Housing became much less affordable in November as prices rose, according to Roost Home Loan Affordability report

Housing became much less affordable in November as prices rose, according to Roost Home Loan Affordability report

Housing became significantly less affordable in November, according to the Roost Home Loan Affordability Index.

Servicing an 80% mortgage at November's national median selling price, would take 65.6% of the take home pay of someone earning the median income of a working person in the 30 to 34 year age group.

That's sharply up from the 61.8% of take home pay in October, and 61.5% in November last year and 55.6% in November 2012.

The increased cost of servicing a mortgage was driven by a 6% increase in the national median selling price in November. 

Of the 24 urban districts where house prices and incomes are monitored for the survey, housing became less affordable in 17 of them and became slightly more affordable in seven.

The biggest drop in affordability occurred in central Auckland (within the boundaries of the former Auckland City Council) where the amount of take home pay required to service an 80% mortgage jumped from 97.1% in October to 107.9% in November.

Other areas with particularly big drops in affordability were Queenstown, where the amount of take home pay required to service a mortgage increased from 86.7% to 93.7% and New Plymouth, where it rose from 50.6% to 55.4%.

The seven districts that went against the trend, where housing affordability improved slightly in November compared with October were Whangarei, Rotorua, Gisborne, Palmerston North, Wellington City, Kapiti, and Timaru.

Auckland CentralAuckland North ShoreAuckland SouthAuckland WestWellington CityHutt ValleyPoriruaKapiti CoastWhangareiNew ZealandHamiltonTaurangaRotoruaNapier"HastingsGisborneNew PlymouthPalmerston NorthWanganuiNelsonChristchurchTimaruWairarapaQueenstownDunedinInvercargill

The survey also shows that although affordability also declined for first home buyers last month, buying a home should be within their reach everywhere except Auckland, where it could be significantly out of their reach.

"The sharp jump in house prices in November will make life more difficult for first home buyers, but the good news is that competition between banks for mortgage business is intense," Roost Mortgage Brokers spokesperson Ele Thomson said.

"Roost's mortgage brokers are reporting some exceptionally good financing deals being offered at the moment, this could help first home buyers get into the home they want."

The survey measures first home buyer affordability by tracking the median income for a working couple aged 25 to 29 with no children in each urban district, and estimating the percentage of their income that would be required to service a mortgage for a home at the lower quartile selling price for that district.

If the repayments are 40% or less of their take home pay, they are considered affordable and areas where mortgage payments would take up more than 40% of their take home pay are considered unaffordable.

By that measure, all urban districts in the country would be considered affordable for first home buyers apart from Auckland and Queenstown.

In Auckland, servicing the mortgage on a home priced in the lower quartile would take more than 50% of take home home pay, apart from west Auckland where it would be 49.7%. 

In Queenstown it would be 43.7%, while Christchurch is in the upper levels of affordability with the mortgage for a lower quartile home taking 36.7% of take home pay.

The most affordable places in the country for first home buyers are Wanganui, where a mortgage would take 10.7% of take home pay followed by Dunedin at 14.4%.

--------------------------------------------------------------

Mortgage choices involve making a significant financial decision so it often pays to get professional advice. A Roost mortgage broker can be contacted by following this link »
--------------------------------------------------------------

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).

Despite some of those median figures, most regional cities have cheaper houses than a year ago.  Hastings has had a few unusual 700/600k house sales skewing the median. Hastings is still a lower price city, some suburbs are selling 3 bedroom homes in reasonable areas/conditions for under 200k. 
Gisborne is still a cheap housing city. 
The only expensive factor in regional cities when buying a house in NZ is the extraordinarily high interest rates. 
If you had bought a house in 2007/8 in the regions, and are now selling, you are likely to be losing money. 

Median is not the same as average. So a few 700/600k houses won't skew the median.
If median is high is because the majority of the houses have a high price.
Also I don't agree with "the only expensive factor in regional cities when buying is the high interest rates". Interest rates are at historically lowest levels. I live in a Tauranga (regional city) and houses here are overpriced as well, plus quality is generally very poor (lots of leaky homes).
If we are to determine the "only" factor driving prices up that is the speculation factor. Speculation from even average families who take on overpriced loans just because they truly believe it's better to buy today expensive than tomorrow more expensive because "prices don't go down".
Well, we'll all see next year if prices go or don't go down.

House Prices will continue to rise.
This week alone price increases in Tin, Glass, Timber, Concrete have been tipped for early in the new year by suppliers.
With every component of house construction increasing and with Builder Labour now in high demand can you see anywhere where there will be reductions in the cost of a new House?
Councils still layer on fee after fee and fatter council contributions. The basic componenet of Residential Land is still steadily climbing and being consumed.
The only way I see the high demand being quenched is with massive supply and NZ just doesnt have that type of construction capabilities.
Just completed a Resource consent for 24 lots in an already zoned residential area. Circa $115,000 + eight months holding costs, construction drawings $ 30,000 + 3 months holding costs. It will take less time to construct the roads,Sewers, Power, Phones , Street lights and Footpaths than the regulatory period process took for permits...
Even if you dont take NZ residential natural population(Births) increase into account , Auckland Built 9000 dwellings including appartments and retirement units that wont even house the new 39,000 immigrants and returning Kiwis.
Many Kiwis who consider returning to NZ now cant as Houses are beyond their reach.
We just met some first home owners in Coloundra Australia, they where kiwis who worked out they couldnt afford to Buy a house so moved to Couloundra where there is a sea of brand new houses for around $340k AUD. plus they still get a new home owners grant.
ive watched the Housing Crisis "can" being kicked down the road now for about 5 years and am very positive that its not going to get better Quickly,,,,at present there isnt even a Plan...
Merry Christmas to all and thanks for the Entertaining articles through out the year...
 
 
 

The data above is clearly showing at least 7 cities/areas where house prices are declining.  Regardless of building costs, if there are no reasonable jobs or business opportunities then there is low demand for housing. 
There are many more entries which declined significantly since 2007.