By Greg Ninness
First home buyers have fared better in Auckland than the rest of the country over the last few months, because prices at the lower end of the market have remained flat in Auckland but have continued rising throughout the rest of New Zealand.
The latest sales figures from the Real Estate Institute of NZ show the national lower quartile price (the price point at which 25% of sales are below and 75% are above) was rising strongly at the beginning of the year, hitting $480,000 in March. This was up a whopping 19% compared to a year earlier.
The lower quartile price then dropped back to $446,000 in May following Level 4 lockdown restrictions, but then climbed steadily to hit new record high of $500,000 in September.
That trend was evident throughout most of NZ, with the lower quartile price in September being higher than it was in March in all of the country except Auckland and Southland, while four regions - Waikato, Bay of Plenty, Wellington and Otago, had record lower quartile prices in September.
But things were different in Auckland, where the lower quartile price peaked at $737,500 in March, dropped back to $705,200 in May, and has bounced around between $722,000 and $730,000 over the last four months.
So while prices at the bottom of the market have shown a steady rise to new highs over the last few months in most places, in Auckland they dipped slightly from their March peak and have remained largely flat since.
So what does that mean for first home buyers?
In most of the country the rise in prices has pushed up the amount of money they will need to save for a deposit and the amount of money they will need to borrow for a mortgage.
The amount of money needed for a 20% deposit on a home purchased at the national lower quartile selling price increased from $96,000 in March to $100,000 in September, while the amount needed for an 80% mortgage increased from $384,000 to $400,000 over the same period.
Both of those were record amounts.
But in Auckland the amount of money needed for a 20% deposit on a lower quartile-priced home dropped from $147,500 in March to $145,000 in September, while the amount needed for an 80% mortgage declined by $10,000, from $590,000 in March to $580,000 in September.
That means the slight easing in prices at the bottom end of the market in Auckland compared to most of the rest of NZ has made it slightly easier for first home buyers in Auckland to get into their own homes now compared to March, while their counterparts in the rest of the country will be finding it slightly more difficult to get their foot in the door of their own home.
Of course Auckland remains the most expensive region writh a lower quartile price that is 45% higher than the national average. So first home buyers in Auckland still face a a considerably more difficult path to home ownership than those in the rest of NZ.
The other factor that has a significant impact on home loan affordability is mortgage interest rates, which were in steady decline between April 2017 and July this year, with the average of the two year fixed rates offered by the major banks falling from 4.80% to 2.72% over that time.
But they have been stuck on 2.72% for the last three months, which means the additional stimulus which falling interest rates provide to the housing market has come to an end, for the time being at least.
Looking at the overall impact of the movements in interest rates and prices since the last market peak in March, taking the national figures, first home buyers would need to stump up an extra $4000 for a 20% deposit on a lower quartile-priced home and will need to borrow an extra $16,000 for an 80% mortgage.
But the lower interest rates mean the the mortgage payments on a lower quartile-priced home would have dropped by about $13 a week.
So around most of the country, typical first home buyers will need to save more and borrow more to get into their own home, but may be finding the mortgage payments a little easier once they get there.
The effect of lower interest rates has been much more noticeable in Auckland because prices have not risen there like they have in the rest of the country.
The weekly payments on an 80% mortgage for a home purchased at Auckland's lower quartile price, would have dropped from about $597 a week in March to $544 a week in September, saving prospective first home buyers $53 a week.
So by almost any measure, typical first home buyers in Auckland were better off in September than they were in March. Because the amount required for a 20% deposit on a lower quartile-priced home would have dropped by $2500, the amount they would need to borrow for an 80% mortgage would have declined by $10,000 and the mortgage payments would have dropped by about $53 a week.
The tables below show how much money would be needed for a 10% or 20% deposit on a lower quartile-priced home in all regions, the size of the corresponding mortgages and their weekly payments, and how much of typical first home buyers' after tax income would be eaten up by those mortgage payments.
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| HOME LOAN AFFORDABILITY WITH 10% A DEPOSIT | ||||||
| At the lower quartile selling price | ||||||
| September 2020 | ||||||
| Amount needed for 10% deposit $ | Years to save 10% deposit | Amount of mortgage required with 10% deposit $ | Weekly mortgage payments $ | Median weekly after-tax pay for couples aged 24-29 $ | Affordability: Mortgage payments as per cent of income | |
| Regions | ||||||
| Northland | 42,000 | 2.5 | 378,000 | 401.99 | 1,617.32 | 24.9% |
| Auckland | 72,500 | 3.9 | 652,500 | 693.91 | 1,741.96 | 39.8% |
| Bay of Plenty | 55,000 | 3.3 | 495,000 | 526.41 | 1,610.40 | 32.7% |
| Waikato | 51,500 | 2.9 | 463,500 | 492.91 | 1,682.19 | 29.3% |
| Hawkes Bay | 44,100 | 2.6 | 396,900 | 422.09 | 1,611.11 | 26.2% |
| Manawatu/Wanganui | 30,500 | 1.8 | 274,500 | 291.92 | 1,638.22 | 17.8% |
| Taranaki | 34,000 | 2.0 | 306,000 | 325.42 | 1,638.22 | 19.9% |
| Wellington | 60,000 | 3.2 | 540,000 | 574.27 | 1,768.35 | 32.5% |
| Nelson/Marlborough | 55,000 | 3.2 | 495,000 | 526.41 | 1,652.97 | 31.8% |
| Canterbury/Westland | 39,500 | 2.2 | 355,500 | 378.06 | 1,720.35 | 22.0% |
| Otago | 45,000 | 2.6 | 405,000 | 430.70 | 1,626.31 | 26.5% |
| Southland | 27,300 | 1.5 | 245,700 | 261.29 | 1,688.91 | 15.5% |
| New Zealand | 50,000 | 2.8 | 450,000 | 478.56 | 1,709.68 | 28.0% |
| Districts/Cities | ||||||
| Whangarei | 46,900 | 2.6 | 422,100 | 448.89 | 1,725.78 | 26.0% |
| Rodney | 76,500 | 4.2 | 688,500 | 732.19 | 1,741.96 | 42.0% |
| Auckland North Shore | 78,000 | 4.2 | 702,000 | 746.55 | 1,741.96 | 42.9% |
| Auckland West | 71,000 | 3.9 | 639,000 | 679.55 | 1,741.96 | 39.0% |
| Auckland Central | 83,500 | 4.5 | 751,500 | 799.19 | 1,741.96 | 45.9% |
| Auckland South | 72,500 | 3.9 | 652,500 | 693.91 | 1,741.96 | 39.8% |
| Papakura | 60,000 | 3.3 | 540,000 | 574.27 | 1,741.96 | 33.0% |
| Franklin | 62,500 | 3.4 | 562,500 | 598.20 | 1,741.96 | 34.3% |
| Hamilton | 55,000 | 3.1 | 495,000 | 526.41 | 1,676.33 | 31.4% |
| Tauranga | 63,500 | 3.7 | 571,500 | 607.77 | 1,627.68 | 37.3% |
| Rotorua | 42,500 | 2.4 | 382,500 | 406.77 | 1,670.46 | 24.4% |
| Gisborne | 47,600 | 3.1 | 428,400 | 455.59 | 1,462.43 | 31.2% |
| Napier | 54,000 | 3.2 | 486,000 | 516.84 | 1,617.56 | 32.0% |
| Hastings | 45,000 | 2.7 | 405,000 | 430.70 | 1,611.11 | 26.7% |
| Wairarapa | 40,000 | 2.7 | 360,000 | 382.85 | 1,388.81 | 27.6% |
| New Plymouth | 45,000 | 2.7 | 405,000 | 430.70 | 1,612.61 | 26.7% |
| Whanganui | 33,100 | 2.1 | 297,900 | 316.81 | 1,514.46 | 20.9% |
| Palmerston North | 48,700 | 2.7 | 438,300 | 466.12 | 1,735.17 | 26.9% |
| Kapiti Coast | 59,500 | 3.6 | 535,500 | 569.48 | 1,580.87 | 36.0% |
| Porirua | 66,500 | 3.7 | 598,500 | 636.48 | 1,677.29 | 37.9% |
| Wellington Hutt | 60,300 | 3.3 | 542,700 | 577.14 | 1,720.14 | 33.6% |
| Wellington City | 68,500 | 3.2 | 616,500 | 655.62 | 2,009.41 | 32.6% |
| Nelson | 55,000 | 3.2 | 495,000 | 526.41 | 1,652.97 | 31.8% |
| Christchurch | 40,500 | 2.2 | 364,500 | 387.63 | 1,714.17 | 22.6% |
| Timaru | 33,000 | 2.0 | 297,000 | 315.85 | 1,572.13 | 20.1% |
| Queenstown | 83,500 | 4.9 | 751,500 | 799.19 | 1,626.31 | 49.1% |
| Dunedin | 45,500 | 2.8 | 409,500 | 435.49 | 1,521.27 | 28.6% |
| Invercargill | 28,610 | 1.7 | 257,490 | 273.83 | 1,609.47 | 17.0% |
| Notes: Calculations based on buying a home at the REINZ's lower quartile selling price for September 2020. Mortgage interest rate used to calculate repayments is the average of the two year fixed rates offered by the major banks, with a loading for a low equity loan. Weekly income is the combined median after-tax pay for couples aged 25-29 with both working full time. Years to save is based on saving 20% of after-tax pay per week. | ||||||
| HOME LOAN AFFORDABILITY WITH A 20% DEPOSIT | ||||||
| At the lower quartile selling price | ||||||
| September 2020 | ||||||
| Amount needed for a 20% deposit $ | Years to save 20% deposit | Amount of mortgage required with a 20% deposit $ | Weekly mortgage payments $ | Median weekly after-tax pay $ | Affordability: Mortgage payments as per cent of income | |
| Regions: | ||||||
| Northland | 84,000 | 4.9 | 336,000 | 314.93 | 1,617.32 | 19.5% |
| Auckland | 145,000 | 7.9 | 580,000 | 543.63 | 1,741.96 | 31.2% |
| Bay of Plenty | 110,000 | 6.5 | 440,000 | 412.41 | 1,610.40 | 25.6% |
| Waikato | 103,000 | 5.8 | 412,000 | 386.17 | 1,682.19 | 23.0% |
| Hawkes Bay | 88,200 | 5.2 | 352,800 | 330.68 | 1,611.11 | 20.5% |
| Manawatu/Wanganui | 61,000 | 3.5 | 244,000 | 228.70 | 1,638.22 | 14.0% |
| Taranaki | 68,000 | 3.9 | 272,000 | 254.94 | 1,638.22 | 15.6% |
| Wellington | 120,000 | 6.4 | 480,000 | 449.90 | 1,768.35 | 25.4% |
| Nelson/Marlborough | 110,000 | 6.3 | 440,000 | 412.41 | 1,652.97 | 24.9% |
| Canterbury/Westland | 79,000 | 4.3 | 316,000 | 296.19 | 1,720.35 | 17.2% |
| Otago | 90,000 | 5.2 | 360,000 | 337.43 | 1,626.31 | 20.7% |
| Southland | 54,600 | 3.1 | 218,400 | 204.71 | 1,688.91 | 12.1% |
| New Zealand | 100,000 | 5.5 | 400,000 | 374.92 | 1,709.68 | 21.9% |
| Districts/Cities: | ||||||
| Whangarei | 93,800 | 5.1 | 375,200 | 351.67 | 1,725.78 | 20.4% |
| Rodney | 153,000 | 8.3 | 612,000 | 573.62 | 1,741.96 | 32.9% |
| Auckland North Shore | 156,000 | 8.5 | 624,000 | 584.87 | 1,741.96 | 33.6% |
| Auckland West | 142,000 | 7.7 | 568,000 | 532.38 | 1,741.96 | 30.6% |
| Auckland Central | 167,000 | 9.1 | 668,000 | 626.11 | 1,741.96 | 35.9% |
| Auckland South | 145,000 | 7.9 | 580,000 | 543.63 | 1,741.96 | 31.2% |
| Papakura | 120,000 | 6.5 | 480,000 | 449.90 | 1,741.96 | 25.8% |
| Franklin | 125,000 | 6.8 | 500,000 | 468.65 | 1,741.96 | 26.9% |
| Hamilton | 110,000 | 6.2 | 440,000 | 412.41 | 1,676.33 | 24.6% |
| Tauranga | 127,000 | 7.4 | 508,000 | 476.15 | 1,627.68 | 29.3% |
| Rotorua | 85,000 | 4.8 | 340,000 | 318.68 | 1,670.46 | 19.1% |
| Gisborne | 95,200 | 6.2 | 380,800 | 356.92 | 1,462.43 | 24.4% |
| Napier | 108,000 | 6.4 | 432,000 | 404.91 | 1,617.56 | 25.0% |
| Hastings | 90,000 | 5.3 | 360,000 | 337.43 | 1,611.11 | 20.9% |
| Wairarapa | 80,000 | 5.5 | 320,000 | 299.93 | 1,388.81 | 21.6% |
| New Plymouth | 90,000 | 5.3 | 360,000 | 337.43 | 1,612.61 | 20.9% |
| Whanganui | 66,200 | 4.1 | 264,800 | 248.20 | 1,514.46 | 16.4% |
| Palmerston North | 97,400 | 5.3 | 389,600 | 365.17 | 1,735.17 | 21.0% |
| Kapiti Coast | 119,000 | 7.1 | 476,000 | 446.15 | 1,580.87 | 28.2% |
| Porirua | 133,000 | 7.5 | 532,000 | 498.64 | 1,677.29 | 29.7% |
| Wellington Hutt | 120,600 | 6.6 | 482,400 | 452.15 | 1,720.14 | 26.3% |
| Wellington City | 137,000 | 6.4 | 548,000 | 513.64 | 2,009.41 | 25.6% |
| Nelson | 110,000 | 6.3 | 440,000 | 412.41 | 1,652.97 | 24.9% |
| Christchurch | 81,000 | 4.5 | 324,000 | 303.68 | 1,714.17 | 17.7% |
| Timaru | 66,000 | 4.0 | 264,000 | 247.45 | 1,572.13 | 15.7% |
| Queenstown | 167,000 | 9.7 | 668,000 | 626.11 | 1,626.31 | 38.5% |
| Dunedin | 91,000 | 5.7 | 364,000 | 341.18 | 1,521.27 | 22.4% |
| Invercargill | 57,220 | 3.4 | 228,880 | 214.53 | 1,609.47 | 13.3% |
| Notes: Calculations based on buying a home at the REINZ's lower quartile selling price for September 2020. Mortgage interest rate used to calculate repayments is the average of the two year fixed rates offered by the major banks, with a loading for a low equity loan. Weekly income is the combined median after-tax pay for couples aged 25-29 with both working full time. Years to save is based on saving 20% of after-tax pay per week. | ||||||
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85 Comments
But, I thought house prices were going through the roof, they told me so on Seven Sharp! I think you must be wrong!
Affordability isn't the same as house prices. A house at 2 million is affordable to most people if the interest rate is less than 1%. The problem occurs when interest rates rise. At 8% , they could be paying $150,000 per year in interest alone. 8% is historically low. But there is no justification for house prices rising so much, when inflation is so low. The problem is supply, land being drip-fed onto the market, lack of competition in the building materials market, and that houses are used as an investment vehicle. Plus many other problems, that create the perfect storm for house prices continuing to rise.
Get in before you miss out!
You cannot lose,
Let’s do this.
What a crappy time to be a 20something year old. Risk if you buy, risk if you dont.
What a really really crappy time to be a 15 year old if things continue.
Jacinda needs to call a press conference outside the RBNZ offices. She can emerge from them holding a blood spattered rolling pin, and announce to the media she has just held a conversation with Orr and team and that they have agreed to introduce measures to halt increases to house prices.
The effect would be immediate.
Let's do this. Today.
Jacinda is working hand in glove with the RBNZ. Remember she doesn't want to see prices fall. She's a phoney and a sellout.
I've just sharpened up my pitch fork, got a burning torch and a sack of rotten tomatoes, now what do I do?
Put rotten tomato on end of pitchfork and cook over the burning torch, Enjoy.
Or the other option is.........
Yes she managed to hoodwink a huge proportion of the NZ public - keep pushing those fact based comments Brock.
Can't tell if you're being sarcastic or not.
Remember those house prices that were scandalous under a do-nothing, lazy and cruel National government? Well they're $125K higher now.
That's exactly what she did. Read her 2017 manifesto for the details, champ.
Didn’t Judith Collins say she didn’t want house prices too fall either....
Judith said she doesn't want a couple who borrowed themselves to the hilt and then going into negative equity... This was a disgusting statement because it's an endorsement to do just that and the government will protect you from risk.
Exactly, and it is also a signal to ALL homeowners their non-valued added speculative equity is protected.
Labour are also going to do the same by subsidising homeownership via rent to buy or shared equity schemes, ie taxpayers cross-subsidise each other.
Just another form of musical chairs.
Jacinda already stated only 'one factor' to sort this housing ..'supply' what she missed to understand is the overall economic factors & RBNZ influence.
Last time her policy wish being torpedoed by NZFirst, Now? they can govern alone, BUT yea, don't count any hope when the leader already stated in binary term either yes or no.. nothing in the middle, remember how she cornered herself? by saying as long as I'm a PM.. no CGT (despite that the rest of OECDs do implement such measures) - granted, she's young.. world is still black & white, yin-yang.. she is not yet familiar that life is full of those gray area (spin up faster that yin-yang logo, you shall see 'gray' colour). By certain stat means, some OZ states clearly offering a better living prospectus.
John Key said as long as National was elected, GST would not increase. What happened?
Mike Greer article on stuff over the weekend.... He can’t import houses from Japan because they are too highly spec....he’s been told he needs to downgrade the steel content - using the inferior stuff that we are presently using and a whole raft if other downgrades too so as to meet the current NZ spec’s. Fancy that!
Yeah, not only housing. Global warming, inequity, better have a good relationship with their parents and ask them for help for getting houses, otherwise it's gonna be a tough life for them. Those who don't have houses might not be able to find partners / get married. It's has already been happening in China. Hated to say, we are just following China's steps at the moment.
Also like Japan who's population is falling dramatically. We need immigration to make up for the Kiwis don't have the right conditions for a family.
Save their pocket money and buy bitcoin or ethereum etc..... buy as much as you can afford and ride it out.
Unfortunately those get taxed whereas property doesn't.
Yes indeed, but unless the banks are giving out 100% mortgages they’ll still need to save for a deposit.
Risk is ubiquitous......
Get over it and get on with it.
TTP
What does that even mean?
It means "I bought a house years ago and I am alright Jack, so you should just hock yourself to the eyeballs too. Houses will only ever go up".
But I know good people that have been financially wiped out forever by ignoring risk and taking on too much debt.
lowercase,
If you are unfamiliar with TTP-I can assure you that he doesn't know what it means either. His posts are Pointless-always.
What is overlooked of course is that if there were fewer land supply restrictions, both up and out, like there are in other jurisdictions, then the fall in interest rates would NOT have seen a rise in house prices through increased demand.
This would have resulted in housing being more affordable, and without taking on more debt.
And let's not forget the very poor quality of what you are buying.
Need to save the equivalent of 2 - 3x the median individual's income just to attain a 20% deposit, while deposit rates are effectively 0.
Meanwhile 30 years ago people were taking out 2 or more mortgages at 20%+ interest rates to buy a house worth 2 - 3x their income in total, while deposit rates were 12 - 15%. Yet you'll often hear the latter claim the former are "spendthrift"....
What is also overlooked is that it is a 'household' median.
Back in the day that meant ONE income earner, and when interest rates went up the household was able to off-set the increases somewhat by the other partner working part or full time. Then this has been further offset by staying at home longer, working longer hours, delays in starting families. They renting out any spare rooms, then spare beds, then hot bunking. Anyone sold a kidney yet?
And yet, in spite of all this, the income median multiple has continued to grow.
There is nothing left that FHB's can do.
How do I short Avocado orchards?
There has been a societal change where the female (wife/partner/or husband) is now far more likely to be working a full-time job and career, in fact society is actively promoting that outcome. What that means is that a modern family unit now brings in more income than the traditional unit where one partner stayed at home. This will naturally lead to higher house prices and render affordability comparisons to single income in the 70's/80's/90's largely redundant.
I know, let's just blame the RBNZ and boomers - it's more fun and easier than digging into the facts.
Having both partners working was a great trick for those wanting to get ahead as the benefits were huge. Now all the tricks have been done and it's hard to work out ways to get ahead except unless you're lucky enough to have help from you parents.
This societal change and falling interest rates have been the main driver of property prices over the last 50 years. Both of which won't occur again with interest rates nearly at their absolute bottom and polygamous relationships hasn't taken off (though the banks might start encouraging this). People expecting property to keep doubling every 10 years are likely to be disappointed (after this last hurrah).
Many factors push property prices higher of which the double income development is one. We can't blame someone for that though so it gets a free pass here.
Property prices will keep going up over the long-term, it's just the tail winds will change.
Yes I never said it was the only one, I also didn't say they wouldn't keep going up, but without those two factors, growth has to be slower unless our growth in incomes increases (which is unlikely since most investment funds just go into houses and not innovative business).
You're right that it makes price comparison difficult -- and that we can't really blame anyone, because most people wouldn't want to turn back the clock on womens' right to work.
But a family having to work twice as hard (two wage-earners instead of one) to achieve the same standard of living as their parents had indicates that maybe our measures of economic success are not that great.
I agree with you. Of course women should be able to pursue a career, have the same opportunities as men and be paid the same - but has it made us happier and what does it mean for the kids? Now instead of a choice, it's a must to survive.
I'm not blaming boomers orthe RBNZ, and if you want to dig into facts, here you go:
http://www.performanceurbanplanning.org/
https://books.google.co.nz/books/about/Economics_Real_Estate_and_the_Su…
https://books.google.co.nz/books/about/Economics_and_Land_Use_Planning…
https://www.amazon.com/Order-without-Design-Markets-Cities/dp/0262038765
You have the relationship between house prices and income back to front. It is the rise in house prices that have caused the need to have both partners working, not the other way around.
And the comparison is not just for those three decades, but for every decade prior to that as well. All of which are comparable.
In jurisdictions where land supply is not restricted and supply can equal demand, house prices are approx. 3x median income, irrespective of the rate of immigration and how low interest rates are; fact.
I am blaming Baby Boomers and the RBNZ.
If it's all a question of land and supply then why have house prices increased so markedly in the past 6 months when, all else equal, the only change has been the RBNZ's madness and a complete halt to immigration??
See my reply to Fritz below, namely fuel, ignition source, and accelerants.
Where? Houston?
A number of reasons, beyond limited planning regulation, why that is so. Including lots of flat land and massive economies of scale for construction.
You mean flat like Australia is, and their median multiple is almost as high as ours.. And if you think building on flat land is cheaper, then there is plenty of flat TC3 land in Christchurch you can buy.
And California's economy of scale is just as big if not bigger than say Texas, but California's median multiple is twice Texas's.
All these types of reasons, are just excuses and have already been covered in the Productivity Commissions report on Housing etc.
Housings first function is to provide shelter, the cost of which is a store of fuel, both in a literal and figurative sense.
Restrictions of all types (but in this case of land restriction and then council consenting time and cost restrictions) are the ignitions for price instability.
Low-Interest rates and/or high immigration are accelerants.
Without the ignition to start the fuel burning, accelerants don't work.
Yes Chch has plenty of flat land surrounding it and that has been a key reason why they have been able to build lower cost housing.
I am talking about Auckland, I should have been clearer. Also for a long time construction costs have been 20% lower in ChCh than Auckland.
Apart from Sydney, housing is being built on the fringes of Aussie cities at prices much lower than Auckland. Again, it's the availability of flat land and much lower construction costs. Little if anything to do with council regulation.
Planning regulation has an impact but it is exaggerated. Lower levels of regulation can actually have a perverse impact of raising prices, look at what is happening in Auckland as developers bid high prices on land with medium to high density development potential.
Also the Houston model might be one of the better ones if you look at housing affordability in a vacuum, however it generates a whole lot of negative externalities that disciples of the model fail to acknowledge.
Sorry, Fritz but you are going down the compact city rabbit hole with this.
One, the point is that TC3 land in Christchurch, even being flat is more expensive to build on than 90% of anything in Christchurch.
Two, the reason the land prices did not increase as demand for new sections was needed after the earthquakes is because there was a trifecta of competition between CCC, Waimak and Selwyn District Councils ie less restrictive land policies.
Three, Re Sydney, and yes NZ other cities than Auckland are also cheaper to build on the fringe, flat or not. The point is that if being flat was a given for affordable housing then Aussie, and Christchurch, should be at the same price as Houston. They are not.
Four, Auckland having far more apartments will be dearer on m2 basis than the more stand-alone housing in Christchurch. And even if construction costs are 20% dearer in Auckland, then that would be fine if it was only reflected in a 20% increase in value, but it is far higher than that.
Five, The reason developers are bidding high prices on land with medium to high-density potential is because of high levels of restriction, leading them to have to compete for limited land to build down to achieve a certain price point. This is due to restrictive land policies, the degree of which at this level is semantics. If the land was more freely available, both up and out, it would result in cheaper pricing everywhere.
Six, And whatever negative externalities a system like Texas has, which you say disciples of the model fail to acknowledge, but you don't mention yourself, is far less of a burden than the doubling and then some of the house prices the Auckland is promoting. The pricing of which takes money away from every other part of the income earners needs.
The reason that Auckland prices are the way they are, is because of policy. It's disingenuous to criticise Auckland house prices and then support the very policies reasons for their existence.
Well the double income thing has largely been exhausted. Two people working full time on average incomes will struggle to buy in Auckland, especially if they have kids.
That's that last trick or hack available to those wanting to get ahead and live with a decent standard of living - not to have kids.
Yeah.
But even having no kids won't be a guarantee into home ownership, especially if prices rise another 10-20 % in the next 2-3 years.
Soon all avenues (no kids, very low mortgage rates etc) will be exhausted. You will either need to be high income earners or the children of the well off.
Zero percent interest mortgages will probably come in then to keep the bubble going. Or maybe people will even be paid to have a mortgage.
The problem is that if the government decided to actually solve the housing disaster, and make sure there were enough houses for everyone, then that could affect prices in the downwards direction.
But there is o political will to reduce house prices by any major political party. Most politicians own at least one home, so they have vested interests too.
TK.. so for a fair and accurate measure just compare average household income to house price ratio then. It was around 3.5 in Akld when I bought my first house, now it is 10; a giant 3 fold increase in affordability.
Your first home might be more "affordable", but going from two to four beds for that family home is going to mean doubling or tripling your mortgage.
This measure is still cooked. It's useful as a barometer, but the terms it uses seem designed to make the unpalatable seem acceptable.
For example, using the *median* income and the *lower quartile* property; using *household* income, because no one ever loses a job or gets pregnant (that 40% of household income, manageable yes?, becomes a catastrophic 80% overnight); and assuming that interest rates will stay low forever (maybe a fair assumption).
So it's a measure of affordability that says young people should expect to live in crappy housing forever, never have children, and take on debt assuming that interest rates never rise.
Except that young people will usually see their incomes rise quite a bit over their first 10 years of working.
I have issues with the report for a different reason: Is 24-29 really typical FHB age these days? Maybe it is in provincial areas but I suspect that it's higher in the cities. Though at least 24-29 gives some consistency when comparing Interest's home affordability metrics over time.
Yes, it's flawed on several grounds. These grounds have been raised before, but apparently ignored.
Up until the early 1990s house prices were historically 3x median income multiple,
Anything greater than this points to a dysfunction in the housing market which is mainly due to restrictive anti-competitive land markets, followed in short order by council consenting times and costs.
Jurisdictions that have competitive land markets having housing at approx. 3x income, irrespective of immigration demand, and low-interest rates.
In 1992 you could buy a new 745m2 suburban section in Albany for $45,000, now the latest offering at Flatbush 348m2 for $695,000 https://www.trademe.co.nz/a/property/residential/sections-for-sale/auck…
Not quite right ...
We lived in a 2 bedroom 80 sqm state house in Mt Roskill on ¼ acre section in the 1950's through 1960's. Our next door neighbour urged my father to buy the place. The cost was 6 times his annual income. At the same time Group Home Builders, Neils and Universal Homes were selling house and land packages out in Manurewa for 4 times his income (Manurewa was a long way out of town then and the Southern Motorway stopped at Penrose-Ellerslie) He didn't want to move out there. We didnt buy or move
It's a median so there is a range so you will get examples above this, and below this. But if you take it at face value, there is no reason other than Govt. policy for Auckland to be any higher than 4 or 6x median income today.
Wouldn't that be great?
Housing affordability improves for FHB in Auckland......is this a joke ?
Though interest rates have fallen - House prices have shot up by 10% to 20% plus so any fall of interest rates have been offset by rising house price. So may be FHB are paying same or slightly more mortage but DEBT amount/ burden is much higher.
Even QV now shows estimates 10% to 20% more than RV...and is it all to help FHB ?
What has helped is removal of LVR so can borrow more and have been allowed to take high risk and if this is called 'AFFORDABILITY FOR FHB HAS IMPROVED' is a joke on FHB and also true are buying more as FOMO created by various agencies including RBNZ and media is at peak and fight for toilet paper has been replaced by house.
Yes, and for many where 'affordability' has supposedly increased, they are still likely to miss out, regardless of whether their offer is the highest, to those who are able to put in unconditional offers etc. People who are able to take part in this scramble, are still continually missing out on places.
Greg Ninness.. I will ask again. If things continue down the current path, how do you see this impacting on our teenagers who will be looking to buy in 5 or 6 years? Some of us actually care and want to protect them. Do you??
You just don't understand, do you!
"Affordability" isn't about "How much you pay" for something, it's whether you can use all of your present and future financial resources to pay a lender the interest on the debt you will need. Price becomes a tertiary consideration! After all, the Guaranteed Capital Gains - all tax-free if you structure it right - will take care of any minor impediments - like Capital Repayment orPurchase Price.
Good you're finally seeing the light bw
I'd be interested to know where these all are? I'm looking in South Central Auckland and houses with CVs of 700-850 are selling for 950-1.2 mill.... These would have been considered lower quartile 18 months ago.
I think it's quite easily explained. A larger proportion of lower quartile properties selling in Auckland over the past one year have been new, 2 bedroom townhouses selling for circa 580-700k. They are usually sold off the plans so you don't have the bidding wars.
People who can still 'afford' to stay in this game, are struggling to get their offers accepted. There is so much competition. I could pitch a tent in a public park, list it as leasehold and it would receive several offers. I feel utterly sick thinking of all those currently struggling and of the generations to come and what is being done to them.
184,000 more people living in NZ than two years ago. 80% approx from migration and 20% through natural increases (births).
https://www.stats.govt.nz/information-releases/subnational-population-e…
No one creative enough during the recent election campaign to ask those party leaders a simple basic question: What would you like to see this country ideal level of housing affordability ratio relative to income? apart from being twisted so much into loan serviceability level (which basically goes down to 'multiple renters') answer.
Well they were kind of asked, and they kind of answered.
With effectively a bullshit answer of not wanting prices to go up, or down.
I still can't see how this lunacy doesn't end in a severe correction. How far are we from the Minsky moment now? A perminantly high plateau is wishful thinking.
I've been thinking the same thing for a few years, but it doesn't happen. Even though it affects me directly as an Aucklander in the potential-FHB bracket, I'm trying to remain philosophical. When the rules of a game seem stacked against you, better not to play. I'll be watching. If there's no correction in the next year or two, I'll just have to accept that and move. Auckland will have to learn that there might be downsides to driving out all the young, educated people.
It's been happening for years Brisket, they leave, do well and then come back cashed-up and buy. The pull of family and child-hood memories is strong.
That's not really true. Some come back. Many stay overseas. I have plenty of friends and acquaintances who went to Aus or Europe, and stayed there. Well north of 50%.
Yes there are over 1m Kiwis living outside NZ and most have good reasons.
Te Kooti seems to live in a bit of an alternative reality, a quite quaint and nostalgic one.
You'd like it!
I would say 75% of my friends who went offshore have returned in some capacity. Nearly all own at least one property here.
The ones you've mentioned probably born & raised here, young, went offshore into hospo & tourism then back for obvious Covid support reasons. How many of them really with their offshore six digits salary want to come here? as matter of facts, you can search how many rare skills six figure earner here heading offshore. Why?
The problem is the 'correction' is really just the blood-letting that should have followed in 2008, but didn't. So that's 12 years+ of deferred 'correction' that just never happened. A lot of young educated people are still here, they're just absolutely up against it in terms of financial stability.
The only reason it will happen sometime next year is if there are massive unemployment numbers. There is a chance of this but I would not bet the farm on it.
A credit crunch - like 08 - is quite possible.
Past that one, but little correction Fritz; We lead/lag the world to mitigate the credit crunch part, we printing it freely. We called changing the goal post, changing the referee, changing the player numbers, lastly? we even deny that there's a two team playing football, rather.. we say, we just a spectators watching a chess game. What getting close to possible right now is... 'Confidence crunch' - watch how this at play, behavioral for credit/08 and likewise behavioral now for confidence crisis. All of us being ushered by vague promise, facing major issue in unsettling times.
Greed is good, debt is great.. Get in and buckle up!
I suspect that the lower quartile price in Auckland is heavily skewed by the extremely cheap leasehold properties (Central Auckland pigeon hole apartments). Should leasehold be included in this metric?
An interesting point. Can anyone confirm whether this is the case or not, and whether their numbers are high enough to meaningfully affect the stats?
I wouldn't say leasehold would be that meaningful, but the sheer quantity of 1 and 2 bedroom apartments and townhouses, old and brand new, will be having an effect.
Interest.co.nz are totally off the mark with their age assumptions, very few buy before age 27. Many buy or want to buy not long before starting families, in which case one bedroom and often 2 bedroom dwellings are simply too small. So it would be more appropriate to look at median prices, not lower quartile.
Now housing maeket is so high that is evudent from RE agents when asked pruce feedback, do not shy away from giving expectation much higher than RV, unlike before when it will be RV or near around ( even less) *and now is 10% to 20% more and could be higher AND are getting it also.
Wondering has wages gone up so much that FHB are now million dollar plus house.
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