Housing affordability worsened for first home buyers for the second month in a row in March, likely signalling the end of the steadily improving affordability levels that have been a feature since December 2023.
The deterioration in affordability was caused by the combination of an increase in house prices at the bottom of the market, and ongoing increases in mortgage interest rates.
The Real Estate Institute of New Zealand's national lower quartile selling price was $607,000 in March, up from $600,000 in February and $583,000 in January.
An even bigger impact on affordability levels came from steadily rising mortgage interest rates, which have increased in each of the last four months.
The average two year fixed mortgage rate was 5.05% in March, up from its low point of 4.49% in November last year. The last time the average two year fixed rate was above 5% was in May last year.
The twin effects of higher interest rates and higher prices have added about $50 a week since January to the mortgage payments on a home purchased at the REINZ's national lower quartile price with a 10% deposit.
Auckland again the country's problem child
Those cost pressures have been particularly acute in the Auckland region, where the mortgage payments on a lower quartile-priced home ($799,000) have increased by $96 a week since January.
Housing is classed as unaffordable when the mortgage payments on a home purchased at the lower quartile price with a 10% deposit exceed 40% of the after-tax pay of a typical first home buying couple.
By that measure, Auckland is once again the country's problem child for housing affordability, with all districts from Rodney in the north to Franklin in the south now classed as unaffordable.
Around other urban centres, Tauranga, Porirua and Queenstown are all in unaffordable territory. See the tables below for the full regional affordability measures.
Looking ahead, the recent increases in mortgage interest rates show no sign of letting up, and prices at the bottom of the market are being held up by very high levels of low equity mortgage lending.
That suggests affordability levels could continue to worsen for first home buyers as the housing market heads into winter.
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