Roost Mortgage Brokers Home Loan Affordability report shows affordability slides in Auckland but flat elsewhere

Roost Mortgage Brokers Home Loan Affordability report shows affordability slides in Auckland but flat elsewhere

By David Chaston

Home loan affordability declined noticeably in March as the national median house price popped up, even though interest rates remained at record lows and incomes nudged up further.

However, the national result was skewed significantly by sharp rises in central Auckland and the North Shore. Almost all other urban areas recorded stable house prices.

The Roost Home Loan Affordability monthly reports show affordability for young working couples are still at their best levels in seven years in most parts of the country, although affordability for home buyers in central Auckland, Wellington and Christchurch remains difficult.

“Banks have plenty of cash to lend and are competing hard for business, particularly as the outlook for interest rates remains subdued,” said Colleen Dennehy, a spokeswoman for Roost Mortgage Brokers, which sponsors the Roost Home Loan Affordability report from interest.co.nz.

Rising rents and stable house prices in most provincial centres is changing the results for investors, improving returns which are now showing substantial gains. In increasing numbers of towns, after-tax returns beat bank term deposits by a substantial margin, without considering capital gains.

Banks have held their floating and fixed mortgage rates at record lows over the last month despite some substantial falls in wholesale interest rates recently. Some bank economists have suggested floating borrowers fix their mortgages to avoid any increases over the next two years, but with those recent falling wholesale rates some institutions may be tempted to lower fixed rates to win market share.

Bank economists have generally forecast the Reserve Bank will hold rates until December 2012, but with sharply slowing economies in Europe, a slowing of growth in China, and questions about how strong the US recovery will get, it is equally likely our rates will remain low for even longer.

Affordability declined nationally in March because median house prices rose to NZ$370,000. This increased the proportion of after tax income needed to service an 80% mortgage on a median house to 53.9% in March from 51.8% in February, the Roost Home Loan Affordability report shows.

Household affordability for first home buyers improved to 22.2% of income from 21.3% 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 Auckland Central, North Shore, Hamilton, Rotorua, Napier, Palmerston North, the Hutt Valley, Nelson and Invercargill, where house prices rose. It improved in many 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.

For investors, the situation is getting noticeably better. Nationally, investor returns (not including capital gains or losses) are now running at 4.2% after tax and these compare will a 3.1% after tax return for a one year term deposit. But in a number of smaller urban areas, returns of up to 8% after tax can be achieved. In almost all centres, returns are improving. Towns such as Rotorua, Hsstings, Gisborne, Wanganui, New Plymouth, Dunedin, and Invercargill are all centres where you can get at least 5% after tax returns. Parts of the Wellington region also give this level. (Contact us for more information about investor returns.)

Regional home loan affordability comparison:      
mortgage payment as a % of weekly take-home pay      
 
Mar-12
Feb-12
Mar-11
Mar-10
Mar-09
Mar-08
New Zealand
53.9%
51.8%
54.6%
64.7%
55.7%
83.4%
Northland
50.4%
50.5%
54.6%
63.8%
56.4%
84.5%
- Whangarei
41.9%
42.7%
42.2%
54.4%
49.6%
73.5%
Auckland
68.3%
64.6%
66.5%
80.9%
68.2%
97.7%
- Central
75.6%
71.3%
72.9%
91.5%
71.0%
104.8%
- North Shore
73.6%
69.8%
73.1%
87.1%
70.8%
103.9%
- South
67.8%
69.0%
65.5%
78.1%
70.1%
93.1%
- West
56.0%
54.9%
59.9%
68.2%
58.1%
82.4%
Waikato/BOP
48.4%
48.9%
48.7%
61.4%
54.8%
80.8%
- Hamilton
51.3%
49.2%
50.0%
63.2%
56.3%
81.9%
- Tauranga
55.2%
56.4%
59.6%
71.6%
62.1%
89.2%
- Rotorua
42.0%
35.7%
37.2%
48.3%
44.2%
62.9%
Hawkes Bay
46.2%
47.4%
44.1%
55.0%
48.9%
71.3%
- Napier
50.5%
48.0%
47.6%
62.6%
54.2%
72.8%
- Hastings
42.7%
46.6%
42.4%
54.9%
49.6%
74.4%
- Gisborne
42.4%
41.2%
41.8%
56.0%
44.9%
67.8%
Manawatu/Wanganui
35.9%
35.5%
35.0%
45.2%
40.4%
58.6%
- Palmerston North
40.0%
37.5%
39.2%
49.9%
44.8%
70.2%
- Wanganui
29.6%
29.5%
29.7%
41.4%
31.1%
49.8%
Taranaki
42.9%
42.5%
43.5%
54.6%
46.3%
66.0%
- New Plymouth
46.0%
50.0%
46.0%
59.5%
55.5%
88.0%
Wellington region
53.0%
52.3%
57.4%
67.8%
57.8%
90.7%
- City
57.5%
59.2%
59.0%
71.5%
61.3%
91.6%
- Hutt Valley
47.2%
45.1%
50.4%
58.9%
49.9%
71.7%
- Porirua
53.9%
53.3%
60.8%
69.0%
56.6%
86.5%
- Kapiti Coast
52.7%
51.4%
54.2%
71.2%
53.9%
86.2%
Nelson/Marlborough
52.6%
52.7%
54.1%
66.7%
58.3%
82.5%
- Nelson
55.1%
52.2%
54.2%
64.8%
57.6%
78.8%
Canterbury/Westland
48.3%
50.0%
45.0%
56.8%
49.6%
77.1%
- Christchurch
56.1%
54.8%
54.0%
65.3%
54.3%
84.4%
- Timaru
38.9%
44.0%
37.8%
46.3%
41.0%
61.1%
Central Otago Lakes
62.4%
62.5%
72.0%
86.0%
77.8%
123.9%
- Queenstown
70.3%
81.9%
83.8%
100.5%
95.2%
126.6%
Otago
39.0%
37.9%
35.0%
45.4%
41.2%
62.2%
- Dunedin
44.6%
44.0%
40.6%
52.3%
46.0%
71.8%
Southland
31.0%
28.3%
29.7%
36.7%
32.4%
50.0%
- Invercargill
32.6%
30.7%
32.5%
38.6%
34.2%
57.5%

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?

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.

4 Comments

Comment Filter

Highlight new comments in the last hr(s).

Canterbury Mayors plead for land supply.

The Mayors of the Waimakariri and Hurunui are pleading with the government to open up the fringe land supply.

http://www.ctv.co.nz/on-demand.html Friday News Item.
4 minutes and 36 seconds into the above  CTV on demand news article.
 
 

http://www.youtube.com/watch?v=_xvDYMYSi_8&feature=youtu.be
 
Please find above an edited link containing the Waimakariri District Mayor David Ayers discussing the housing crisis in Canterbury on CTV.
 
CTV are due to go digital soon!
Congratulations CTV for  doing a stellar job once again of exposing the housing crisis in Canterbury and tackling the real issues here.
Mr. Brownlee needs to step up and act quickly.
 Christchurch is being hollowed out.
How can we begin to have a recovery if our beaten down citizens are up and leaving?
It doesn't take a rocket scientist to figure out that if you allow some REAL land supply vents on the fringes,  the prices for housing will come down.
Who are you protecting Gerry?
Why did Phil Heatley blank out 95% of the Christchurch housing reports recently?
How is that helpful to the recovery?
I am confused.
Speakon.
 

Well done Speakon, i agree how can anything but 100% transparency of information be helpful to the recovery.
Could you steer us to the 95% blanked out Christchurch Housing report, that sounds more murky than freely and transparently sharing information.
 

As in the past, ppl look at stats and draw conclusions at face value
They dont look into them...at the moment IF they looked at re sales a very different picture emerges, A market of speculators picking up homes that are a little run down, send the painter plasterers, carpet layer in, then resell and if it doesnt re sell quick then rent it out at a much higher (because of condition) rent than 2 or 3 weeks previously.
How many have noted how many of the sales over the last 3 or 6 months are resales in that time?
Just in the area I have monitored since begining of 2006, 6 months ago 12 to 15% where resales, in the last 3 months thats picked up to 16% to 18%.... Net diff between purchase and sale prices varies between 40K and 109K
Purchase price is marginally much up on post 2007,  and sale price near peak and just over 2006/2007 prices
And an ide of rents, a house that was rented for about 350 gets rented for 420/450  even 480.....much nicer home higher rent.....is that technically a overall rent increase?
Are homes becoming more expensive (unaffordable) or are a great proportion just having added value to them?
Inflating rents and higher ave sale.