Expanded Home Loan Affordability Reports show there is hope for first home buyers in Auckland but they still face tough choices

Expanded Home Loan Affordability Reports show there is hope for first home buyers in Auckland but they still face tough choices

By Greg Ninness

There is good news for first home buyers in Auckland, according to some new additions to interest.co.nz's regular Home Loan Affordability Reports.

For the first time interest.co.nz has been able to produce separate Home Loan Loan Affordability Reports for the fast growing districts of Rodney, Papakura and Pukekohe on Auckland's northern and southern flanks, and these show that housing is still affordable for first home buyers in two out of those three areas.

The reports have had a major makeover to better reflect movements in the housing market. This includes the new reports to show affordability trends in the areas where much of the supply of new housing is expected to be built to cater for the region's rapid population growth.

Another major change to the reports is that all of the affordability calculations in them are now based on 30 year mortgage terms, rather than the 25 year terms previously used.

The move to 30 year terms reflects changes in buyer behaviour and a general trend towards longer mortgages as a result of rapidly rising house prices, particularly in Auckland.

The Home Loan Affordability Reports measure how much of their weekly income a typical first home buying couple would need to set aside to meet the mortgage payments on a lower quartile-priced home in 40 cities, regions and districts throughout the country.

The reports assume first home buyers in each area are a couple who are both aged 25-29 and working full time for the median rate of pay for people their age, and they have been saving 20% of their net income for four years to use as a deposit.

The affordability benchmark used in the reports is that housing is affordable when the mortgage payments take up no more than 40% of take home pay.

Any more than 40% is classed as unaffordable.

Pukekohe is Auckland's most affordable district & even Auckland Central scrapes in

On that basis, Pukekohe is easily the most affordable district in Auckland, with the mortgage payments on a home purchased at the district's lower quartile price of $491,500 taking up just over a third (33.9%) of a typical first home buying couple's take home pay, well below the 40% affordability limit.

That is followed by Papakura, where the mortgage payments on a house purchased at the district's lower quartile price of $549,500 would take up 38.5% of a typical first home buying couple's take home pay.

And a surprising addition to the affordable list under the reports' new format is Auckland Central, the area of the Auckland isthmus falling within the boundaries of the former Auckland City Council before it merged with its neighbours to form the super city.

This includes many of Auckland's most expensive suburbs and is an area which has shown some of the strongest price growth over the past few years.

Yet the mortgage payments on a home purchased at the district's lower quartile price of $644,400 would take up 39.6% of a typical first home buying couple's take home pay, putting Auckland Central into the affordable category by the skin of its teeth.

The reason for Auckland Central's apparent affordability for first home buyers is to do with the make up of its housing stock and the higher wage rates prevalent in the district.

Auckland's central isthmus contains most of the region's apartment stock and many of these are so-called shoe box apartments that were mainly built as student accommodation prior to 2009.

The market for these types of apartments has been extremely buoyant, as investors chase them for the high rental yields they can provide relative to other residential properties, although younger owner-occupiers have also been showing interest in this market as more traditional forms of housing get priced out of their reach.

And in many Central Auckland suburbs such as Mt Eden and Mt Albert you are likely to find blocks of older-style home units sitting cheek by jowl with million dollar-plus villas, although even these are now likely beyond the means of most first home buyers.

The areas also contains most of the city's leasehold properties, which would drag down its average prices.

Wage rates also tend to be higher in Auckland Central than other parts of the Auckland region, and that combined with a greater mixture of housing types has improved affordability for first home buyers in the district, although it may not be long until it passes the 40% threshold into unaffordable territory. 

South, West & North unaffordable

However the areas immediately surrounding Auckland Central fall squarely into the unaffordable camp, with the mortgage payments on a lower quartile-priced home taking up 47.1% of  a typical first home buying couple's income in Auckland South (Manukau), 44.6% in Auckland West (Waitakere), 48.7% on the North Shore and 42.1% in Rodney.

The reports highlight the stark choices facing Auckland's aspiring typical first home buyers in the current market.

Either be prepared to purchase on the very southern fringes of the region and accept the frustrations of a daily commute on Auckland's over-stretched transport system if you work outside of your home district, or buy a potentially tiny apartment in the CBD that a few years ago would only have been considered suitable for student accommodation.

Outside of Auckland the only other centre where housing is unaffordable for first home buyers is Queenstown, where the mortgage payments on a lower quartile priced home would take up 45.1% of a typical first home buying couple's take home pay.

The reports show that housing remains well within affordable limits for typical first home buyers in all other centres.

In Hamilton the mortgage payments on a lower quartile-priced home would take up 24.7% of a typical first home buying couple's take home pay, in Tauranga it would be 29.1%, Wellington City 23.3%, Christchurch 23.4% and Dunedin 15.7%.

The most affordable city in the country is Whanganui where the mortgage payments on a lower quartile-priced home would take up just 8.1% of a typical first home buying couple's take home pay, followed by Invercargill at 10.6% and Gisborne at 11.7%. 



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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So I guess that the people that have been saying unaffordable,either are being to fussy or on the dole or just a media beat up.

Good houses in good areas will always be pricey as most want to live in a good area.

Define what "you" consider to be a "good area"

How can Christchurch go from $600k in April 2016 to $470k in May 2016? That seems very erratic.

There still seems something strange with these figures Greg
1 The average change for NZ is 6.6%, but the only regions with less than this are Timaru, Palmeston North, Gisbourne and Central Auckland.
2 The NZ average price looks too low. Only 7 relatively small regions have lower average prices.


Why not just make it 40 year mortgage term and make even more affordable? Who knew it was so easy...

That's a great idea, it looks like you've just solved the housing crisis! Nick Smith and John Key will be taking notes so they can use this in their next press release.

Why not make it an unlimited term? Interest only is all the rage these days!! Lower payments!!! That's the only part that matters, isn't it? Great for the banks, too - win-win!


$491,500 isn't exactly 'chump change' for most first home buyers. I guess 'affordable' is relative.

Do many first home buyers save 20% of their net income? Why isnt the income used related to the area of the home? Why is it reasonable to use a 30 year term, just because people are doesn't make it sensible. Different areas involve different living costs, for example if you live way out but work centrally some of your costs will rise and others will fall. Why is it reasonable to use a lower quartile home, shouldn't these be rental stock? Do they need renovations as there is no allowance for such. Why is it okay to do such a bad job on such an important topic?

Yes many first home buyers save 20% of net income. People work longer and retire later so a longer term is reasonable. Lower quartile homes are typical FHB homes. Rental stock could be in any quartile, there are no rules. Renovations are good DIY projects for FHBs but you can still live in most unrenovated houses.

Given the average 25-34 year old saves $6,500 per year... That people work longer and retire later isn't a good thing, its a sign of financial stress. Rental stock could be in any quartile, indeed is in every quartile, however is concentrated in the... lower quartile. First home buyers should not need to be buying in the lower quartile lol. And if median auckland earners are buying lower quartile property in papakura, taking out a 30 year loan and retiring later, well grats everyone, what a bloody rock star economy.


Can I please have a mortgage based on a million years term? That would make it a couple of bucks a year.
Total nonsense. People are buying houses later and later and the mortgages are getting longer and longer. Eventually the superfund will pay directly the banks.

That's called an interest only mortgage.

How long before we start seeing cars being washed down the streets of Auckland and into the Manukau Harbour or the Waitemata?

This is what happens when you have far too much concrete, asphalt, tile and steel and not enough preamble ground:


Presumably sewage systems have become overloaded and will be depositing untreated human waste onto Auckland beaches, as usually happens when there is heavy rain.

It's going to get very 'interesting' when sea level rises a little more.


"The move to 30 year terms reflects changes in buyer behaviour and a general trend towards longer mortgages as a result of rapidly rising house prices, particularly in Auckland"
What a load of circular bollocks! Affordability is not getting better at all. You say it yourself! The prices are rising and rising so we have to cheat to make them look better!

For Pukekohe buyers that work in Manukau or even worse further north. Good luck with getting to work.

I guess it sets a simple, but flawed baseline. Maybe comparing a standard property type would be more reliable eg. 100sqm, 3brm home on 600 sqm section. Otherwise you are comparing a no land shoebox apartment in downtown to a larger rural block with a shed on it. similar pricing but nothing else is comparable. Also the point about expenses above is valid, servicing a loan @ 5% means $100 per week spent on commuting in support of your job equates to you supporting $100,000 more loan value if you bought closer.

Percentages are deceiving too. If my household earns 100k in Auckland and spends 60% on mortgage, there is still 40k left over. If we earn 50k in Whanganui and spend 40% on mortgage, there is only 30k left over. (not that these are real figures, just an example).

Yes I agree...but just a point to add, for $490k in Pukekohe you will be lucky to get a 2 bedroom unit, unless you are prepared to live in the scary part of town (which I guess is a sacrifice FHB have to make).
But not only the cost of transport and parking makes it a daunting proposition but the travel time is also a factor. Only 5 years ago commuters used to leave at 7am to get into CBD at 8.30am, now people are leaving as early 5.30am and they have to turn around and do the same at the end of the day.

That is no way to live. I commuted Mangere Bridge to Warkworth for 18 months. Worst 18 months of my working life by far - work isnt worth it.


Such stats are just worthless because they fail the 'reality factor' ..

Just a few examples: Such stats disregard the reality that many people will not get a wage/salary increase over the next four years, meanwhile houses may continue going up at near record levels of 15-20% per annum which by ALL normal economic measures is unsustainable. This house price inflation actually strips ones ability to save just like inflation strips ones ability to afford things with the same coin.

'Saving 20% of their net income for four years' to use as a deposit is quite frankly for most very unrealistic. Living costs & prices ARE still going up during that time, particularly rent, power, fuel etc. So again we have stupid statistical assumptions relying on there being a status quo economic situation.

Sorry, time to get real. And the realities are blindly obvious. Houses in NZ are the world's MOST expensive vs average incomes.....FACT! To claim anything else is either delusional or dis-ingenious. Nice try though. A career in 'Spin' awaits

In some places in India it is several hundred years average income to buy a house.

What is it in Antarctica Zac? Just as relevant..phhh serioiusly, You think that's apples with apples do you?

Wanganui is affordable.
I guess your whole narrative collapses if houses are affordable.
How come it's spelled Wanganui on the map but Whanganui below in the columns> Covering both bases?

Do you think we should compare NZ to India and things are just fine until we are just like india?

So the model first home buying couple saves 20% of their net income for 4 years? They're just not committed!

I thought I'd died and gone to heaven, interest.co.nz reporting something positive about property and housing in new Zealand, someone wake me up, p.s. I have been saying this all along

30 year mortgage the best investment vehicle in the world, what a few of the whiners above don't understand is that after ten years your relative mortgage value has gone done in future value however your salary should have gone up, so with inflation you have a diminishing mortgage and a higher salary to up your payments, point is get in now and inflation takes care of the rest

but we are in an era of zero inflation and growth worldwide to inflate the debt away

good luck with that and will eat my hat (with interest) if in 10 years time a cup of coffee, electricity bills or cars go down in value...I can only state my opinion but you can always state the opposite...come back to me end of next year and tell me if the above is cheaper...

I've heard some good things about our power prices dropping once they kill the old coal generator at Huntly.
Even without factoring in the death of the Huntly coal generator, you'll find that power prices have been dropping a little in Auckland over the last few years if you are willing to switch providers whenever one has a better deal. An example: http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-d...
More data: http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-d...

So taking supply out of the market is going to cause prices to ... drop?

I think you're a bit back to front there.

My limited understanding is that electricity prices are fixed for all sources of generation at the price of the most expensive source being generated during that 15 minute interval. As such whenever the coal generators at Huntly are operating power prices rise significantly. Additionally New Zealand's energy intensity has been dropping quite rapidly over the last few meaning we use less power to do the same amount of work. While capacity has actually been increasing ( You don't see the benefit from the increase in capacity until the more expensive generators get shut down because of the way the spot market fixes prices based on the most expensive generator that is running at the time ).

Being just a lay person I fully expect that my understanding of the electricity market is incomplete.

Is that not something of an oxymoron?

"after ten years your relative mortgage value has gone done in future value" - (Assuming you meant "down") No guarantee of that.
"your salary should have gone up" - See above
"point is get in now and inflation takes care of the rest" - How's that been working lately? Going well is it? No I didn't think so.
Your post is full of the usual bull about property ever going one way.


Similar story for me. Houses have actually always gone up in value since I have been buying them (30 years).

"Real" affordability is a product of interest rates as much as it is of house prices and incomes. How about a simple formula that factors these in? This kind of affordability might not have changed all that much over the last few years.

Houses are not affordable until all the homeless can afford a house!
Does the Home Loan Affordability Report factor in alcoholics who sleep on park benches?

- just trying out this SJW malarkey.

The report is based on median earners not alcoholics

You forgot to mention the Mentally Ill who do the same. Foetal alcohol syndrome also probably plays a part, as does general physical / sexual abuse. Superiority is such a pleasant trait.


Sorry Greg you may as well throw the report in the bin. It is embarrassing how the Nz media are trying to make the housing crisis appear ok. Our own pm declared it a crisis back in 2007 and now prices in Auckland are 500k more approaching a million dollars and you are trying to tell us affordability has improved as you have added 5 extra years to the mortgage loan. What a joke.

Saying people like 30 years over 25 and referring to buyer behaviour is like the pm saying people prefer renting now days. In both cases the consumers don't really have much choice. Shame on Nz media

The 30 year terms reflects the fact that people can't afford the repayments on 25 year terms.

When exactly are people going to save for retirement. Changing the length to suit your message is just adding fuel to the fire. You need to compare like for like.

"Another major change to the reports is that all of the affordability calculations in them are now based on 30 year mortgage terms, rather than the 25 year terms previously used.

The move to 30 year terms reflects changes in buyer behaviour and a general trend towards longer mortgages as a result of rapidly rising house prices, particularly in Auckland."

Well Said Joe Public. Ask any first home buyer and will laugh on the report. Now when house in Auckland is million is affordable and will be more affordable when it touches 1.5million than in 2007 when the house was 500000 - what a joke.

No one but defintely John Key and party will be happy with report and will believe it blindly.

Why is everyone trying to prove that their is nk housing buble. I dont think anyone has doubt about housing bubble.

I told my friend who is hunting for a house and his reaction was funny and the the choice iof words he used was amazing.

Delusional, typical age of first home buyers in New Zealand let alone Auckland is definitely not 25-29.Any brief review of current home ownership numbers will show that the age to purchase a first home is being skewed sharply upwards, .More will retire with mortgage debt , and God help a spike in interest rates in the coming thirty years , let alone the next three..

Nothing is either good nor bad but thinking makes it so,What people don't know don't hurt them ,so in some cases the media are sh.t stirrers telling people things to get a reaction. At least in Thailand people are thankfull for what they have rather than what they don't . All about mindset.

Very true. We bring it on ourselves. I think it's an incessant need for drama and action that fuels our taste in news media. Amazing how your view of the world can change just by switching the 'channel'.

Reality is not the solid notion we think it is.

The media in NZ are gun shy when it comes to reporting real news,however should a prominent sports person visit a hospital the media turn up in droves with their cameras and microphones.
Meanwhile a long standing volunteer at the same hospital just keeps on keeping on.
Meanwhile it's great to see UCLA dismiss one of it's top basket ballers because he failed to keep up with his academic studies.Great stuff

Pukekohe and Rodney are the two places where Auckland Council over supply lots of land - prices are affordable and stuff get built.

Auckland City is the one place Auckland Council decides to starve of land supply - nothing gets built no matter how high the prices soar.

Affordabilty. So now many first time buyer will be able to buy. No more in news, no more discussion on housing crisis as does not exist. This is what Hon PM has being saying all the time and most kiwis did not even realise that house is now affordable.

So please all first home buyer, please go out over the weekend and buy your first home.

Wishful thinking. May be one day.....

30 years? God who has the kind of job security these days where they can commit to mortgage payments over a period of thirty years? They'd have to save at least another 5 or 10% on top of the deposit just to cover unexpected periods of loss of income!

if you want the safest option then the best thing to do is to rent and put any savings into NZ Government Kiwi bonds with a 2% return, that way you will have no risk in your life and when you turn 65ish you can then collect the government pension and then re-invest your Kiwisaver into Kiwi Bonds or maybe a bank deposit if you dare...

Even though when on a world wide basis Auckland is often in the top 10 most affordable cities in the world, and has been very close to the top of that list often.

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