Roost Mortgage Brokers Home Loan Affordability report shows slight improvement in January; 1st home buyers dipping into KiwiSaver

Roost Mortgage Brokers Home Loan Affordability report shows slight improvement in January; 1st home buyers dipping into KiwiSaver

By Bernard Hickey

Home loan affordability improved again slightly in January as median house prices were broadly stable and interest rates remained at record lows.

The Roost Home Loan Affordability monthly report shows affordability for young working couples remains near its best levels in seven years, although affordability for home buyers in central Auckland, Wellington and Christchurch remains difficult.

“First home buyers are increasingly using their KiwiSaver nest eggs for deposits and banks are competing hard to lend up to 95% to help them get into the market,” said Rhonda Maxwell, a spokeswoman for Roost Mortgage Brokers, which sponsors the Roost Home Loan Affordability report from Interest.co.nz.

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.  Eligible first home borrowers can also receive a Housing NZ subsidy of up to NZ$5,000 each when they withdraw their KiwiSaver funds.

Some banks further trimmed some of their longer term fixed mortgage rates in early February to nearer floating rate levels, but many new borrowers are still choosing to float in the expectation that interest rates will stay lower for longer and could even fall again if economic conditions worsen.

Bank economists have forecast the Reserve Bank will hold rates until late 2012, although calmer global financial markets have in recent weeks begun to push up longer term wholesale rates, causing some to consider fixing.

Affordability improved slightly nationally in January, with incomes up a smidgen while the median house prices was unchanged at NZ$355,000. This reduced the proportion of after tax income needed to service an 80% mortgage on a median house to 51.9% in January from 52% in December, the Roost Home Loan Affordability report shows

Household affordability for first home buyers improved to 21.0% of income from 21.5% 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 needed by two young median income earners to service an 80% home loan on a first quartile priced house.

Affordability worsened somewhat in Northland, Whangarei, Kapiti Coast and South Auckland, where house prices rose. It improved in most other areas where median prices were flat to slightly lower. 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 slightly in January because of slightly higher incomes. 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 33.95% from 34.0% in December.

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.

See the Standard Home Buyer Affordability reports here.

See the First Home Buyer Affordability reports here.

Details of our household profiles, the data sources, and the methods used, are set out in the Notes section of this report, below.

Regional home loan affordability comparison:      
mortgage payment as a % of weekly take-home pay      
 
Jan-12
Dec-11
Jan-11
Jan-10
Jan-09
Jan-08
New Zealand
51.9%
52.0%
53.3%
63.6%
54.3%
80.9%
Northland
49.1%
46.6%
54.5%
62.4%
50.2%
84.8%
- Whangarei
44.3%
39.3%
40.7%
55.1%
44.2%
73.8%
Auckland
65.3%
67.2%
66.8%
77.6%
66.4%
96.3%
- Central
66.0%
74.5%
72.4%
86.4%
70.0%
96.7%
- North Shore
69.3%
73.1%
73.8%
85.6%
72.2%
102.1%
- South
68.4%
66.0%
69.7%
84.4%
68.1%
97.0%
- West
56.0%
58.8%
57.3%
68.9%
57.4%
86.9%
Waikato/BOP
47.4%
47.5%
52.7%
62.3%
53.9%
80.5%
- Hamilton
49.2%
52.8%
55.3%
62.5%
51.2%
79.9%
- Tauranga
58.1%
51.0%
55.6%
70.5%
62.7%
86.8%
- Rotorua
36.1%
38.1%
44.6%
45.2%
43.0%
69.4%
Hawkes Bay
45.5%
45.0%
48.1%
57.3%
48.1%
74.5%
- Napier
49.4%
48.8%
47.8%
62.1%
53.0%
76.1%
- Hastings
41.3%
46.2%
51.6%
62.3%
44.5%
74.5%
- Gisborne
40.8%
40.8%
40.0%
51.0%
52.2%
79.2%
Manawatu/Wanganui
36.8%
34.6%
38.3%
45.5%
39.7%
59.8%
- Palmerston North
39.7%
40.2%
42.3%
48.9%
43.8%
64.1%
- Wanganui
28.8%
29.0%
30.3%
44.8%
34.8%
49.6%
Taranaki
47.6%
44.7%
46.0%
59.4%
48.1%
68.4%
- New Plymouth
51.8%
47.1%
52.6%
70.4%
56.2%
80.4%
Wellington region
52.1%
52.4%
53.7%
63.0%
56.0%
81.0%
- City
57.7%
58.6%
56.8%
68.5%
55.6%
84.5%
- Hutt Valley
46.7%
49.3%
47.2%
57.8%
51.8%
68.8%
- Porirua
55.5%
51.4%
55.0%
67.9%
58.3%
82.7%
- Kapiti Coast
54.1%
52.5%
60.1%
65.1%
53.8%
78.3%
Nelson/Marlborough
52.1%
53.2%
54.9%
68.4%
56.1%
88.8%
- Nelson
51.0%
50.5%
56.9%
63.2%
58.5%
86.9%
Canterbury/Westland
49.2%
49.3%
48.9%
60.3%
49.0%
76.7%
- Christchurch
53.7%
54.5%
55.5%
65.5%
54.0%
80.6%
- Timaru
40.3%
41.9%
42.9%
45.9%
42.2%
58.1%
Central Otago Lakes
69.1%
69.1%
68.7%
81.4%
82.3%
122.7%
- Queenstown
79.2%
89.8%
82.8%
105.4%
100.1%
147.1%
Otago
35.8%
38.9%
35.1%
49.1%
37.8%
60.5%
- Dunedin
41.8%
43.6%
40.7%
54.9%
44.4%
67.5%
Southland
29.6%
30.5%
30.3%
35.5%
31.5%
58.8%
- Invercargill
32.0%
32.5%
34.8%
37.8%
34.9%
62.4%

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)

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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16 Comments

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Where do these numbers come from that state Auck Central prices are down 2.3% on the year?
 
QV:
The old Auckland City continues to be the strongest performing area within Auckland, up 2.7% over the last three months, up 7.2% over the year, and is now 4.4% above the previous market peak.

It's a typo, should be up 2.3% don't you be silly. There is only one way for Auckland Central prices which is up!  I watched an asian couple bidded 1.2M in an auction last week for a 4-beds Grey Lynn do-up with only 400 sqm land.

28 arnold went for 2.6 in GL last week - that was only 400 ish.
crazy days in the GL !

That was RN's house? was on a double sized site of over 900sqm.  Still a lot more than I thought it would go for.  Must be a record for Grey Lynn by quite a bit.

oh yes right you are: 981 Square Metres
I went to see it - and somehow it didnt seem like such a large site.
Still - very strong price.
I'd be looking for a sea view @2.6
 

SK
You don't see a bubble forming in the central Auckland market?
Do you think these prices are supported by fundamentals?
Research consistently shows that where booms occur in supply constrained markets, busts typically follow. Supply constrained markets tend to be more volatile - bigger increase in the boom times, then bigger busts. Therefore isn't there every chance that some of the mugs paying these prices are going to end up in strife?  
So the rest of Auckland may not be booming, but perhaps also has less risk of busting?
 

I have considered it - the 2.6 sale was an outlier remember.
It's certainly quite frothy.
A few factors are in play I think:
buyer type - stable private sector jobs, receiving pay increases. tax cuts. hyper low rates. younger than the remuera/epsom buyer.
suburbs in question - newly trendy and aspirational - people under 50 dont want to be in remmers/st heliers/epsom any more - too beige and sedate.
on that basis I dont see a bubble - eastern suburbs loss is the central suburbs gain.
 

mmmm, it's still got a bit of a bubble feel to me
time will tell
 
 

silly silly prices
central Auck is in bubble territory and staring down the barrel of an ugly correction at some stage

na mate your wrong - the barrel is a bubble gun, and the bubbles will keep on coming even if a few have popped beforefand, an endless supply of bubble mixture is created by mixing the world together.
your thinking like a local, like the bloke in a village that has never been to a city before - there are billions of people and amongst them are more that would like to live in New Zealand than to leave it.
the cities will always be popluar, the gravitational pull of the biggest cities will continue - like a black hole it sucks in the dollars, with the deepest and fullest pockets unable and unwilling to resist the force. Prices will continue to rise... [sorry Bernard]
Best advice - do not swim against the current when you can walk on a dry river bed.
President of Property

Dont lose you fingers when the top blows off Kimy. 

This country is different right....
The USA saw 30~40% drops and it was only that little due to the allowance of mark to make believe and the Fed buying some of the debt. OZ has a bubble as bad as us, that looks very shaky...and tax rises look probable there as does a mining output decline.  The EU looks a serious mess and is deflating even by the fiddled figures put out by Brussels etc. UK and Japan really, well not good at best. Many other countries are crippled by high oil prices so are going no where. China looks to have been one huge dodgy ponzi scheme for at least 5 years and that is becoming blindlingy obvious. 
and you think not only will prices not suffer in NZ but they will rise?  while everywhere else is looking over a cliff? Your happy pills must be as good as GBH's is all I can think.
regards
 
 
 
 
 

So where is the money coming from to pay the interest, Fonterra, Lamb, Beef, Wool, F@P?
 
 HaHaHaHa, I dont think so buddy, they have enough problems of their own. In a fait based money system interest is the growth required, so wheres it going to come from, or do we lower the growth requirement? It helps if debt is backed by production of some kind, but we are way past that point.
 Soon NZ will be hard up against the wall, falling tax revenues, incomes down, economy flat, the rest of the country being milked to keep the property Ponzi scheme alive.
No where easy to go. Risk of depositors fleeing = currency control, its been done before.
How are they going to buy the votes next election?
 

Kimy there are lots of counter points, if you just want to collect points supporting your income/speculation, and dismiss the risks and their impacts yeah sure.....its your choice after all.
regards

Kimy, you take on the familiar argument of economists who argue that no matter what ppl will pay. We saw that with the expectations of $200, $300 and $500 a barrel oil when it was approaching $147 in 2008....its essential so ppl will pay it, it collapsed to $35.
I dont know where you get the illusion of cashed up migrants, they are I suspect few and far between then you imply. The SA's families I know rent because they have no money to bring in despite high skill sets.
Now sure I can accept that as long as the status quo continues, ie the world staggers on as is, NZ property isnt likely to crash, the trouble is events outside of NZ are not likely to be that kind.
So sure continue gambling....
regards
 
 

Show us an example of an economist stating that no matter what the cost, people will pay it.  Since it's a familiar argument, you should have no trouble. 
 
For example, who exactly - which economist - said in 2008 that oil was going to go to $200, $300, $500 a barrel?
 
Further, if it is so easy for people to stop using oil, and they are so ready willing and able to do so if the price goes up - then what exactly is the "peak oil" problem?