Prices at the bottom end of Auckland’s housing market increased by a shocking $85,000 in October, making it increasingly unrealistic for couples on average wages to expect to be able afford a home of their own in the region.
The Real Estate Institute of New Zealand’s lower quartile selling price in Auckland jumped from $850,000 in September to $935,000 in October.
Within the Auckland region lower quartile prices now range from $855,000 in Waitakere to $1,157,000 on the North Shore.
The lower quartile price is the price point at which 25% of sales are below and 75% are above, representing the bottom quarter of the market that is most affordable.
According to interest.co.nz’s Home Loan Affordability calculations, those prices just about rule out the possibility of home ownership for young people on average wages.
The median, combined after-tax wage for couples aged 25-29 in Auckland is $1792 a week, if both work full time.
That’s before allowing for any deductions such as contributions to KiwiSaver or student loan payments.
Unfortunately that’s probably not enough to allow them to be able to afford a home of their own in the region.
Their first hurdle will be getting a deposit together.
The amount needed for a 10% deposit on a lower quartile-priced home would range from $85,500 in Waitakere to $115,700 on the North Shore. If couples on median wages were able to save 20% of their after-tax pay each week it would take them between 4.6 years and 6.2 years to scrape up a 10% deposit.
Those saving times would double for a 20% deposit.
Even if they could come up with a deposit, being able to afford a home would still be uncertain.
If they had a 10% deposit they would need a low equity mortgage, which is probably going to be around $700,000 on which they would be paying a premium interest rate.
Interest.co.nz estimates that the payments on a 90% mortgage for a home purchased at the lower quartile selling price would range from $928 a week in Waitakere to $1256 a week on the North Shore.
That’s equivalent to between 51.8% and 70.1% of the take home pay of couples on the median wage for 25-29 year-olds. And that’s before allowing for other property-related expenses such as rates, insurance and maintenance.
That is likely to restrict the availability of low equity mortgages to people earning higher than average wages, and perhaps substantially higher than average wages.
And even those who could pull together a 20% deposit may struggle with their mortgage payments in Auckland.
A traditional measure of affordability is that mortgage payments should take up no more than 40% of after-tax pay.
In October, Waitakere was the only district in Auckland where the mortgage payments on a lower quartile-priced home would be less than 40% of after-tax pay for couples earning median wages, even if they had a 20% deposit.
And Waitakere was only just inside the 40% affordability threshold by the skin of its teeth at 39.9%.
So even couples who have a 20% deposit are likely to struggle meeting their mortgage payments unless they are on higher than average wages.
Those sorts of problems are no longer restricted just to Auckland.
The REINZ’s national lower quartile price increased by $47,500 in October to $650,000.
That means couples on median wages with just a 10% deposit would likely struggle to meet the mortgage payments on homes purchased at the lower quartile price in Waikato, Bay of Plenty, Hawke’s Bay, Wellington and Nelson/Marlborough.
Housing unaffordability is no longer mainly just an Auckland problem. Like Covid, it is now spreading through the rest of the country as well.
The tables below give the main affordability measures for all of the major urban districts throughout New Zealand.
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