgage outstanding is $749,988
With house price of $900,000, and mortgage of $749,988, the equity value in the house is $150,012 (vs initial equity deposit of $194,000, so a loss of $43,988 or 22.7%)
4) total costs paid out for ownership - $51,520 per year (being $47,640 mortgage payments and $3,880 rates and insurance costs)

B) Rent option
1) cash of $194,000 (same 20% deposit as above used to buy house) deposit in bank earning 2.5% interest
2) let's spend the same amount as cost of ownership of $51,520 above, so the annual cashflow payments are exactly the same. This is allocated in the following way:
a) rent 3BRM house in Meadowbank - $38,480 per year ($740 per week rent as per median trademe listing)
b) save remaining $13,040 into bank.

After 2 years, the renter has $230,227 cash in the bank ($194,000 initial cash balance plus 2x $13,040 saved as cash differential and bank deposit interest income at 2.5% interest rate)

Comparison of financial outcomes of identical cashflows (have $194,000 cash at 2016, spend $51,520 per annum for 2 years), live in 3BDRM house in Meadowbank:
1) Owner-occupier has equity value of $150,012
2) Renter has equity value of $230,227 cash in bank to use as deposit in future

Renter is better off than the owner occupier by $80,215 or 53% ...

PS: if the renter chose to buy at the current house price, then they could use the $230,227 as a deposit and take a smaller mortgage of $669,773 ($106,227 less than the other buyer). Total costs of ownership would be lower at $44,998 per annum (compared to $51,520 per annum above - which is $6,521 per annum (for 30 years) in lower ownership costs). Such is the benefit of taking on less debt to buy a house when it has a cheaper price.

Refer chat here -

Very good comparison, but...

They didn't get 2 years renting because the landlord kicked them out with a 90 day notice 6 months in. Their lives are disrupted. Had to find a new place. Probably a different commute to work or school, or had to change schools. They had to pay to move all their belongings. Were probably paying rent for 2 places at the same time for a few weeks. Need to spend a few days doing a deep clean for any hope of getting their bond back. Have to sort out the change of address with their bank. Sort out changing power. Vehicle registration. Etc.

I would say avoiding all of the above was worth the $80,215.

"I would say avoiding all of the above was worth the $80,215."

I understand the qualitative issues that you have highlighted - there is a price for peace of mind and stability. That is your personal choice to choose ownership over renting even if it cost $80,215 more. There may be an amount where you might make a different choice - for example what amount would make you prefer renting over buying? Perhaps $150,000? $300,000? Only you know your number, that would outweigh the qualitative factors that you highlight above.

For someone else, $80,215 might represent all their savings for 10 years, and that is the only money they have. They might make a different choice, based on their own circumstances and preferences.

The key point here is that every owner occupier buyer needs complete information so that they can make a fully informed decision to suit their own individual circumstances and personal preferences.

If you spent exactly the same amount each month for accommodation, is it better to buy a house or rent?

A good video explaining the rent vs buying decision, and how to maximise your future wealth.
It is highly dependent upon:
1) future expected returns on the house
2) starting rental yields
3) annual growth rate of rents
4) future expected returns on the investment portfolio

Will more landlords follow suit? Could be more properties listed for sale by landlords ... Potential opportunities for patient owner occupier buyers in Auckland, especially if the economy goes into a recession and highly leveraged landlords are selling at the same time ...

Thank-you all so much for all of your insights and time on these replies. Lots to think about it. Appreciate each of your comments!

Mid-20's is young, are you both ready and mature enough for the financial commitment? If so, I would go for it. Have a plan B, what if you lose an income for example. The house is probably going to absorb your time and most of your spare cash in the early years, but in return you will get a sense of satisfaction and pride that renting can never provide. Despite what you read here (less so now though), property in prime cities will rise in the medium to long term. You always have the option of renting the place should you transfer or circumstances change.

I never regretted buying a house, only selling. Good luck.

The property bulls shouldn't get too cocky. The RBNZ has left the LVR settings unchanged. That's going to place a lid on the market.

That's going to place a lid on the market.

Are you sure that will stop the surge that has been observed in last month in Auckland housing market.

I acknowledge there has been an uplift, regardless of today's decision.
All I'm saying is keeping the status quo will limit the uplift.

May be otherwise RE Agents would have used it (If LVR was reduced) to create fear to FHB and played on FOMO.

Fundamentals have not changed (Except Low interest Rate) so chances of the market flying is limited and who knows may turn again as though interest rates are low but how many FHB can afford million dollar Plus house or even $900000 house in Auckland (Instead of a moratge of $900 per week may pay pay $850 or $800 but still has to be paid besides deposit).

Also have noticed that most the houses (That I have checked) have been purchased by investor/speculators in 2016 or after and are now using this window opportunity to offload (With No Loss or minimum loss or minimmum profit) and if they were so sure of the market, why would they not wait for few more months and sell at a profit after waiting for sucha a long period, already. May be RE Agent are using fear tactics to get listing from the sellers - Sell now before it falls again.

Will this short rally last is a big question.

If it does than future fall in house price is doubtfull and if it does not last - next fall will be meaningfull.

My household is relatively high income, in terms of the stats, and we have 250K in savings.
But even then, we are reluctant to buy. There is still plenty of rubbish in our budget of 750-850K, and yeah we can't afford 900K plus, especially as I am in my early 40s and don't have the benefit of a 40 year mortgage to consider.
If we can't afford it, with a high household income and decent savings for a deposit, how many FHB households can? Or course there are some that can - they earn a lot, are much younger, and / or get help from the bank of mum and dad. But there's an awful lot who can't.

We will keep our eyes open, but we aren't at all desperate FOMO. Worse case scenario, we keep renting the next 5-6 years, then leave Auckland and buy a house mortgage free, with our accumulating savings plus likely inheritance.

How much rent are paying? By my calculations, $900k property less $200k deposit leaves $700k mortgages. 25 years p&i, fixed at 3.5% initially is $810 p/w. That's $42k pa out of around $180k net income. I would say that is pretty comfortable.

We are about 180k gross income, my wife works part time.We pay $780 in rent.
I thought the banks stress test on 5%?

I'm not sure, 5% is $49k pa, so I'd still think you were well within most debt-servicing tests even at that level. There are a number of 5 year 3.99% offers out there, that's $44k pa with 5 years certainty and only $70 p/w more for an asset you will ultimately own. Even after a only a year you will have paid of $16.5k of debt.

thanks for your thoughts :)

"I thought the banks stress test on 5%?"

The lowest I've heard is ANZ at 6.65%. However they also have the lowest debt service ratio at the stress test rate.

Other banks may have higher stress test rates, but allow higher debt service ratios at those stress test rates.

Go check out the mortgage calculators online at the big 4 banks to see what your borrowing capacity is for your set of circumstances.

As an indication, for the median household income in Auckland of $95,000 for a family of 4, here were the maximum mortgages allowed:
1) ANZ $419,000 (debt to income of 4.4x)
2) ASB $522,000 (debt to income of 5.5x)
3) BNZ $531,587 (debt to income of 5.6x)
4) Kiwibank $540,305 (debt to income of 5.7x)
5) Westpac $466,161 (debt to income of 4.9x)

With that income level you can easily afford a $900k property, hell, after putting $200k down your weekly mortgage payments would be less than your current rent on a 30 year mortgage.

That's the thing about binary predictions of have/have not - We're even in a better position theoretically, to commit as such. But in practical life it's more than just that.. we have family, societal, community commitments etc. So much so, most of us in higher level learning/specialisation, mentoring our next young Jedi.. into just that... Get more dosh $ & experiences 'outside NZ'. Sad facts, we're in a breaking points of attending ever increasing populations import increases in healthcare sectors to service, no matter how much you increased the remuneration, the time/work load is just not worth it on this country. And donated our productivity to the Banks? - Not for now thanks, call us again across the ditch. In less than 12mths, handling almost 50 all those wealthy enough property owners, mumbling certain regrets on their deathbed side? - makes, you think what is the most important things to attend on this short life.

I'll be a FHB with < 15 years before retirement but the bank is happy to give me 30 year mortgage, if I can put together the deposit. We just pay more per month than what is required for that term. At 30 years, the repayment is the same as our rent. If I add on what I'm currently putting aside for the deposit, we'll pay it off in 9 years. That's even with keeping my Kiwisaver contribution at 10%. Of course, that means another 9 years of self-imposed austerity.

Who'd have thought that lowering interest rates would push up prices!