Roost home loan affordability report for January

Property

Home loan affordability improves slightly in January, but near worst in two years; multiple income households in best position

22nd Feb 13, 12:15pm by Bernard Hickey

Home loan affordability improved slightly in January after a fall in the national median house price, but is just above its worst levels since November 2010.

Interest rates also increased marginally, but are only just above record lows.

House price inflation over most of the last year has been the driving factor in home loan affordability, and has been only partially offset by lower fixed mortgage rates linked to more intense competition between banks.

New Zealand’s median house price fell to NZ$370,000 from a record high NZ$389,000 in December, according to REINZ data, but remains up 4.2% from a year ago.

A surge in house prices in Auckland and Christchurch over the last year because of a shortage of supply is now beginning to leach out into some provincial areas where economic activity is stronger and emigration is slower.

Nationally, affordability improved by 2.6 percentage points in January from December, but remains worse than a year ago because of rising house prices.

That is, it took 3.6 percentage points less of take home pay to afford the mortgage payments for a median priced house, according to the Roost home loan affordability report released today.

This means it cost $30.58 less per week in January 2012 than in December 2011 to make home loan payments on a median priced house.

“These record low interest rates and hot competition between the banks is making it easier for first home buyers and investors to buy in this market,” said Colleen Dennehy, a spokeswoman for Roost, which sponsors the Home Loan Affordability report series from interest.co.nz.

Affordability improved in Northland, Auckland, Wellington, Canterbury and Otago, but deteriorated on Auckland’s North Shore, Hastings and Invercargill.

Average advertised floating mortgage rates rose slightly in January, but have been broadly unchanged over the last year. Advertised six month and 1 year mortgage rates have fallen over the last year.

For first home buyers – which in this Roost index are defined as a 25-29 year old who buys a first quartile home – the news is also better in January.

Apart from Auckland, Queenstown and Canterbury, it takes around 20-40% of after tax pay to afford an 80% mortgage on a lower quartile priced house. That percentage rises however to 66%, 67% and 47% respectively in those three most expensive areas. Any level over 40% is considered unaffordable, whereas any level closer to 30% has coincided with increased buyer demand in the past.

For working households, the situation is similar although bringing two incomes to the job of paying for a mortgage makes life considerably easier. A household with two incomes would typically have had to use 35.1% of their after tax pay in January to service the mortgage on a median priced house. This is down from 36.9% a year ago.

On this basis, most New Zealand cities have a household affordability index below 40% for couples in the 30-34 age group. This household is assumed to have one 5 year old child. For households in the 25-29 age group (which is assumed to have no children), affordability also improved, with 21.8% of after tax income in households with two incomes required to service the debt, down from 22.8% the previous month. 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.

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.

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Regional home loan affordability comparison:
mortgage payment as a % of weekly take-home pay
	Jan-13	Dec-12	Jan-12	Jan-11	Jan-10	Jan-09
New Zealand	53.4%	56.0%	52.4%	53.8%	63.6%	54.3%
Northland	44.8%	48.3%	49.4%	54.9%	62.4%	50.2%
- Whangarei	42.9%	39.3%	44.5%	41.0%	55.1%	44.2%
Auckland	69.9%	73.3%	66.2%	67.5%	77.6%	66.4%
- Central	67.3%	83.3%	66.9%	73.2%	86.4%	70.0%
- North Shore	77.6%	75.6%	70.3%	74.6%	85.6%	72.2%
- South	66.8%	73.5%	69.4%	70.6%	84.4%	68.1%
- West	64.1%	64.4%	56.7%	57.9%	68.9%	57.4%
Waikato/BOP	47.7%	48.9%	47.8%	53.3%	62.3%	53.9%
- Hamilton	49.0%	51.6%	49.6%	55.9%	62.5%	51.2%
- Tauranga	50.7%	55.2%	58.6%	56.2%	70.5%	62.7%
- Rotorua	40.8%	32.3%	36.4%	45.1%	45.2%	43.0%
Hawkes Bay	43.7%	40.6%	45.3%	48.4%	57.3%	48.1%
- Napier	44.4%	49.8%	49.2%	48.1%	62.1%	53.0%
- Hastings	50.5%	39.9%	41.2%	51.9%	62.3%	44.5%
- Gisborne	50.1%	40.3%	41.1%	40.4%	51.0%	52.2%
Manawatu/Wanganui	33.7%	35.5%	37.0%	38.7%	45.5%	39.7%
- Palmerston North	37.1%	38.4%	39.9%	42.6%	48.9%	43.8%
- Wanganui	28.3%	31.6%	29.0%	30.5%	44.8%	34.8%
Taranaki	47.6%	43.0%	47.9%	46.4%	59.4%	48.1%
- New Plymouth	53.8%	48.6%	52.1%	53.1%	70.4%	56.2%
Wellington region	51.1%	54.3%	52.6%	54.1%	63.0%	56.0%
- City	57.2%	58.9%	58.3%	57.2%	68.5%	55.6%
- Hutt Valley	42.9%	47.7%	47.1%	47.5%	57.8%	51.8%
- Porirua	59.6%	61.5%	56.0%	55.5%	67.9%	58.3%
- Kapiti Coast	52.3%	48.4%	54.6%	60.7%	65.1%	53.8%
Nelson/Marlborough	53.4%	55.2%	52.4%	55.5%	68.4%	56.1%
- Nelson	51.6%	56.3%	51.3%	57.5%	63.2%	58.5%
Canterbury/Westland	51.0%	51.9%	49.3%	49.4%	60.3%	49.0%
- Christchurch	52.6%	59.2%	53.8%	56.2%	65.5%	54.0%
- Timaru	43.2%	40.8%	40.3%	43.4%	45.9%	42.2%
Central Otago Lakes	67.1%	70.9%	70.5%	69.9%	81.4%	82.3%
- Queenstown	88.7%	89.5%	80.9%	84.3%	105.4%	100.1%
Otago	37.0%	39.0%	36.6%	35.7%	49.1%	37.8%
- Dunedin	42.2%	43.3%	42.7%	41.4%	54.9%	44.4%
Southland	27.7%	28.9%	30.1%	30.6%	35.5%	31.5%
- Invercargill	30.7%	27.5%	32.5%	35.2%	37.8%	34.9%

No chart with that title exists.

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15 Comments

by xingmowang | 22nd Feb 13, 12:54pm 1361490866

I work pretty hard. I am still struggling to save up a deposite for my first house.

sigh~~~

by Gummy Bear Hero | 23rd Feb 13, 12:11pm 1361574708

.... if you're working so hard , why waste your munny on something so silly as a house ?

Getcha savings into something useful , something that'll benefit yourself and mankind , get into business !

..... a house ! .... Tch Tch , I do worry that the bankers and real estate agents have permanently addled the average person's brain ! ....... sigh~~~

by billionaire | 25th Feb 13, 6:56am 1361728605

Nothing has changed in 30 plus yrs! I recall wife and I working 2 jobs each, not a weekend off for 2 years to achieve our first home (averaging 70 hours a week each). Had three mortgages including 1 through solicitors trust account to buy a section at high interest rates at the time. We were prepared to do a lot of work around our new home, painting, staining, gardens, cobbling, laying concrete in the basement 3 yrs after build when we could afford it, then some time later putting in the aluminum windows, garage doors etc etc. the problem today is those going for their first home want it the "easy" way and want to start off where their parents are today (fully completed home, all the latest furnishings and gadgets)

30 yrs later we are freehold, all the toys, rental property etc

it can be done, hard work, prepared to forgo those annual overseas holidays, flashy cars etc until they can be afforded without borrowing or putting on the credit card!

Planning and determination can make a big difference!

by splineman | 25th Feb 13, 8:08am 1361732893

Ha you took a harder route than us......

Our first home was $78,000, had $28,000 downpayment. Wife was off with the baby for six years and I was an engineer in a toolroom.

Paid it all off within 7 years at 11% mortgage rate. That was 25yrs ago......we have never looked back. Mortgages no way man......not for us.

It's not the inerest rate that will kill you but the loan amount and amortization time. Both really high these days.

by Mike B | 22nd Feb 13, 2:19pm 1361495945

Throughout history there have been mass migrations. I believe we are about to embark on the final journey. A journey that will revolutionise how we live.

The Journey so far has taken us from the land to the cities. Now we will mass migrate from the cities to the towers.

Welcome to the corporate housing estates.

In the not to distant future the big corporates are going to wake up to the big potential in housing. When that happens the revolution, in housing, will begin in earnest.

So what is it?

Massive, very high tech, multi story complexes that will be like small villages with apartments, supermarkets and other shops, entertainment, medical centres, schools, and so on. They will even have a crematorium and a wall cemetery. It will be such that a person could live their whole life in a complex without ever having to leave.

These multi story, very high tech, complexes will house fifty thousand (50k) people. Note that it will take twenty of these to house one million people..

Home ownership will disappear as these apartments will be leased. People will be able to buy and sell their leases. So trading in leases will replace trading in houses.

Access throughout the complex will be controlled by your cell phone. There will be zones for the various classes of people.

Food will be farmed inside the complex using vertical layered farming. Protiens will come from farmed insects, and some from stem cell farms inside each complex.

Monorail will move people from complex to complex.

There will be no need for Councils as all waste will be recycled within the complex, there will be no roads, no building permits and so on. There will be minimal government as the corporations will take care of most of the external necessities.

People living outside these complexes will be smug at first. But they will become more and more isolated, as more people move into these complexes. Eventually their houses will be worthless and become abandoned.

So what is in it for the big corporations?

They will have complete control over your life and your money. They will control the complex and all the power, water, internet (ISP), cell phone coverage, cable TV. They will even be your bank. When you enter a complex you will be set-up with an account and be given a special bank card. As everyone in the complex earns and spends their money in the complex its just a simple electronic transaction in a computer. Even if you go to work in another complex they will own that as well.

So you will

Pay your rent to them

Pay your power bill to them

Pay your internet connection (ISP) to them

Pay your cable television to them

Pay your water bill to them

Pat your cell phone bill to them

Your bank loans and interest to them

And so on

As the complex is high tech they will know everything about you and can sell this info to advertisers. Just like the internet, people don't mind sacrificing their privacy, so long as they get something back. In exchange for all this the people will get low rent for a modern apartment supplied will all the latest technology.

Finally there will be a clause in all leases that you are not allowed to hold any form of protest inside the complex.

by Muppet King | 22nd Feb 13, 3:52pm 1361501564

Whatever you're on, I want it

by StanGoodvibes | 22nd Feb 13, 5:00pm 1361505607

I think the phrase you are looking for MK is "I'll have what she's having"

by Gummy Bear Hero | 23rd Feb 13, 12:27am 1361532421

I get the same feeling that Mike B has whenever I spend too much time wandering around Singapore Airport .......

..... it's a trip in itself , without ever getting on a 'plane .......

by iconoclast | 23rd Feb 13, 10:10am 1361567400

Singapore .. where the city burghers are planning new housing development underground to accomodate population expansion .. where the sun don't shine

by JetLiner | 23rd Feb 13, 12:23am 1361532206

Meanwhile, outside, heavily-armed gangs roam the post-apcalyptic countryside, fighting each other over the last few scraps of resources ;)

The general idea is interesting, and has been explored in a number of dystopian/post-apocalyptic films (e.g. Tank Girl, Cherry 2000, Logan's Run, etc.) with a 'corporate' inside and an explicitly or implicitly unfriendly outside. Perhaps when crime becomes a big enough problem, such buildings might become the equivalent of gated communities, with residents given background checks, etc, to keep the 'scum' out...

by Mike B | 23rd Feb 13, 9:44am 1361565845

The future always seems like science fiction yet when it arives we take it for granted

Stem Cells

http://www.guardian.co.uk/science/2013/jan/05/the-future-of-food

Inside the meat lab: the future of food

With billions of mouths to feed, we can't go on producing food in the traditional way. Scientists are coming up with novel ways to cater for future generations. In-vitro burger, anyone?

The future feast is laid out around a cool white room at Eindhoven's University of Technology . There is a steak tartare of in-vitro beef fibre, wittily knitted into the word "meat". There are "fruit-meat" amuse-gueules. The green- and pink-striped sushi comes from a genetically modified vegetarian fish called the biccio that, usefully, has green- and pink-striped flesh. To wash this down, there's a programmable red wine: with a microwave pulse you can turn it into anything from Montepulciano to a Syrah. For the kids, there are sweet fried crickets, programmable colas and "magic meatballs". These are made from animal-friendly artificial meat grown from stem cells: packed with Omega 3 and vitamins, they "crackle in your mouth". Yum.

Vertical Farming

http://online.wsj.com/article/SB10000872396390443855804577602960672985508.html

The seeds of an agricultural revolution are taking root in cities around the world

The idea is flowering in many forms. There's the 12-story triangular building going up in Sweden

http://www.futuretimeline.net/blog/2012/10/26.htm

World's first commercial vertical farm opens in Singapore

Protien

http://www.3news.co.nz/Need-more-protein-Eat-insects/tabid/1160/articleID/251054/Default.aspx

Need more protein? Eat insects

http://www.pbs.org/newshour/rundown/2012/05/bugs-for-dinner.html

80 percent of the world's population eats insects as a regular part of their diet

And there are plenty of them. Of the 1.1 million species of insects scientists have identified and named, 1,700 are edible. They are cold-blooded creatures, which makes them much more efficient in converting energy to protein -- no wasted heat.

Bugs don't use much water the way cows do

But the big advantage of eating insects is that they are generally healthier than meat. A six-ounce serving of crickets has 60 percent less saturated fat and twice as much vitamin B-12 than the same amount of ground beef

Other Technologies

The rest of the technology i have mentioned such as

Cable TV

Cell phones

Internet

and so on are already here

SO - the only thing missing is for the big corporations to move in

by Mike B | 23rd Feb 13, 11:07am 1361570846

If you look back at the last century it was not the central banks interventions, nor government interventions that changed world economies. It was science and technology.

QE', LVR', OCR', equities, bonds, etc, etc. None of these have ever changed the world economy. They have just been tools of bankers, meddlers, manipulators, greedies and so on. They have also been tools to deal with crisis’s which they themselves have caused.

I will point out here that a world recession or depression is NOT changing economies it is all about causing and fixing crisis’s.

What has changed world economies are cars, aeroplanes, computers, TVs, internet, cell phones and so on. None of this came from world banks, IMF's, Central banks and so on. It all came from science and technology.

If we wish to see into the future economies we have to look, as Bernard has rightly been doing, at robots. But other technologies will also be just as important, so we have to look at ALL technologies.

by Gummy Bear Hero | 23rd Feb 13, 12:17pm 1361575079

True to a point ...... but it is munny that oils the financial engine ......

....... and as such , it is governments that have back-stopped the financial system when it occassionally hit the wall ......

Chaos occurred when they took a hands off policy , as in the 1930's depression and the current GFC ...

by Kleefer | 6th Mar 13, 6:03pm 1362546231

Technology has changed the world to an extent but it would be more accurate to say capital accumulation has changed the world. This capital accumulation is enabled by sound money and market-generated interest rates that reflect the actual level of savings in the economy. So central bankers can change the economy, but only by wrecking it by stuffing up the price signals that enable capital to be allocated to the uses that best satisfy people's wants.

by Mike B | 23rd Feb 13, 11:09pm 1361614177

Money both creates and destroys economies. That is true but it is a contradiction. In reality it is not money causing this contradiction, but those that control its issuance.

A responsible government would control the issuance of its currency in a manner that befits its economy. When such a responsibility is exercised then money neither creates nor destroys an economy. It is the science and technology being turned into marketable products that changes the economy. These changes are usually permanent (long term) and beneficial to society whereas money is merely a tool to assist those new products into existence.

I am not sure how to make it any clearer