Roost Home Loan Affordability for Oct

Property

Roost Home Loan Affordability report for October shows deterioration nationally, but falling interest rates keeping borrowers interested

22nd Nov 11, 5:34pm by Bernard Hickey

By Bernard Hickey

Home loan affordability worsened nationally in October because of a rise in median house prices, but an improving outlook for lower interest rates is boosting turnover and borrower demand.

The Roost Home Loan Affordability report for October showed a slight deterioration from September, largely due to a rise in the median house price to NZ$359,000 from NZ$350,000.

Floating mortgage rates were steady and fixed mortgage rates edged lower, moving in line with financial market expectations for a fall in the Official Cash Rate over the next year. Last month economists and markets had expected the next move to be a rise in the rate from midway through next year.

The growing fear of a financial crisis in Europe and the outlook for slowing growth globally has dampened expectations for interest rate increases.

“Home buyers are heartened by the more solid outlook for low interest rates,” said Rhonda Maxwell, spokeswoman for mortgage broking company Roost.

“Banks remain very competitive and the potential for further falls in fixed and floating mortgage rates is strengthening the appetites of home buyers,” she said.

Affordability deteriorated nationally, with higher prices in North Shore, West Auckland, South Auckland, Wellington and Christchurch affecting affordability, although it remains near its best levels in 7 years overall, the Roost Home Loan Affordability report shows.

Affordability improved in Central Auckland because of a slight fall in the median price. See the main report for links to regional reports.

A young couple earning the median wage could afford to buy a first quartile priced house in October, with 21.6% of their disposable income required to service an 80% mortgage. This is up from 20.6% in September and just above its best levels since August 2004.

The Roost Home Loan Affordability report measures affordability nationally and regionally for individual income earners and households, taking into account median house prices, interest rates and incomes in their regions and cities.

The Roost Home Loan Affordability measure for all of New Zealand showed the proportion of a single median after tax income needed to service an 80% mortgage on a median was 52% in October from 51.8% in September. The worst level of affordability was 83.4% seen at the peak of the house price boom in March 2008 when 2 year mortgage rates were close to 10%.

Low interest rates the key

Affordability has generally been improving since December 2009 as house prices have flattened out and interest rates have fallen.

More than 50% of home owners are now on floating mortgages and most new borrowers are choosing to float, given advertised floating rates at around 5.75% are cheaper than average longer term fixed rates at around 6.2%. The Home Loan Affordability reports use the floating rate.

Affordability is difficult in Auckland, Wellington, Christchurch, Hamilton and Tauranga for those on a single median income, but homebuyers in smaller provincial cities will find home ownership much more affordable. Households with two incomes are also in a stronger position, particularly those bidding for homes priced in the lower quartile.

Affordability for households with more than one income improved in September because of the fall in median house prices. This measure of a ‘standard typical household' found the proportion of after tax income needed to service the mortgage on a median house rose to 34.4% from 33.5% in September.

This measure assumes one median male income; half a median female income aged 30-35 and a 5-year-old child that receives Working-for-Families benefits. Any level over 40% is considered unaffordable for a household, whereas any level closer to 30% has coincided with increased buyer demand in the past.

The first home buyer household measure assumes a first home buyer household includes a median male income and a median female income aged 25-29 with no children. Any level over 30% is considered unaffordable in the longer term for such a household, while any level closer to 20% is seen as attractive and coinciding with strong demand.

The full media release is attached which includes important additional information, including links to all Regional Reports. This was an extract.

Full regional reports are available below:
- New Zealand (159kb .pdf)
- Northland (159kb .pdf)
    - Whangarei (159kb .pdf)
- Auckland region (159kb .pdf)
    - Auckland Central (159kb .pdf)
    - Auckland North Shore (159kb .pdf)
    - Auckland South(159kb .pdf)
    - Auckland West(159kb .pdf)
- Waikato and Bay of Plenty (159kb .pdf)
    - Hamilton (159kb .pdf)
    - Tauranga (159kb .pdf)
    - Rotorua (159kb .pdf)
- Hawkes Bay and Gisborne (159kb .pdf)
    - Napier (159kb .pdf)
    - Hastings (159kb .pdf)
    - Gisborne (159kb .pdf)
- Taranaki (159kb .pdf)
    - New Plymouth (159kb .pdf)
- Manawatu and Wanganui(159kb .pdf)
    - Palmerston North(159kb .pdf)
    - Wanganui(159kb .pdf)
- Wellington region (159kb .pdf)
    - Wellington City (159kb .pdf)
    - Wellington Hutt Valley(159kb .pdf)
    - Porirua (159kb .pdf)
    - Kapiti Coast (159kb .pdf)
- Nelson and Marlborough (159kb .pdf)
    - Nelson (159kb .pdf)
- Canterbury (156kb .pdf)
    - Christchurch (156kb .pdf)
    - Timaru (156kb .pdf)
- Central Otago Lakes (159kb .pdf)
    - Queenstown (159kb .pdf)
- Otago (159kb .pdf)
    - Dunedin (159kb .pdf)
- Southland (159kb .pdf)
    - Invercargill (159kb .pdf)

Regional home loan affordability comparison:
mortgage payment as a % of weekly take-home pay
	Oct-11	Sep-11	Oct-10	Oct-09	Oct-08	Oct-07
New Zealand	52.0%	50.8%	55.0%	63.3%	68.1%	81.6%
Northland	46.8%	46.5%	55.1%	61.4%	74.7%	78.2%
- Whangarei	41.8%	41.6%	50.7%	56.5%	69.5%	70.1%
Auckland	63.9%	65.4%	68.6%	76.9%	82.8%	96.9%
- Central	66.6%	69.4%	66.4%	87.1%	88.4%	99.3%
- North Shore	70.9%	69.7%	72.5%	83.5%	89.4%	104.6%
- South	65.1%	64.9%	70.0%	76.8%	81.2%	98.1%
- West	57.8%	55.1%	58.9%	67.6%	76.5%	81.1%
Waikato/BOP	48.4%	46.2%	51.2%	62.6%	67.9%	81.1%
- Hamilton	50.9%	52.1%	55.6%	64.1%	73.7%	82.6%
- Tauranga	56.1%	50.8%	54.7%	78.3%	75.5%	101.2%
- Rotorua	33.3%	39.2%	37.7%	49.1%	53.9%	60.2%
Hawkes Bay	42.3%	44.1%	51.2%	54.9%	59.8%	68.3%
- Napier	47.8%	49.9%	56.1%	56.3%	64.2%	69.7%
- Hastings	38.3%	40.3%	50.7%	57.1%	60.1%	74.2%
- Gisborne	39.1%	40.3%	49.2%	60.0%	56.0%	79.2%
Manawatu/Wanganui	34.6%	34.4%	39.7%	43.7%	50.7%	59.5%
- Palmerston North	39.7%	37.9%	46.1%	46.3%	57.4%	73.8%
- Wanganui	25.5%	32.8%	31.2%	41.6%	41.8%	47.6%
Taranaki	45.4%	40.9%	48.6%	53.5%	62.8%	66.9%
- New Plymouth	48.9%	46.1%	54.6%	63.7%	67.4%	74.7%
Wellington region	52.4%	50.8%	56.7%	68.3%	69.5%	79.1%
- City	52.5%	57.0%	58.9%	73.4%	71.5%	83.3%
- Hutt Valley	47.2%	46.1%	52.3%	59.9%	61.6%	68.6%
- Porirua	60.4%	56.3%	53.5%	63.2%	71.3%	83.8%
- Kapiti Coast	55.3%	50.7%	53.5%	65.6%	72.1%	83.3%
Nelson/Marlborough	54.4%	51.7%	55.3%	63.1%	72.5%	88.7%
- Nelson	52.2%	53.1%	59.7%	62.1%	70.2%	93.3%
Canterbury/Westland	49.2%	46.7%	51.3%	57.3%	61.2%	75.2%
- Christchurch	53.5%	52.9%	56.6%	64.8%	68.6%	83.1%
- Timaru	37.5%	38.6%	42.3%	48.9%	55.6%	58.6%
Central Otago Lakes	65.7%	60.4%	65.8%	94.1%	104.1%	137.2%
- Queenstown	74.3%	84.5%	81.6%	108.1%	109.1%	151.1%
Otago	36.3%	36.1%	41.9%	45.8%	50.4%	59.1%
- Dunedin	42.0%	41.1%	47.7%	53.3%	56.3%	63.4%
Southland	31.2%	26.2%	28.4%	34.5%	43.8%	47.6%
- Invercargill	33.4%	28.3%	29.9%	37.3%	43.7%	51.5%

No chart with that title exists.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

36 Comments

by BigDaddy | 22nd Nov 11, 7:18pm 1321942695

As prices edge up steadily, the doom sayers will be gnashing their teeth. Olly Newland has been proven right yet again and the gloomsters lie humbled in the dust.

The boom from 2002-7 was just property prices getting ahead of themselves. Now after 3 years of a flat market the steam is building up again.

The threat by Labour of a Capital Gains Tax will be music to the ears of all property investors and speculators. Anything which impedes the flow of property onto the market ( as such a tax surely will) creates shortages. Shortages create price rises and the wealthy get the cream.

Likewise wage rises. An extra dollar in the workers pocket inevitably ends up as higher rents or rising property prices.

by Kakapo | 22nd Nov 11, 7:27pm 1321943268

Nurse! Nurse!!

He's woken up again!

by KW John | 22nd Nov 11, 8:00pm 1321945212

The polling may be 'bollocks', but I couldn't wrangle a second tick for this by revisiting it. Great timing.....

by Gummy Bear Hero | 22nd Nov 11, 8:13pm 1321945984

I am " humbled in the dust " Big Daddy ! ........ go , you good thing ........ prove the Bernard Hickeyophiles wrong , gloomsterisationalying is just so " 2009 / 2010 " ....... Pah !

... life goes on , get with the times you nasty little oinks ........ stop watching worms , get off to some auctions , and buy a few rental properties .........

Feed those worms , instead .........

by mandalay | 22nd Nov 11, 10:18pm 1321953531

You're joking right? 1.2% up across the country and you're crowing like a cockerel... sigh! Here's a big WHOOP WHOOP from me too... or not...

by doublegz | 22nd Nov 11, 9:02pm 1321948976

Bernard and his financial crisis in Europe makes me laugh...day in day out, radio, TV, online he went on and on and on like there is no tomorrow. Was there no one listening to him when he was little that makes him who he is today? OMG!

by Malarkey | 22nd Nov 11, 9:49pm 1321951768

Soooo...The fact that the pessimistic assessments of BH (and many others) have been largely correct means that you're actually saying you just wish people would ignore the problems.

Gutless clowns like you allow these economic catastrophes to occur.

by MCNZ | 23rd Nov 11, 9:28am 1321993712

Lets hope that this will be a shot in the arm for the residential construction sector.

last months numbers for new homes for all of Wellington was 95 , the big hardware retailers are starting to lay people off now.

there are over 2000 kiwi builders now living in Qld and NSW with no intention of returning.

Britain has launched a 400 million pound Get Britain Building scheme to make properties accessible and to keep them affordable.

Simply if we dont build new homes in numbers then demand will outstrip supply.

Now seems the very best time in the past decade to be building but the numbers are the opposite.

Can anyone give a decent explanation why the banks are so adverse to allowing residential construction loans? Why arent we building swags of new houses so supply stays abundant?

by steven | 23rd Nov 11, 10:02am 1321995749

Houses are simply over-priced...hence ppl cant afford them.....

I notice Placemakers has been doing power tool discounts to the trade......I saved $350 on a a big purchase......looking to do it again for the next one.

The (power tools) are simply over-priced when you compare costs to the USA.....when the USA price is $499USD on ebay/Amazon but the NZ price is $1583 you just have to wonder wtf is going on. Blades are $40US v $300NZ here, like why?. I look at the great wood an American DIYer/pro can get at a cost I just cant believe and drool...

Just who is making money in the construction industry? someone somewhere is getting fat margins......If Placemakers can take a makita 1216 saw from $1800+ to $1350....they must still be making a profit....(OK on "special")....outside of that they are making a profit plus that $500....I assume makita NZ is making a similar margin if the US retail prices are any indication.....me thinks there is considerable fat to be removed from the system still.

regards

by SK | 23rd Nov 11, 10:06am 1321995974

I wonder why prices are increasing if people can't afford them.

by martinv | 23rd Nov 11, 11:36am 1322001393

Afford. An interesting word.

Superficially at least if one saves up money, then buys something with that money, it would seem they can afford to buy it.

If one wants to buy something, but has no savings, no way to increase their savings, and they must borrow the entire amount necessary to make the purchase, can they "afford" it?

Clearly there is a whole range in between the two examples above.

I think what we're seeing is more and more purchases are tending towards the second example rather than the first. Banks are willing to lend, and people are willing to borrow, in spite of the fact the will be a slave to that debt for possibly their entire lifetime. When people are willing to be slaves for longer and longer, and that's signed up in a contract, you can extract quite a lot of money out of them during that time.

Of course if we look to the US where their housing bubble has already popped we see that at some point the debtors will at some point reach a debt level where they cannot pay off even the interest at which point TSHTF.

by amalgam | 23rd Nov 11, 11:39am 1322001577

Afford. An interesting word.

Yep, there's quite a big difference between being able to afford something and being able to borrow enough to buy it.

by Malarkey | 23rd Nov 11, 12:43pm 1322005418

Because the drooling 'tards out there still listen to slimy spruikers such as yourself, and are willing to pay any asking price to get into the property ponzi scheme. The more they agree to pay stupidly high asking prices and the more they borrow to pay stupidly high asking prices, the more sellers are encouraged to ask for even more. Morons beget morons.

by hauraki | 23rd Nov 11, 12:18pm 1322003900

Isn't nearly everything over priced in NZ?

Because of our small market and down under location?

A huge 5 bed house built and furnished for US$150k, yet costing NZ$400k plus here with half the floor area

Golf GTI starts for US$20k in US, asking NZ$55k here

Semi auto steyr AUG sells for US$2k, and freaking NZ$9k here

by hauraki | 23rd Nov 11, 12:24pm 1322004284

Isn't nearly everything over priced in NZ?

Because of our small market and down under location?

A huge 5 bed house built and furnished for US$150k, yet costing NZ$400k plus here with half the floor area

Golf GTI starts for US$20k in US, asking NZ$55k here

Semi auto steyr AUG sells for US$2k, and freaking NZ$9k here

by SK | 23rd Nov 11, 12:56pm 1322006209

Far too simplistic.

150k for a huge place in the middle of nowhere with no jobs. Oklahoma, Detroit?

400k for a place in Avondale perhaps - down the road from the major city of a country with very low unemployment rate comparatively, more opportunities and less depression.

by hauraki | 23rd Nov 11, 1:28pm 1322008109

You may have misunderstood me.

House built and furnished - not including land.

Was only comparing building materials, furnitures, whitewares etc.

by 69er | 23rd Nov 11, 3:27pm 1322015234

Hauraki- Sure you could find a well loved SLR for your money- no need to splash out on a new Steyr popgun(wink). I guess a lot of it boils down to economies of scale. I saw someting on the net www.loksa.co.nz which looks interesting as far as cheap housing goes. Not sure if these costs would be passed on to end buyers but $850 per square metre for a luxury house is very cheap. The DBH has costs to build a largish house in Welly at around $1500 but from our experiences it is well over $2000, up to $3000+ for a complicated site. That's for a square meterage across the foundations, so you lose 15-20% of your floor plan in wall thicknesses etc. We heard of one couple who got a bit carried away with their house build, which climbed to around a million. They ended up having to sell- luckily it was snapped up by an asian couple and they made a profit on it.

by Vanderlei Luxemburgo | 23rd Nov 11, 10:51am 1321998712

MCNZ the banks cannot let the price of housing dropped or they will be screwed so they have a vested interest in keep supply down and prices up.

by SK | 23rd Nov 11, 10:01am 1321995662

Prices edging up nationally - can't be a bad thing!

by amalgam | 23rd Nov 11, 11:40am 1322001630

Buying-power plummeting nationally - can't be a good thing!

by Houses Overpriced | 23rd Nov 11, 3:56pm 1322016965

For how much longer???

by Frazcam | 23rd Nov 11, 10:45am 1321998358

There are always ways to try and find money to buy a property. The only people who moan are those that have bad credut, no savings or no equity - if house prices were lower THEY would still struggle to buy.

by amalgam | 23rd Nov 11, 11:41am 1322001693

Why should people have to enslave themselves to debt for half a lifetime just to be able to buy somewhere to live?

by SK | 23rd Nov 11, 12:52pm 1322005966

No one has to - you can rent a cheap little rat hole in Porirua instead.

by Malarkey | 23rd Nov 11, 12:55pm 1322006128

Yep, while you fat gutted spoiled rotten baby boomer property parasites suck the nation dry, and the next generations go without because of it. Yes, why should people expect to be able to afford to pay reasonable prices for decent homes when guys like you expect to have everything? Let them eat cake.

by SK | 23rd Nov 11, 1:00pm 1322006436

Hilarious!

I'm not fat, not a baby boomer, not spoilt and not sucking anyone dry - my name is not UBS.

Again - if you dont want to be 'sucked dry' dont sign the dreaded mortgage papers.

by Frazcam | 23rd Nov 11, 3:45pm 1322016327

Making a statement like that you have just made yourself look like an idiot Malarkey - everybody has choices. If you don't want to own a house DON'T, but don't knock others for wanting to better themselves.

by Frazcam | 23rd Nov 11, 3:41pm 1322016072

Well amalgam, I guess with a comment like that, I should say, why should I slave to pay taxes for people who don't want to work or are sick and CAN'T work or for Working for Families or public healthcare etc...

Unfortunately only a socialist state would intervene to bring down the cost of housing or make cheap housing. All those peple who have saved in the past and borrowed and worked flat out to get on the housing ladder never had your attittude - thank god.

by LOL | 23rd Nov 11, 4:19pm 1322018354

Take a look at how much combined annual income is needed to pay off even a baby mortgage within 20 years. Most people won't have enough left over to pay the rest of the bills.

Houses are insanely overpriced and often being bought by people who are already insanely leveraged on other property.

The point will inevitably be reached where prices are so high that almost nobody will be able to borrow the money required to pay them.

LOL

by meh | 23rd Nov 11, 2:25pm 1322011517

"""This measure assumes one median male income; half a median female income aged 30-35 and a 5-year-old child that receives Working-for-Families benefits"

Is this correct? One and a half x median income would put the couple over the threshold for working for families.

When can we see a monthly report on Home affordability rather than loan affordability? Anyone can "afford" a loan depending on amount borrowed, term and interest rates.

by Don Key | 23rd Nov 11, 5:16pm 1322021812

Malarkey is on the button as regards the tired old ponzi scheme that is the property market.,only limping along because of the falling interest rates.And the collateral damage can be seen in the status of the" have nots" and the widening gap between those who think they can afford it all ,and those on minimum wage wage who cant afford to take their kids to the doctor.And the irony is that its the middle class salary slaves that think J.K has a nice smile that will be without a chair when the music stops.-There is another way!!!

by MortgageBelt | 23rd Nov 11, 5:37pm 1322023039

Economics 101: 'Price' is arrived at by the intersection of Supply and Demand.

Supply = existing homes, sections, new builds etc

Demand = Individuals & familes with 5%, 10%, 20% deposits and a reliable income to service loans from 150,000 to 500,000.

Is the price a conspiracy run by RE, Banks, PIs? We could also moan about the price of groceries e.g. $300 a week for a family, $28,000 for a Peugeot 208. It may be doom & gloom out there but noone's giving goods away for free....

The opportunity cost could be viewed as alternatives such as renting - renting the property as opposed to renting the money for the property, living with relatives...

Thrift, saving, sacrifice, hard work, gaining skills & qualifications from the time you are 17, buy a modest small property early in life, disconnect Sky, bike to work, eat spaghetti in cans, etc .... any kiwi can buy a house if they plan their life over a 5 - 10 year period....

Bernard has a reminder for some: "Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making these comments."

by Ptolemy | 24th Nov 11, 1:34pm 1322094842

You are right MB. In the housing market in NZ both of these factors are manipulated by vested interest groups.

Supply - local councils restricting land, lack of development due to finance, sellers not wishing to take a loss on their sale etc

Demand is very manipulated by the banks. Cheap and plentiful credit has meant that afordability of the loan (not the house) has kept housing just in reach of the masses.

So as you have rightly pointed out price is the intersection of those too factors. If the manipulation of either of these were to cause a change to the current equilibrium you would see a move in price (either way).

I know which one I think is most likely - Europe's debt crisis is going to mean the ost of debt is going to increase for indebted countries like ours. This will affect demand. A deeper and prolonged recession will mean those who have overextended will be forced to sell increasing supply and dampening demand as people lose their jobs.

I think it extremely unlikely we will be able to avoid the fallout of what is happening in Europe for too much longer - at best a global slow down in trade will affect jobs here - at worst credit markets will dry up for our government and banks and then something much worse will eventuate.

by Chairman Moa | 23rd Nov 11, 6:14pm 1322025240

@ steven | 23 Nov 11, 10:02am

"The (power tools) are simply over-priced when you compare costs to the USA.....when the USA price is $499USD on ebay/Amazon but the NZ price is $1583 you just have to wonder wtf is going on. Blades are $40US v $300NZ here, like why?. I look at the great wood an American DIYer/pro can get at a cost I just cant believe and drool..."

Steven, I hope you pay the GST on those imported tools- You should buy from Placemakers still 'cos it keeps our people employed... if you keeps on buying from the evil eBay then shame on you!

by The_Duke | 24th Nov 11, 4:05pm 1322103942

Hahaha...... by that rationale, we may as well open subsidised manufacturing plants all over the country and get back to full employment!

Price always wins Moa- I buy most of my high-end gear off fleabay as well.

Why the hell would anyone give middle-men like Placemakers their hard-earned dollars just to keep someone they don't know in a job? Especially when the premium is 2 or 3 HUNDRED per cent??