By Bernard Hickey
Home loan affordability improved in December after median house prices dipped nationwide, helping to lift demand from first home buyers who see record low interest rates staying lower for longer and who can now use their KiwiSaver money as a deposit.
Affordability for young couples who both have jobs is near its best levels in seven years because of record low interest rates and rising incomes, although affordability for home buyers in central Auckland, Wellington and Christchurch remains difficult.
“There has been a surge of interest from first home buyers in recent months because of the low interest rate outlook and because many are now able to start withdrawing their KiwiSaver money,” said Rhonda Maxwell, spokeswoman for Roost Mortgage Brokers, which sponsors the Roost Home Loan Affordability report from Interest.co.nz.
See all the regional reports for regular home loan affordability here.
After three years in the scheme KiwiSavers who want to buy a first home can withdraw contributions made by themselves and their employers for a deposit. They cannot withdraw the government’s kick-start or tax credits contributed by the government.
Many first home buyers reached their 3 year anniversary in late 2011 and banks are competing hard for these home buyers, often lending up to 95% of the value of the home and waiving loan fees to win business from rivals.
See all the regional reports for first home buyer affordability here.
“Mortgage brokers and advisers are in the best position to get the best deal from any banks and either to advise borrowers directly on using their KiwiSaver contributions, or refer them to an authorized financial adviser,” said Maxwell.
Comments from the Reserve Bank over the last month and the darkening outlook for the global economy have further flattened the interest rate outlook. Most economists now see the Official Cash Rate on hold here until late this year or early next year. Some banks even trimmed their fixed mortgage rates in early January as wholesale interest rates fell, making the fixed vs floating decision even tougher for borrowers.
Affordability improved nationally, with prices lower in central and South Auckland, and in central Christchurch. The median house price fell to NZ$355,000, which reduced the proportion of after tax income needed to service an 80% mortgage on a median house to 52.0% in December from 53.8% in November, the Roost Home Loan Affordability report shows.
Best in 7 years
Household affordability for first home buyers improved to 21.5% of income from 22.1% the previous month and is around its best levels since late 2004. First home buyer household affordability is measured by calculating the proportion of after tax pay from two young median income earners required to service an 80% home loan on a first quartile priced house. Affordability worsened somewhat in North Shore, West Auckland, Hamilton and Tauranga, where prices rose. See the main report for links to regional reports.
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.
Affordability has generally been improving since December 2009 as house prices have flattened out and interest rates have fallen, although there has been some deterioration in recent months as house prices have firmed again. More than 60% 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 5.8%.
The Home Loan Affordability reports use the floating rate. Affordability for households with more than one income improved in December 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 fell to 34.0% from 35.2% in November. 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.
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 | ||||||
|
Dec-11
|
Nov-11
|
Dec-10
|
Dec-09
|
Dec-08
|
Dec-07
|
|
| New Zealand |
52.0%
|
53.8%
|
55.5%
|
65.2%
|
60.0%
|
81.3%
|
| Northland |
46.5%
|
49.1%
|
51.5%
|
61.7%
|
62.5%
|
85.7%
|
| - Whangarei |
39.3%
|
41.6%
|
45.0%
|
52.6%
|
50.7%
|
71.5%
|
| Auckland |
67.1%
|
67.9%
|
67.9%
|
80.6%
|
75.7%
|
101.3%
|
| - Central |
74.5%
|
77.3%
|
76.3%
|
89.2%
|
77.7%
|
104.3%
|
| - North Shore |
73.1%
|
72.6%
|
75.3%
|
83.7%
|
76.6%
|
102.9%
|
| - South |
65.9%
|
67.8%
|
70.3%
|
82.2%
|
77.3%
|
100.7%
|
| - West |
58.7%
|
58.2%
|
55.2%
|
72.1%
|
68.2%
|
85.0%
|
| Waikato/BOP |
47.5%
|
48.3%
|
53.0%
|
62.2%
|
58.7%
|
82.2%
|
| - Hamilton |
52.8%
|
51.2%
|
55.2%
|
68.3%
|
60.7%
|
82.2%
|
| - Tauranga |
51.0%
|
59.6%
|
66.3%
|
68.0%
|
71.2%
|
91.1%
|
| - Rotorua |
38.1%
|
36.5%
|
37.3%
|
42.1%
|
44.6%
|
62.4%
|
| Hawkes Bay |
45.0%
|
47.8%
|
51.0%
|
59.5%
|
53.8%
|
72.0%
|
| - Napier |
48.8%
|
47.8%
|
56.1%
|
64.1%
|
58.9%
|
79.6%
|
| - Hastings |
46.2%
|
47.2%
|
51.9%
|
62.9%
|
52.7%
|
72.7%
|
| - Gisborne |
40.8%
|
44.5%
|
43.7%
|
57.0%
|
53.7%
|
72.7%
|
| Manawatu/Wanganui |
34.6%
|
36.1%
|
37.3%
|
45.4%
|
44.1%
|
62.9%
|
| - Palmerston North |
40.1%
|
39.9%
|
41.1%
|
48.8%
|
46.1%
|
63.2%
|
| - Wanganui |
29.0%
|
33.4%
|
32.3%
|
44.3%
|
34.2%
|
53.5%
|
| Taranaki |
44.7%
|
42.7%
|
45.4%
|
55.2%
|
51.4%
|
67.0%
|
| - New Plymouth |
47.1%
|
47.0%
|
56.0%
|
67.2%
|
56.0%
|
75.3%
|
| Wellington region |
52.4%
|
51.9%
|
58.3%
|
67.0%
|
62.6%
|
81.0%
|
| - City |
58.5%
|
58.6%
|
64.6%
|
72.1%
|
66.6%
|
88.3%
|
| - Hutt Valley |
49.3%
|
46.2%
|
52.0%
|
59.0%
|
57.3%
|
70.1%
|
| - Porirua |
51.4%
|
58.5%
|
63.0%
|
65.4%
|
67.5%
|
80.2%
|
| - Kapiti Coast |
52.5%
|
51.0%
|
57.2%
|
63.0%
|
59.4%
|
80.4%
|
| Nelson/Marlborough |
53.2%
|
52.9%
|
56.7%
|
68.6%
|
60.2%
|
87.4%
|
| - Nelson |
50.5%
|
53.1%
|
57.2%
|
70.9%
|
54.0%
|
81.0%
|
| Canterbury/Westland |
49.3%
|
50.8%
|
50.0%
|
60.1%
|
56.3%
|
77.2%
|
| - Christchurch |
54.5%
|
57.8%
|
58.7%
|
66.7%
|
61.2%
|
83.0%
|
| - Timaru |
41.9%
|
37.7%
|
39.0%
|
45.3%
|
40.1%
|
61.6%
|
| Central Otago Lakes |
69.1%
|
64.4%
|
68.7%
|
85.6%
|
84.1%
|
106.9%
|
| - Queenstown |
89.8%
|
71.1%
|
73.7%
|
95.2%
|
88.1%
|
137.1%
|
| Otago |
38.9%
|
38.9%
|
40.4%
|
45.5%
|
45.2%
|
63.8%
|
| - Dunedin |
43.5%
|
43.6%
|
46.1%
|
51.6%
|
51.5%
|
69.6%
|
| Southland |
30.5%
|
30.6%
|
31.0%
|
35.7%
|
32.8%
|
49.4%
|
| - Invercargill |
32.5%
|
32.5%
|
31.9%
|
38.6%
|
31.5%
|
53.0%
|
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.