By Greg Ninness
House prices are now falling in most parts of the country making home ownership more affordable for first home buyers in most places, according to interest.co.nz’s June Home Loan Affordability reports.
The reports show that the Real Estate Institute of New Zealand’s lower quartile selling prices have fallen back from their recent peaks in 10 of the 12 regions where affordability is measured, - Northland, Auckland, Waikato, Hawke's Bay, Taranaki, Wellington, Nelson/Marlborough, Canterbury, Otago and Southland, with prices continuing to rise in only two regions - Manawatu/Whanganui and Bay of Plenty.
In Auckland, the lower quartile selling price was $650,000 In June, a decline of 4.4% from the peak of $680,000 set in March.
Within the region the price falls have been greatest on the North Shore where the lower quartile price was $775,000 in June, down 9.6% compared to the peak of $857,500 set in July last year.
There was also a significant fall in south Auckland where the lower quartile price dropped from its peak of $665,000 in May to $625,000 in June, a decline of 6% in a month.
In the central Auckland suburbs the lower quartile price dropped from its peak of $695,669 set in March to $668,500 in June (-3.9%).
In Rodney the lower quartile price dropped from its peak of $728,000 in May to $710,000 in June. And in west Auckland it was back from its peak of $680,500 in August to $672,000 in June.
Prices have also dropped in Franklin on Auckland’s southern rump, where the lower quartile price has fallen back from its peak of $580,000 in January to $525,000 in June.
However Pukekohe has gone against the trend setting a record high of $590,000 in June.
Pukekohe and Franklin the only affordable parts of Auckland
Although the price falls will be welcomed by first home buyers struggling to find a place they can afford, the only parts of Auckland that could be considered affordable for first home buyers are Pukekohe and Franklin.
That’s because the mortgage payments on a home purchased at the lower quartile in either of those districts would be below 40% of the net income of typical first home buyers.
Even after the latest falls in prices, other parts of Auckland remain out of reach for typical first home buyers who would struggle to meet the mortgage payments on a lower quartile-priced home in those areas.
The only other district in the country to face similar affordability issues to Auckland is Queenstown, which is the second most unaffordable place in the country for first home buyers after Auckland’s North Shore.
In both districts, typical first home buyers would need to set aside more than half of their after tax pay each week to make the mortgage payments on homes purchased at the lower quartile price.
People in that situation would likely be at risk of serious financial hardship as interest rates rise, potentially to the point where they could face losing their homes.
But outside Auckland and Queenstown, housing remains well within affordability limits for first home buyers.
Even in other major centres such as Hamilton, Tauranga, Wellington City, Christchurch and Dunedin, lower quartile prices remain low enough that the mortgage payments would be well under 40% of net pay for typical first home buyers in those areas.
Outside of Auckland and Queenstown, lower quartile prices range from $152,000 in Whanganui to $510,000 in Tauranga, and the mortgage payments on homes purchased at those prices would take up between 10.5% and 35.7% of typical first home buyers’ take home pay, well within affordability limits.