A flattening of house prices at the bottom of the market is making home ownership more affordable for first home buyers in most parts of the country but Queenstown prices have gone through the roof

By Greg Ninness

Housing affordability is improving for first home buyers in most parts of the country but the improvements are so small most aspiring first home buyers probably wouldn't notice the difference, according to interest.co.nz's latest Home Loan Affordability Reports.

The reports track movements in dwelling prices, mortgage interest rates and incomes in 41 locations around the country to see how much of a typical first home buying couple's weekly income would be eaten up by the mortgage payments on a lower quartile-priced home in each area.

Nationally house prices appear to have been relatively stable since the end of summer, with the REINZ's lower quartile selling price staying within a very narrow band between $375,000 and $381,000 since March.

But while lower quartile prices have been more or less flat, mortgage interest rates have been steadily declining, with the average of the two year fixed rates offered by the major banks dropping from 4.84% in February last year to 4.63% in July this year.

And incomes have been slowly rising.

Separate Home Loan Affordability Reports are available for each of the following regions and cities (click to view).
Northland Region
Whangarei District
Auckland Region
Rodney District
North Shore District
Waitakere District
Central Auckland District
Manukau District
Papakura District
Franklin District
Waikato Region
Hamilton District
Bay of Plenty Region
Tauranga District
Rotorua District
Hawke's Bay Region
Napier District
Hastings District
Gisborne District
Taranaki Region
New Plymouth District
Manawatu/Whanganui Region
Palmerston North District
Whanganui District
Wellington Region
Masterton District
Kapiti District
Porirua District
Hutt Valley District
Wellington City
Nelson/Marlborough Region
Nelson City
Canterbury Region
Christchurch District
Timaru District
Otago Region
Dunedin District
Queenstown-Lakes District
Southland Region
Invercargill District
All New Zealand

Interest.co.nz estimates the national median take home pay of typical first home buying couples (both aged 25-29 and working full time at the median pay rate for their age group) would have increased from $1598.89 a week (after tax) in March, to $1610.48 in July.

Over the same period, the REINZ's national lower quartile selling price declined marginally from $381,000 in March, which was a record high, to $377,707 in July, while the average two year fixed mortgage rate also fell from 4.67% in March to 4.63% in July.

That meant that the amount that would need to be set aside each week for the mortgage payments on a lower quartile-priced home would have dropped from $366.66 in March to $360.20 in July.

When that's combined with the small lift in incomes it would make typical first home buyers better off by $18.05 a week in July compared to March, and the proportion of their net pay that would be eaten up by mortgage payments would have dropped from 22.93% to 22.37% over the same period.

While the improvement in affordability is relatively small, it is at least a step in the right direction and the trend is evident in most parts of the country.

The end of a sustained period of rapid price growth and worsening affordability?

The flattening of house prices that has occurred appears to mark the end of a sustained period of rapid price growth and worsening affordability, with the REINZ's national lower quartile house price increasing by 39.9% over the last five years, from $270,000 In July 2013 to $377,707 in July this year. 

Interest.co.nz estimates the average take home pay for typical first home buying couples increased by just 10.1% over the same period, from $1462.95 in July 2013 to $1610.48 in July this year, which meant lower quartile prices increased at four time the rate of typical first home buyers' take home pay.

However the effects were moderated by declining mortgage interest rates with the average two year fixed rate declining from 5.64% in July 2013 to 4.63% in July this year.

Taking all of those factors into account, the amount of their weekly income that typical first home buyers would need to set aside for the mortgage payments on a lower quartile-priced house has increased from 19.63% in July 2013 to 22.37% in July this year, still well below the 40% threshold at which housing is considered unaffordable.

That means that overall, housing in this country is still considered affordable for first home buyers and by a substantial margin.

The two big exceptions to that are the Auckland Region and Queenstown.

In Queenstown the REINZ's lower quartile price hit a record high of $807,500 in July, making it easily the most expensive place in the country for first home buyers.

That means the mortgage payments on a lower quartile-priced home in the town would eat up 57.15% of the net pay of typical first home buyers hoping to buy there, which would likely put home ownership well out of reach for most of them.

Most of the rapid escalation of lower quartile prices in Queenstown has occurred in the last three years.

In the Auckland Region, the lower quartile selling price has risen astronomically over the last five years, from $385,000 in July 2013 to 660,000 in July 2018 (+71%).

But most of that growth occurred between 2013 and 2016, and the the lower quartile price in the region has been more or less flat for the last two years.

The fact that lower quartile prices have stopped increasing in Auckland and interest rates have been falling has helped first home buyers, with affordability in the region slowly improving for most of this year.

However Papakura (lower quartile price $608,000) and Franklin (lower quartile price $537,500) on Auckland's southern flank are the only districts within the Auckland region where house prices are low enough for them to be considered affordable for typical first home buyers.

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 or click on the "Register" link below a 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.


Here comes the correction we're all looking for...
26 Halifax Avenue in DGZ Epsom
(C.V $2,025,000 - priced to sell at $1,679,000)

If you think Core Logic still value your house at peak level and you have a CV of $2.5M, TAKE 70% OFF THE PRICE and that's what you'll get in a normal Auckland market! We're slowly but surely going back to that level, like it or not. Fasten your seat belt!!

I think you should take 170% off the CV

BTW, the handpicked example you give is 17% off CV, not quite 70% (but you're only 53% off...)

I did mention "slowly but surely". 17% now will turn into 70% within a couple of years time.

Wow, you have an amazing gift to acurately see the future

Yes, thank you Yvil. Before you know it, the Ponsonby villas will be worth $500k each. 我的天啊!

9 Stuart St, Ponsonby just sold for over $4 Million. Shame the buyers didn't know what you know

Poor thing. I do feel sorry for them :'-(

Also a villa on Vermont St (sorry I forgot the number) just sold for well over $3 Million

That's money down the gutter 多可怜啊。

Yes agreed but that's what happens when you rely on 海外投资者

Looks like DGZs flip of the poles is holding. I believe the term is bipolar.

...or it could be mental illness or depression. It's not a funny subject, just look at what happened recently to a well known Remuera resident.

Wait a minute, are you in the national party? Should we start calling you Dr Jian Yang?

You and your Jian Yang. It's not about the Story of YanXi Palace (延禧攻略). It's called getting real in NZ (新西兰攻略).

Again DGZ??
The current owners bought this house for $1,005,000 in November 2012. According to the ZS principle it should be worth something like $1,600,000 or less, possibly around $1,550,000 in today's climate. That's still a cool half million in less than six years.

Nice area but I can see some drawbacks like no garage and a steep hike to the front door. It does have a full freehold section which is unusual for this price range. Nevertheless it was cheapish in 2012 and thus remains cheapish. I may go to the open home and check it out.

The current owners = 中国人。

The current owners bought this house for $1,005,000 in November 2012. According to the ZS principle it should be worth something like $1,600,000 or less, possibly around $1,550,000 in today's climate. That's still a cool half million in less than six years.

What's your pirnciple? Extrapolating the past into the future? Nothing particularly new. You could have picked that up from the Ashley Church school of forecasting.

Basically, "if it was a cheap house ten years ago it's still a cheap house now" relatively. A concept my wife and a number of private sellers have a lot of difficulty understanding.

Also who the hell is upvoting your tedious comment? Come on, I am the only one calling out the flaw in using this property as an example of a sign of impending doom. DGZ is just having a laugh of course.

The concept of a "cheap house" is meangingless without any objective anchor. If you have to exchange more resources to obtain something, it doesn't make it "cheap" compared to the past on any relative basis.

It's not cheap compared to the past, it's cheap compared to other houses in the street. This ratio will tend to remain so into the future if you make no improvements. It's kind of a "well, duh" thing but it is surprising how many people don't get it. Two houses in the same street, one 500k, the other 1000k, ten years later they are worth 1000k and 2000k respectively.

Doesn't matter. You're extrapolating the past into the future. It's not forecasting. It has nothing to do with determnining if something is "cheap."

26 Halifax Avenue purchased by Bernard Hickey April 2005 for $613k and sold in 2012.

BH should definitely put in a cheeky "take it or leave it" offer of $500k. LOL!

NZ homes are gross and not fit for our climate. Most of these old rot boxes should have been bulldozed 30 years ago.

Rates, along with insurances are only going up - there are clearly still some desperate buyers out there .. strange people would take on a mortgage under these conditions.

I understand people have/are gaining money through property, don't get me wrong, if you have the money n want the property, that's fine.

Property in NZ could double in price, maybe tripple - all that means is the NZ dollar has become worth far less. This is fine if you can access zero percent interest rates.

People fail to realize most counties are devaluing their currency - so it may appear the NZD has only gone down a little, but this is far from reality.

If anybody tells you the official inflation rate is accurate, don't listen to them - they're an idiot.

Simple solution. Build yourself a new home and make all of the decisions you wish other people had made. You’ll likely overcapitalise as cheap buyers will look at price not quality.

Even the new ones are junk. Pink sticks and fluff. The typical new house has
NO air-tightness barrier
NO floor insulation and
NO window frame insulation
NO ventilation system
NO central heating

But hey at least all those $building standards and $council inspectors make sure everything is "meets NZ code". For all those $$ you'd expect they do a physical test with expensive instruments to make sure the insulation actually performs. When the spec says R2.6 that's totally ignoring all the uninsulated bits of solid timber and metal window frames.
You see we have "unique conditions" compared to other countries - kiwis are used to wearing their puffer jacket inside the house.

Honestly the default spec is probably fine for most people but it shouldn't take $2000+/sqm and thousands of council fees to achieve it. It's Corolla features at the Camry price.

Thanks for a very detailed report. Given the data readily available I think that you have produced a very sound measure.

While the past 8 to 10 years have been a period of high property prices, they have also a period of traditionally very low mortgage rates.
I note that you have data from 2013. At this time - from memory - mortgage interest rates were already low due to the GFC and QE. It was the significantly lower mortgage rates at this time that probably gave the best period of home affordability for some time and as such fueled the subsequent boom in property prices.
As a base, is there a possibility of at least a snap shot of some more historical analysis from say 1988 when interest rates were significantly higher at around 7 to 8%.

That's a very good point Printer8, I would love to know what % of FHB medium incone had to be paid to buy a lower quartile house 10 years ago in 2008. Sure, houses were much cheaper but then interest rates were much higher and wages a little lower. How about it Greg?

You realise the drop in interest rates is temporary while the increase in prices is permanent right?


You implied that the higher prices 2018 v 2008 were somewhat compensated in terms of overall affordability by higher interest rates.

My point is that single point in time interest rates are irrelevant to the question of affordability. Price is a singular moment - what the person pays is the price they pay forever for a given house. Whereas interest rates fluctuate over the life of a mortgage. Both a person who bought in 2008 and 2018 will be paying the 2018 interest rates and therefore will benefit equally.

Therefore, the whole idea of an affordability calculation including a single point interest rate is flawed. If you must factor in interest rates for comparing with the past, then you need some assumption of likely rates over 25 years. Arguably interest rates 2008 - 2033 would be higher than 2018 - 2043 but I wouldn’t bet on it, would you?

So it is best to just compare house prices and ignore wages and interest rates for year to year comparisons.

Hi Hardly
I think you need to think about what "affordability" means.

I think you need to think about what affordability means. Maybe you could expand on your thoughts and we could be less juvenile.

Hi Hardly
My thoughts about what is "affordability" has nothing to do with it. Read the second paragraph of the article (repeated below) that explains what "affordability" is in the context of the article and all discussion including this particular thread.

"The reports track movements (i.e. in "affordability") in dwelling prices, mortgage interest rates and incomes in 41 locations around the country to see how much of a typical first home buying couple's weekly income would be eaten up by the mortgage payments on a lower quartile-priced home in each area."

So, "affordability" is a snapshot (at a particular time) measure of a FHB's ability to purchase a house given the three factors which change over time: house prices, mortgage rates, and income. Note that it is a measure at a particular time.

Affordability is not the only measure that could be used to determine how readily FHB can purchase a home. For example, the percentage of people owning their own home is reflection of this, and over the past decade this has fallen as houses become less affordable.

While these measures may have limitations they are far better measure of whether a house is more of less affordable than just considering the change in house prices. As an example; Just because a house was $550,000 a year ago and is now on the market today for $600,000, it doesn't necessarily mean that it is necessarily less affordable today, if average incomes are up significantly and mortgage rates are down significantly.

Individually, FHB will be very well, well aware of this when they consider purchasing a property; they will be taking the price of the house, the current mortgage rate, and their income and ability to service the mortgage to determine whether or not the home is affordable. And that is exactly what the "affordability" measure is all about, but on a wider generalised scale.

Oh, and one last thing. I am on superannuation so I am not likely (regrettably somewhat) to be the juvenile here. :)

So, "affordability" is a snapshot (at a particular time) measure of a FHB's ability to purchase a house given the three factors which change over time: house prices, mortgage rates, and income. Note that it is a measure at a particular time.

Incorrect. This measure as calculated is does not measure a FHBs ability to purchase a house. It measures their ability to service a mortgage once they have purchased. It does not address credit availibility, property availability, deposit requirements or completion in the market for FHB type properties.

I get that it’s a snapshot in time and it’s the measures the author chooses to use. I just happen to disagree and was doing so in particular in relation to the earlier comment comparing now as favourable to 2008. My point is that a purchase price as a snapshot in time is quite useful since the price you pay is the price you pay. Incomes are less useful since these change but at least they usually go up at a predictable pace over the long term. Interest rates are the least useful since they go up and down and as we’ve learned over the last 10 years can be quite unpredictable. I believe in measuring affordability we should stick to an assumed interest rate - say 7% - and leave it at that. That way affordability would be based on a reasonable outlook of the whole of life cost, not an overall optimistic one which I consider today’s interest rates are.

But these are our opinions and that is what we come to post and when we both take time to explain what we think in reasoned ways neither of us is juvenile.

Further to this, I think affordability should be looked at probabalistically and not as a single figure. As historic data is gained it can shift from a confidence range to a specific number. You could say there is probably a 90% confidence interest rates are going to be between 5% and 8% over the next 30 years. Accepting this uncertainty makes more sense than expressing affordability based on today’s unprecedented rates.

The vagueness of your comments appear such that you still don't seem to have really comprehended either what is being measured or purpose for this measure; that is simply a measure of a FHB's ability to enter the property market at a particular time and how that ability at any one time changes over time.
It is not about sustainability of that entry. Assumptions of uncertainties in trying to achieve as you say are problematic and your assumption of a 7% mortgage interest rate is pretty wild and would make such a measure rather questionable.

Funny, I thought I was quite specific in my statements. I’m sorry you think we are having a different conversation. But if we aren’t talking about the same thing why do you keep talking?



What is the average age of first home buyer at present. Are they the mythical 25-29 year olds portrayed here.We simply are a delusional nation arguing whether homes are now more affordable when home ownership rates continue to plummet and have done so for decades. Since June 2008 ,households living in their own home have increased by an 'astonishing 'average of 5600 per annum,whilst those living in rented households have increased by 13000 per annum or in total an astonishing 26 percent more than in the June 2008 quarter.

Selling for 30% above the 10 month old CVs in hot regional cities still at the moment.

Yup....because it's all about Auckland interest rates will be very tame for a very long time and we'll see a full regional catch up - many regions up maybe 40% from 2007 cf Auckland 90% up... As what happened last cycle big regional gains under the radar as banks find many many more people able to borrow 400k in places like palmy while next to no fhb can borrow 800k for a shack in Auckland.... They are in the business of selling mortgages so guess where they are selling too during this phase... Regions.... Cities of around 100k population have a large base of buyers... Which cities of this size have median price under 400k? PN the only one - with population growth strong it's no wonder it's still on the up and has another 18 month, 2 years left to run


So all foreign buyers have 2 months to buy as it will be implimented fron 23 Oct.

It means that the percentage of house sell should go up considerably and if now is flat will fall afterwards when the law is in place.

Surprisingly no news or mention of it in media and even nothing on this website.

So the ban will be in place only after 2 months and now is free market for all or is their something that am missing.

You are correct, there will continue to be foreign buyers ahead of the ban. Seeing as the market is not exactly hot now, it will be interesting to follow the market in the spring selling season to see how large the impact is following implementation.

Good work finding that Stuart, I have not seen it published anywhere yet either.

Well no wonder FHB think they cannot afford a house....."That meant that the amount that would need to be set aside each week for the mortgage payments on a lower quartile-priced home would have dropped from $366.66 in March to $360.20 in July." I was paying back over $600 a week and it was on ONE income. Two of you on good money should be able to pay back $1000 a week.

thats a national price. the affordability crisis is mostly confined to Auckland where the lower quartile price around double that number.

Well no wonder FHB think they cannot afford a house....."That meant that the amount that would need to be set aside each week for the mortgage payments on a lower quartile-priced home would have dropped from $366.66 in March to $360.20 in July." I was paying back over $600 a week and it was on ONE income. Two of you on good money should be able to pay back $1000 a week..

What happens to the consumer economy if people start allocating more income to housing costs? Trust me, things are unlikely to be pretty and negatively feeds back into things like employment and income.

Property prices will keep falling

As an investment housing investment is still and always is going to be the best bet!
Positively geared property bought right will give you an income plus guaranteed capital gain if you want to sell at some time in the future.

TM2, why do you bother?

....and that is the million dollar question. TM2 is a true believer - true believers can only believe , never question. Only if his whole world collapses will he realise that maybe he is not as great as he thinks he is.

"For those who believe, no proof is necessary. For those who don't believe, no proof is possible."

Stuart Chase

Yvil, why do I bother?
Because not everyone on Interest.co are so narrow minded and jealous of people who have been financially successful from investing in housing.
Opportunities are out there always.

....or maybe you are to dumb and stupid to understand that there are other ways of being financially successful than investing in housing.

I agree with you TM2 but people will NEVER listen, you are wasting your time

Who knows if prices are falling?

What we actually need is a price per square metre statistic for the whole region. Dwelling sizes are falling on average due to the increase in apartments and terraced housing.

How do you compare an FHB buying a freestanding house, with having to buy a sausage flat unit? There's a quality difference that's not captured in the overall median price data.

They are not falling but you can spin the numbers to suit your point of view. On the face of it prices are down 10% in the area I just sold in this month but its insignificant compared to the 46% gain in the last 3 years. All stats are pretty irelavent really when you get your wallet out house prices are still insane.

Exactly, and if you do manage to jag a house, you can bet it's smaller than your parents.

The equivalent of smaller chocolate bars for the same price. Hidden price inflation.

Very good point. The REINZ stratified index is a good measure that accounts for factors such a more or less appartments being sold in any given month.

Who was that annoying poster who used to go on about buying lower priced (highbury/awapuni) Palmerston North property?

"Palmerston North:
The median house price was $370,000 in April, up from $359,700 last month. The median house price was $343,000 in April 2017 which puts annual growth at 7.9%. Five years ago the median was $271,000.
Dwelling sales in April were 133, down from March’s 148. They are now higher than the 98 sales twelve months ago and higher than the 125 sales five years ago.
The lower-quartile house price was $322,000 in April, up from $305,000 last month. Annual growth was 19.2%, from the $270,100 lower-quartile house price in April."

Well think of it this way; if property prices are falling with our wealthier neighbors who have much higher salaries with a stronger economy then ours. Little NZ will continue to bottom out property price wise for some time to come.
DGZ be careful what you wish for as I think you're going to see quite a big drop for those paper millionaires in Auckland. Zachary you might want to stock on those bake beans.

Business Insider article: Australian house prices are falling, and this time the RBA is unlikely to come to the rescue

“Given a likely lack of policy easing in the coming cycle, home prices will probably keep falling into next year, seeing the longest downturn in many decades.”

The quote referring to policy easing is from AU article I assume? As in NZ last month or so things have changed big time towards the easing side - and even the most bearish of banks Westpac are now predicting a lift in process in NZ through 2019 as a result of the more dovish views of the new Rbnz governor

Have you tried getting a loan? You may reconsider your statement about easing

A loan as a fhb for 300k with a lazy 40k for deposit in kiwisaver? Yes happening all day everyday in palmy... Hence the 20% year on year price gains at the lower end

Ah, palmy

Exciting capital of New Zealand.

“Given a likely lack of policy easing in the coming cycle, home prices will probably keep falling into next year, seeing the longest downturn in many decades.”

The amount that banks lend to property buyers has decreased by 40% since the banks have readjusted living expensse in their algorithms.


A question from the experts on this website or if the editor can answere :

After Royay Assent is it must that it can becomes a bill only after 2 months from the date of assent OR is it that 2 months is the maximum time that it has to be a law (and if government wants can be a a law much before 2 months)

If as per constitution it can only be after 2 months, it is fine but if not than it is a shame and people should know.

Interesting. Should know if 2 months waiting is mandatory as per constitution or........

It's law once it gets the royal assent, and some provisions start immediately. Some other bits take time to set up so that's why the 2 month delay is there.

You're trying to make a mountain out of a molehill.

So I understand that it was possible to impliment it sooner to avoid given opportunity to speculators / foreign buyers.

Everyone knows what happens in this type of scenario if given a long time frame.

This is your perception that it is making a mountain out of a molehill just like National party leader who had the same perception about foreign buyers in NZ that Labour is making a mountain of a molehill.

Reality is that if government wanted could have found ways to impliment it sooner just how it found ways to ban foreigners.

Pragmatist how about :

Where there is a will there s a way.

No, I just live in the real world where systems don't just appear and conspiracy theories are just not worth the effort.

Yeah you are correct real world........ What happens and what should happen.

Flattening and mild decline. A lot of leaky rubbish was purchased in the name of speculator debt based tax savings. This stuff will sell down because it was overpriced.

Lots of external factors coming in to play.

Housing Market; 18 months ago it was FOMO, now it's FONGO (Fear Of Not Getting Out)

It's been FONGO in Canada for a while now and they've had prices fall by a greater percentage. I'm interested in seeing if people go into a panic, as no doubt there are some people in a precarious position buying at the top of the market.

This post is in a stark contrast with the (more balanced) tone of the article.
That it is the "editor's choice" speaks volumes about the editor's outlook though...

Who cares? I can afford an un-insulataed shitbox that needs expensive repairs located in a provincial town. Woohoo. You know what I can't afford? NZ salaries, NZ food costs, gangs running around with impunity, a wet bus ticket legal system, mass migration, no-effort multiculturalism and straining infrastructure.

There's no need for sarcasm from either real estate permabulls or bears. I don't really see any merit in pushing a particular investment type so hard because of personal reasons.

If the price is heading lower then so be it, that's the nature of investment cycles. In reality, there are a number of investment classes all with differing risk levels.