Slightly lower prices, falling interest rates and slowly rising incomes are all helping to improve affordability for first home buyers - but not by much

Slightly lower prices, falling interest rates and slowly rising incomes are all helping to improve affordability for first home buyers - but not by much

By Greg Ninness

Housing finished the winter at its most affordable level for first home buyers in the last six months, according to's latest Home Loan Affordability Reports.

The improvement in affordability is due to a combination of slightly softer lower quartile house prices overall, falling interest rates and slowly rising wages.

According to the Real Estate Institute of NZ, the lower quartile selling price of all homes sold throughout the country peaked at $381,000 in March and dropped to $375,000 in August.

Over the same period the average of the two year fixed mortgage rates offered by the major banks declined from 4.67% to 4.61%.

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

That meant the mortgage payments on a home purchased at the lower quartile price would have declined by just over $10 a week over the same period, from $366.70 a week in March to $356.32 in August.

Also during that period wages have been slowly rising, and the Home Loan Affordability Reports estimate that the combined after tax pay for a typical first home buying couple (both aged 25-29 and working full time for the median rate of pay for their age group) would have increased from $1585.82 per week in March to $1600.18 a week in August.

That meant the amount of their income that typical first home buyers would need to set aside each week to meet the mortgage payments on a lower quartile-priced home would have decreased from 23.12% in March to 22.27% in August, making home ownership the most affordable it has been for first home buyers since February.

Housing is considered affordable when it takes up no more than 40% of take home pay.

By that measure, lower quartile-priced housing should still be affordable for typical first home buyers in most parts of the country.

Auckland is the only region of the country where the mortgage payments on a home purchased at the region's lower quartile price would exceed 40% of typical first home buyers' incomes (43.23% in August), although Queenstown is the most unaffordable town in the country for first home buyers, with the mortgage payments on a lower quartile-priced home there taking up just under half a typical first home buying couple's pay.

However even in Auckland there are some bright spots, with Papakura and Franklin both classed as affordable for first home buyers, with lower quartile prices falling in both districts over the last few months.

In Franklin the lower quartile price was $537,000 in August, the lowest it has been since July last year, which means the mortgage payments on a lower quartile-priced home there would eat up 33.62% of a typical first home buying couple's take home pay, well within the affordability limit.

In neighbouring Papakura, the lower quartile price was $543,000 in August, with the mortgage payments on a home at that price taking up 34.06% of typical first home buying couples' take home pay, also within affordable limits.

However in other parts of Auckland, couples on average pay are likely to struggle to be able to afford their own home.

After Auckland the most expensive place for first home buyers is Nelson/Marlborough where the mortgage payments on a lower quartile-priced home would take up 31.09% of a typical first home buying couples' take home pay, followed by Bay of Plenty 29.26%, Wellington Region 24.98%, Waikato, 24.25%, Hawke's Bay 21.07% and Canterbury 20.13%. in all other regions it was less than 20%, which should put home ownership well within the reach of first home buyers.

Separate Home Affordable Reports for each district are available by clicking on the appropriate link in the box at left.

The interactive chart below tracks changes in Home Loan Affordability for first home buyers in all regions since January 2004.

No chart with this title found.




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Just thinking out loud.

So first time buyers are able to hang themselves for 30 years to buy a 2 bedroom dog box that an investor has chosen to offload. They're maxed out now for 30 years and if income situation changes with kids that will prevent them trading up.

The investor pockets his cash and escapes whatever tax changes may be coming. perfect!

Couple of blips to this though which are regularly overlooked. The investor is not trading up to the middle market, he's dispersing so who buys the middle market? And with foreigners removed from the top end of the market, who buys the top end? The middle don't have any buyers to trade up because the dog boxes have absorbed all the buyers.

What happens next?

Hi Nic
You are obviously not in a happy-chappy mood today.

The alternative is to pay rent for the next 30 years. And the news is not good. The landlord is not a charity offering subsidised accommodation; so one will not only letting that fat cat property investor profit from you, but also paying off his mortgage as well. And at the end of the 30 years - you walk away with nothing.

Look at your comments; the premise for these are one of envy of property investors, not what is in the best interest of a FHB.


..nope the alternative is to wait.

The pop will arrive in a sudden and dramatic fashion - as it always does. Wait FHB's....don't be tempted top prop up us boomers....we've sucked enough off you.


That would be the ideal case. Look at the amount of IPOs that NZ's had over the last year, 0. At this rate, what's the point of creating innovative businesses we can sell to the world if you can just sit on untaxed property gains.

Maybe a turning point would mean that other investment opportunities would look more attractive.


600k mortage over 30 years at 4.5%
5 years you have repaid 10% of the capital and mortgage is still $550k
10 years you have paid back 20% of the capital and mortgage is still 480K

18 months the market corrects 20-25% and you have a mortgage of 450K - 480K but are 8 years ahead of where you would have been had you bought now and can take a 22 year term to polish of the debt.. Alternatively, you still borrow 600k but for a much better house because the middle market will be knackered. Hell you may even want to stretch yourself to hammer an over-leveraged boomer who has too much debt that the banks want back and pick up that £1.5 million home for 900K.

Just sharing my views with the young.

"18 months the market corrects 20-25"

Big gamble right there! -

Try this - expand the affordability graph at end of this article back to include early 2000s - look at where we are in terms of affordability compared to other times in recent history -

We are not at all stretched presently.

Also look at government debt - we have one of the lowest government debt in OECD - plenty of safety there to ensure interest rates remain low and can lower to prop up the property market -

Look forward to seeing you still posting here in 18 months to discuss why NZ real estate is not down 20%


Ah Simples is back

Don't forget about the tightening of credit criteria, it's already being priced into the market. Banks are tightening up loan offerings by around 20%... What do you think they may be expecting?

Can I suggest the same advice I gave Heavy G below. Think on it a bit more, but whatever you do, don't use up all that capacity in one go.

Particularly the aussie banks are tightening up on serviceability yes - with nz lending the LVR has been the limiting factor not serviceability in recent times so that 20% tighening on serviceability won't effect most people except those buying new with low deposit.

What props up the market?

What is there that pops the markets? Property prices are always sticky on the upside as people wont sell at a loss unless they really need too - To get falls of 20% or similar you need something that forces people to sell - extreme hardship - looking at the affordability graph i dont see it

Hi Simon

You're possibly too exposed to the game to want to hear the reality. Have a watch of this it will give you some insight and save me banging my head against a brick wall.

"Downwardly sticky prices lead to "quantity clearing markets" rather than "price clearing markets." In most markets with excess supply, prices and output fall immediately. If prices are slow to respond, however, the burden of adjustment falls on the quantity of production, prolonging the cycle. Home prices have followed exactly that pattern over many years. Demand drops. The inventory of unsold homes rises. Prices stick. Output falls. The inventory of unsold property remains high (because a house is a durable good, not a consumable). But household formation rates remain positive, and the new households eventually absorb the excess inventory and output rebounds. Assuming there is upward inertia, prices then rise and ultimately overshoot; demand again slows, starting the next cycle."

Regarding your YouTube clip : He's worried about stress test in Canada at 2% higher than current rates there I.e 5%.

Well NZ stress tests at 7.5% and has done for well over a year.

He then mentions Australia reliance on foreign capital - well NZ has forced banks to source much more from local deposits.

And again - govt debt to GDP here is so low - a crash won't be allowed to happen here.

A bail out of Aussie banks could happen - this will happen before a crash happens over there or here - with lower rates for those with good credit but in general will be harder to get credit - as we've seen already past year in NZ, we are small and nimble so banks have been over this - and what we've seen is a flat line in Auckland with volumes down a fair bit - and regions gains lowered from 20% growth to 10% -

The tighter lending standards has already happened in NZ ask any broker; sticky prices flat lining with low volumes has occurred and will continue for a few years

You've got time on your hands - how about you give this a read and post a summary - likely has some stuff in it you'll like but also some key differences:

"Home Prices are Subject to Inertia (Bubbles) and Are Normally Sticky Downward In 1957 Paul Samuelson wrote, I have long been struck by the fact, and puzzled by it too, that in all the arsenal of economic theory we have absolutely no way of predicting how long [a bubble] will last. To say that prices will fall back to earth after they reach ridiculous heights represents a safe but empty prediction. Why do some manias end when prices have been ridiculous by 10 per cent, while others persist until they are ridiculous to the tune of hundreds of per cent?5 A good deal of evidence indicates that the housing market is prone to bubbles. I argued in 1986 that the price boom in Boston that began in 1984 was not caused by fundamentals but was indeed a bubble.6 A structural supply-and-demand model that had been reasonably successful at predicting home prices in 9 of the 11 cities in my sample suggested that fundamentals (income growth, interest rates, employment growth, demographics, and so forth) should have pushed Boston home prices up by 16 percent. Instead they increased by over 140 percent before peaking in late 1988.

Shiller and I constructed an accurate measure of price changes with transactions data obtained from Atlanta, Chicago, Dallas, and San Francisco. We found evidence of substantial positive serial correlation in real home prices. Our 1989 paper showed that a change in price observed over one year tends to be followed by a change in the same direction the following year between 25 and 50 percent as large. We found evidence of serial correlation in excess returns as well. Subsequent work demonstrated that both California and Massachusetts experienced price bubbles in the 1980s and 1990s"

Hence why regions up double digit over past year have continued - increased equity fuels further growth and enthusiasm until a hard limit is reached - Some way off for somewhere like Palmy where replacement costs still higher than second-hand properties on full sections

How many eggs do you have in the Palmy basket? Are you worried?

And - living in Palmy - how many of those eggs have been smashed in by p-addicts?

You come across as an extraordinarily bitter and resentful person. Most people just want to get on with their lives, be able to paint their kids bedrooms or have a pet. Your relentless negativity detracts from the quality of this news site.

Where have you been Te Kooti?...

The forums on this website are full of envious doom and gloom merchants who crave a property crash and spout endless drivel trying to justify why this crash is just around the corner. This verbal diarrhea has been spewing forth for several years and there are no signs of it stopping anytime soon.

Unless you enjoy baiting spinners (which I do unfortunately) I suggest you give the forums a miss.

I don't crave a property crash. Nor a property resurgence. The market will do what it wants, no matter my or any one elses feelings.

But I do hope I can stop young people throwing their lives (and retirement savings!) away by going hundreds of thousands of dollars in debt to live in high crime provincial towns. They should know there are options.

If people are bothered by my message - that says more about them than me.

Hahaha says the guy saving to move to Australia, a country originally colonized by convicts! Which is seen come through in all their sports teams and the way they mistreat the aborigines.

Not much crime in Palmy - great schools and highest educated workforce though. Biggest army base in NZ the military police keep the place honest.

Not getting confused with wanganui or Auckland the aggregated robbery capital of NZ:

Not much crime in Palmy

It's immoral and disgusting to lie like that.

I've lived in both Palmerston North and Auckland. As dodgy as Auckland CBD is, it doesn't hold a candle to Palmy.

Maybe you live in Milson, Hokowhitu, Kelvin Grove* or Summerhill and drive everywhere so you don't have to deal with it. But that's not where the affordable 'starter homes' are and you know it.

*Actually, didn't the Mongrel Mob just move into a new pad in Kelvin Grove? There goes the neighbourhood.

yeah lets all forget about the data provided by and all base our opinions on a guy called 'saving_for_auss' -

Enjoy yourself over there i think you'll fit in fine:

Palmy, not much crime??? really are you living in the hill???
When i was living in Palmy (terrace end) I lost count how many times our windows were busted!

crime rate (crime per 10,000 population) one of the 4 lowest in NZ in central region with PN the biggest city in that region:

Stats > random internet guys opinion or individual experiences

Fair enough, but I still got that image of Palmy from John Cleese!

The locals named the dump after him - not sure if he still has the naming rights today though -

The statistics you link are for 'recorded offenses', they are not a measure of all crime and violent assault that happens. Palmerston North has always been understaffed by police, and there is very little police presence. If a crime isn't recorded, it won't show up there. If you call 111 and the police never show up because they are lack resources, it won't show up there. And that's just the less dubious reasons - get close with any provincial cops and they will fully admit to pressure to keep arrests down so their numbers don't look bad

I fully admit I am 100% going off individual experience and anecdotes. I have nothing else to go off, as the statistics for recorded crime are nearly useless for determining actual crime. It doesn't measure what you think it measures.

Shall we set up a give a little page for ya to get you over to Aussie asap? Id be happy to make a contribution if it gets you off here

I'd rather younger productive individuals like him stay and unproductive speculators such as yourself take a hike. Maybe we can pull together enough on kickstarter for your ticket.

Nah mate you couldnt afford me... Would need to pay a lot more than a few young entitled millennials could afford to leave gods own

Travelling and enjoying life thanks... Everyone is entitled to their view however this borderline pathological obsession with predicting, and taking pleasure from, a property slowdown has reduced the comments section to being unreadable.

I am not really concerned how I come across to you. If you think the comments are 'negative' or 'unreadable', that's your problem.

PS: You can do all the above much cheaper/safer in Australia.

My comment wasn't directed at you.

Yeah it was, SFA was referring to your first comment (replying to him) not your reply to my comment.

Nowhere near enough...

Is Nic johnson CJ1009?

No, but he is an excellent commentator.


Don't let wishful thinking cloud your judgement.

No one here has a crystal ball as to what the property market will do. Not you, I, or anyone else.


Minor correction: landlords are currently subsidised via WFF and the Accommodation Supplement.

Nic is waiting on the total collapse in the market so his $1.75 and 2 snail shells will get him his dream home. FHBs who are getting on the ladder now are delaying the inevitable 100% crash that is coming and are therefore to be treated the same as those filthy landlords.

BTW Nic hasn't been a happy-chappy since he entered this world.


Ah, the small brain has arrived to brighten my day!

Think about the dynamic again Heavy-G and my response to Printer8 below. Don't think too hard though because you've got to get through to the end of the week on limited rations.

LONG term renting is making some one else RICH, a good idea is to get on the property early and work up.
Sure the LVRs are a problem now but there is always an alternative , but must look for it

Although not everyone does, people do save the difference between rent and mortgage costs and invest it outside the property market (faaar cheaper to rent where i am anyway, although possibly not the case everywhere) . If you have a mortgage remember you are renting the money LONG term to buy the house, making bankers RICH.

"LONG term renting is making some one else RICH"

There is an important caveat that is missing from your sentence, that gets omitted or forgotten, and is hence incomplete.

"LONG term renting is making some one else RICH, IF property valuations are inexpensive.
LONG term renting is making you RICH, IF property valuations are expensive."

For the same house,
1) at a price of say 70, the valuation may be inexpensive and the price might be expected to increase to fair value over time - buying should be the preferred action.
2) at a price of 100, the valuation may be fair and asset is fairly valued
3) at a price of 200, the valuation may be extremely expensive, and the price might be expected to stay flat until valuation metrics become fairly valued or fall to reach fair value valuation metrics (in this case to 100). In this case renting is the preferred action.

Printer8. I think you probably misunderstand my circumstances.

Just think about the dynamic a bit more and you will possibly come to a different conclusion.

While there may be a steadyish lower end of the market, for a while, the genuine lack of ability and shortage of second time purchasers able to trade up, will likely cause a huge shortage of buyers in the middle and upper ends of the market. Investors tend not to buy single rentals at $2,000,000 (unless they're really daft with numbers - actually we have a few commentators who may be that daft!)

So while averages reported may stay steady for a while, the reality is that the top and middle markets are going to be starved of buyers (investor sellers at the lower end are unlikely to be trading up the market) and so the middle will undergo a significant correction. I can't see too many lenders wanting to stump up $2 or $3 million for single dwellings that have massively negative rental returns to the loan rates, so the top end is cactus.

So while capital gains may have occurred at the lower end of the market, the top was being pumped with foreign buyers. I can see it already. Guy in a $1.5 million dollar house re-mortgaged to buy in Palmy in 2015 for $300k. That went up to $450K so he sold it in 2018. Meanwhile the $1.5 million dollar place has fallen to $1.2 million and there are no buyers anymore. Quick way to lose 150K of equity.

Like I said, just thinking out load and they're all happy thoughts!

Worse if the situation ends up like in Australia, where the banks are applying much more stringent mortgage lending criteria. What they have found is that the majority of recent borrowers would not qualify for their current mortgages under today's rules, so not only are these borrowers unable to refinance, they also cannot borrow more to upgrade to a more expensive home. A large chunk of the buyer market has effectively been removed.

Hi Nic
Thinking out aloud a good thing. So, here is my thinking out aloud.

I look at a lot of the discussion about FHB (and private home ownership) and property investing and note that a very basic consideration is overlooked. That is the basis for buying.

From an investor's perspective buying a home is simply about making money; i.e. an investment. So considerations are largely about rental yields and what is happening to the property market (both potential capital gains as well as capital losses).

From a FHB or home owner's perspective, buying a home is more about intrinsic value (security, security of tenure, pride, etc). We have a culture that over time a home will take on a lot more intrinsic values, a significant part of family (the "family home") memories of family occasions etc.; I know my children were particularly upset when we sold what they knew as their only home, and I had pangs when my parents sold their home even though I hadn't lived there for over 20 years - it becomes one's turangawaewae .

From an economic perspective of home ownership, the most important factor is being able to afford the home and service the outgoings (especially the mortgage) and any future changes to outgoings (e.g. mortgage increases, significant maintenance etc.). In the longer term, if historical trends are consistent, one will most likely make a considerable capital gain.

So, one needs to keep in mind that a home is that - one's turangawaewae - whereas it is only the second (and any subsequent properties) that are an investment.

Market fluctuations should be less important to the home owner compared to the property investor. It is interesting that we have a culture of thinking about what our house is worth. If its value goes up, we think ourselves as more wealthy; however, we still have the same house/home and are unlikely to realise that increase in value (but will happily go out and spend more as we feel wealthier).

What of potential market crashes. As long as one can service the outgoings there should be no need for concern. The home owner is essentially in property for life. They are likely to trade up when circumstances allow such as significant pay rises over time, an inheritance, of the mortgage paid down sufficiently to afford a larger mortgage. Whether the market is up or down is not that important; the old saying applies "you are selling and buying on the same market", and in fact a decrease in the housing market could just make that better preferred home far more affordable as the price differential is most likely to be less.

Well done and a good comment.

So from an investor perspective there are very few places to buy at present that satisfy yield. There are likely to be fewer still if tax advantages are removed. From the perspective of 'one's turangawaewae; - those memories are likely to be more fun filled when not obsessing about debt.

Buyers tend not to buy when things start dropping, why would you, you wait and see how cheap it all get's as no one ever is forced to buy anything, other than food. Sellers however and we appear stuck at 32,000 for the country have made the decision that they would like to sell, some won't have to sell, but many will.

It will be fascinating watching how it all pans out. A few things are definitely happening though, 1) Credit for mortgages while becoming cheaper are now having their volume of offering rationed much lower. 2) There are a lot of very stupid investors who didn't quite understand the mathematics and while it may look good on paper between 2014 and 2017, gains can disappear in a flash and the plan to sell in 2/3/4 years to fund retiurement can be stretched out to 12/13/14 years where little happens to the capital and all you're doing is paying the bank their interest (sometimes topping it up)

I'm all for the market returning to houses being one's turangawaewae - I've got kids who need to learn to do it themselves, but not yet!

The landlord is not a charity offering subsidised accommodation; so one will not only letting that fat cat property investor profit from you, but also paying off his mortgage as well. And at the end of the 30 years - you walk away with nothing.

Don't tell my landlord this, he'd have to put our rent up to cover his mortgage payments. Assuming he put 40% down in deposit, on an interest only basis he is probably cashflow neutral.
On a P +I basis at 4.1% over 30 years, he's $43 per week short on the mortgage payment alone, let alone the extras like rates, maintenance, insurance.

Meantime, all the money we're saving by not paying rent to a bank (interest) is being saved and invested and currently seems to be returning about 9% after tax. Sometimes math is hard..but there even a website to make this stuff easy

I entered the numbers, and hit calculate, and the result came back

"Your home purchase does not break even after 25 years." so at an assumed 4% house appreciation, 3% general inflation, we are better off renting this place than buying, so long as we invest teh extra instead of wasting it on trips.

In 10 years, the realised capital from selling the house is $492k, after RE commission, the invested money is worth $644K.

Not doubt in time the numbers will change.. and then we can buy if we want, because we aren't tied to a mortgage.

EDIT: I whoopsied one of the numbers, I thought it was annual maintenance, but it was monthly. At 4% house appreciation the house wins. Pity there isn't 4% house appreciation anywhere I want to live.

Hi Pragmatist
Your snap shot view is of a very unique time in property investment and invalid for the longer term that you quote.

Rental yields are at a historic low over the past 20+ years that I have been involved in property. Talk to any property investor and they will moan that yields are currently abysmal - that is why I sold a couple of years ago.

As you will be aware, we are in a particular period following a very rapid rise in the housing market in which rent increases have not matched these increases. Your landlord is probably currently feeling OK at the moment accepting of a poor yield knowing that he has made significant capital gains over the past decade. Over the medium to longer term future rent yields are going to need to increase significantly compared to property price increases or your landlord - as with other property investors - are going to loose interest in owning rental property.

When I first starting investing in property, mortgage rates were around 7% and a yield of less than 10% was considered to be a minimum.

And you are assuming that capital gains will return to the market sometime soon. We could be in for a prolonged period of no capital gains, or even small price declines while house prices return slowly to a more typical median multiple, and interest rates rise (RBNZ can't ignore the rising fuel costs and taxes forever). Neither of us have a crystal ball, but at the moment there are no capital gains, and for now buying doesn't make sense, and not being encumbered by a mortgage is rather a good feeling.

The landlord may have made good capital gains over the past decade in other properties and may be using cashflow from other properties to pay this mortgage, but we are the first tenants in this one since he purchased just under a year ago. His financial position doesn't concern me, until it gets to the point he has to sell this place, or try to get out of the poo by raising rent.

As I said, we can buy when buying makes sense, buying is relatively easy if you have a wad of cash and a couple of good incomes... its somewhat more difficult to get yourself out of a mortgage if the market isn't active and growing, and right now in Auckland, its far from active.

At the moment there is almost no short term upside to buying, and plenty of short term downside, both financially and for non financial reasons.

Your landlord sounds like he many be a bit of a John from Bricks and Slaughter - you just have to look at the RBNZ mortgage lending stats to see how many silly sods jumped into the bubble.

No, I don't think he's anything like that. In fact i'd say he's pretty comfortable, probably a ton of equity in his other rentals, and he's no dummy when it comes to numbers, his business is built around being good with numbers.

If he was tight on money, he probably would have accepted the offer I made him regarding the underfloor insulation, instead of declining it and arranging to pay to have it done.

Fair enough

It will be interesting to watch this pan out. What happened in other Western markets was that when re-financing came around and the market had fallen, these investors were asked to 'top up' the equity with cash to maintain loan covenants. Those that could, did. Some that couldn't, sold and others that couldn't got stuffed onto the variable loan rates.

Just sharing how it happened elsewhere.

Hi Pragmatist
No, I don't see considerable capital gains (seasonal variations yes, but no sustained gains of more than 2 to 3%) in the short to medium future as I think RBNZ will control this primarily through LVRs. I have posted in the past that, for economic stability reasons, I think that we are unlikely to see such a significant and sustained increase in property prices as witnessed over the past decade.

In terms of rents, I see these increasing at a rate above house price inflation for improved yields.

For FHB, a flat (or at best/worse a slight increase decrease in prices) market, continuing low interest rates in the short to medium term, and increasing rents. So affordability for FHB will slowly (but only slowly) improve as it is currently doing.

So what should FHB do? Given the number of KiiwBuilds available and the numbers in the lottery, KiiwBuild will be just for the few lucky ones. As you mention, a couple of incomes is needed to buy that first home but that is nothing new as it was the case for boomers.

This presents a significant issue for many FHBs. The window of opportunity in one's life to buy is fairly limited - often when there is two incomes and prior to babies coming along. Can one wait in the hope of success in a KiiwBuild lottery, and can one wait for affordability to greatly improve??

As for landlords, there were a number of reasons I sold my rental properties, but from an investment perspective it was due to poor rental yields compared to other investments, risk of mortgage interest rate increases so adversely affecting yields, and a likelihood of a flat or risk of a correction affecting capital returns. I am at a stage of life where I am prudent and not interested in signifcant risk.

I think you will be lucky to see 3% house price appreciation (in Auckland) in the next 4 years.

The REINZ HPI for Auckland has been basically flat for 1.5 - 2 years already, and the signs for the next little while look weaker (climbing inventory, record numbers of apartments nearing completion, low turnover, low auction clearance rates, foreign buyers ban, kiwibuild & state house building, migration numbers falling), not stronger.

We shall see, but I am not at all worried about sitting it out for a year or two more and building a bigger deposit.

Another alternative is people living under bridges.
lucky we dont have that in good old NZ.
Oh wait.

Definitely in the first home buyer’s best interests to get into the market now if they can.

Inflation will eat away at their debt over time. Their incomes will increase steadily over time due to inflation and career progression, making loan serviceability easier. They will also benefit from significant capital gains in the long run. The rent they would otherwise be paying will increase substantially over the same period. Their mortgage payments on the other hand will be relatively steady at an average of about 5-6% over the life of the loan.

BLSH, yes/no, are you recommending all FHB's buy now on your premise their home will rise in value consistently from this point forward?

It sounds like you might need reminding of the falls that have already occurred in some areas of Auckland since April 2016 and it's just the beginning. It's not hard to imagine you were around telling FHBs to buy back then too!.

Albany Heights – down 7.74 per cent
Lynfield – down 6.86 per cent
Pinehill – down 5.84 per cent
Waitarua – down 5.54 per cent
Golflands – down 5.53 per cent
New Lynn – down 5.41 per cent
Totara Heights – 5.34 per cent
Flat Bush – down 5.26 per cent
Sunnyhills – down 5.05 per cent
Henderson Valley – down 4.92 per cent

Looks to me like the smart and patient who waited and saved have gained considerable traction wouldn't you say??

wait another year and those savings will have tripled

I'm suggesting that all able to get into the market do so, but not because their home will rise in value consistently from this point forward. Property prices go up and down, but over the long run, the trend is very likely to be up. Unlikely to be noteworthy gains for the next 3 years or so.

Nice stats by the way - whoever taught you how to pick cherries did a bloody good job.

David Chaston was thinking of you and Nic Johnson when he posted this picture the other day. You on the left, Nic on the right.

BLSH, perhaps these facts are a bit harsh and have deflated your ego. There are many more areas that have declined at lower percentages and many have just stagnated. Even if it was about cherry picking, its harder for you to perform your spin as few areas have risen enough to justify your BLSH.

BLSH, the cherry picking business is on both sides of the fence if you notice. You can always spot someone here going on about certain beach side area of Auckland selling well above CV.
(OK, I did post one yesterday but it's more of a wind up!)

For most owner occupiers, it is likely that they had worked hard, made lifestyle sacrifices and saved for many years to accumulate their deposit to purchase a house. That is to be commended.

At April 2016, the LVR for owner occupiers was 90%, so this means a 10% initial deposit for some buyers who felt that they had to buy a house. This is the impact of the power of leverage on their purchase price and initial deposit.

Albany Heights – down 7.74 per cent - the owner occupier's equity is now down 77.4% on their initial deposit
Lynfield – down 6.86 per cent - the owner occupier's equity is now down 68.6% on their initial deposit
Pinehill – down 5.84 per cent - the owner occupier's equity is now down 58.4% on their initial deposit
Waitarua – down 5.54 per cent - the owner occupier's equity is now down 55.4% on their initial deposit
Golflands – down 5.53 per cent - the owner occupier's equity is now down 55.3% on their initial deposit
New Lynn – down 5.41 per cent - the owner occupier's equity is now down 54.1% on their initial deposit
Totara Heights – 5.34 per cent - the owner occupier's equity is now down 53.4% on their initial deposit
Flat Bush – down 5.26 per cent - the owner occupier's equity is now down 52.6% on their initial deposit
Sunnyhills – down 5.05 per cent - the owner occupier's equity is now down 50.5% on their initial deposit
Henderson Valley – down 4.92 per cent - the owner occupier's equity is now down 49.2% on their initial deposit

Should a recession occur and the household were to experience unemployment (or other changes in circumstances) and be unable to meet mortgage payments, they might decide to downsize to reduce the debt service burden. The owner-occupiers would experience a loss in value from the initial deposit that they put in. On top of that there are also selling costs which could be up to 2-3% of the sale price of the house (or another 20-30% of the amount of their initial deposit to buy the house). So as a result in some instances, where property price falls are in excess of 7%, after the selling costs of the house, the owner occupier is now in the position of having lost 100% of their initial deposit.

To save for another deposit for another house purchase then might take many more years of savings.

Take another example, a couple purchased a house in Albany Heights but the current house is too small as they want more rooms to accommodate a growing family. After selling the house, they have lost 100% of their initial deposit and are unable to afford to upsize into a new house purchase. They are then forced to rent a larger house.

Owner occupiers are most at risk of being collateral damage should property prices fall further.

For all owner-occupiers, to avoid being collateral damage, the key assumption is the future house price growth from today to the next time the owner-occupier needs to (or is forced) to sell. The house is the largest investment that most households make and that key underlying assumption will likely determine their financial future for many years to come.

CN, well said!

People shouldn't buy property for short term gains. These folks are likely in it for the long run. Tell me how their equity is looking in 10 years time.

You've overestimated the likelihood that that NZ's economy will be devastated when a future external shock eventuates.

BLSH, warnings like the following are appearing almost daily. Can you guarantee this won't happen? If so, what facts support your narrative? ;

I think youvé overestimated Central Banks ability to mitigate the coming hangover Sunshine!

Regarding those posts on imbalance of power in bank loans, surely a FHB must be keeping this in mind if facing the prospect of a significant loss of equity:

"Changes to facility: Point 3.3 .The Bank may also amend the terms of this Agreement or Letter of Advice without having to obtain your further agreement. We will send you a confirmation of any changes at least 14 days before the relevant changes take effect"

They aren't facing a substantial risk of a significant loss of equity.

From my understanding, it depends on the type of financial product that the borrower has used to finance their house purchase. For those owner occupiers on

1) P&I loans, the key constraint is their ability to keep debt service payments up to date. My understanding is as long as they maintain this then the bank generally won't act, even if the home owner is in negative equity. (Please correct me if anyone has heard anything different). I have heard of some owner occupiers who were in negative equity and they managed to keep payments up to date, and they were able to ride out the downturn. Most of the defaults with these type of borrowers is due to a rapid rise in interest rates which may make debt service payments unaffordable or due to a change in personal circumstances such as job loss, relationship separation (as both incomes were used to service the debt), death of a family member (which results in loss of household income) - the drop in household income impacts the ability to maintain debt service payments.

2) interest only loans - the interest only period maturity date might allow the lender to undertake a new credit assessment. If the owner occupier is unable to meet the new lending criteria, then there might be an issue. An interest only borrower may be asked to make payments based on P&I which might be a financial strain on the household finances.

Its good the interest rates are LOW, it is good for the average person and money circulates, HIGH interest rates double digit is bad for the country, it only benefits the RICH and limits progress, I remember the late eighties, the rates were terribly HIGH over 20% plus , should never have been allowed to happen.

nahh...high interest rates benefited me and I didn't know it.

High interest rates made my first house cheaper and made me pay every dime off the mortgage. Mortgage free within 5 years. Then I traded up and struggled all over....but of course as interest rates dropped, up went the house values and here we are today.

Low rates benefit the already asset owners.

The present lot have no room for interest rate drops of any any the only way is stable forever...or up...Good luck with that.

First home buyers do not have to buy a shoe box or dog box in Auckland.
Of course they are expensive for what you get in Auckland.
For 450 k you can buy a reasonable family home in Christchurch in an average area.
Forget the Auckland market if you don’t want to be struggling with a noose around your head for 30 years!
At the end of the day we all make choices that we have to live with.

THE MAN 2, you are right.

Hamilton is better, properties too far away are hard to manage

You might ended up with Lisa Lewis in Hamilton..!

Maybe. But what does one do with it (them)?

"Christchurch experiencing an oversupply of rental properties.

A property manager says the warning signs of Christchurch becoming a renter's market were there 18 months ago.
Landlords are having to drop their rents, and some are even offering free rent for the first week - with an oversupply of houses on the market.
Brazier's Property Management owner Tony Brazier said houses in new subdivisions are being bought as rentals - and that's having a filter down effect right through the market."

For 450k you can buy a much nicer family home in Brisbane in an average area. With much higher salaries and more opportunity.

Potential FHBs please stop and think. NZ is overpriced, violent, and lacks opportunity. Please think of your family and your future before going hundreds of thousands of dollars into debt over a dead end.

BW, we have a large portfolio of property and have absolutely none empty.
If you have a well presented property fully insulated then there is very keen interest in them in ChCh even this time of year.
If you have a shitter then you may have trouble renting it.
All our properties are positively geared so not sure what you are on about.
There are many investors that under rent their property and are not professional or full time

Just reading general comments as many of us do who don't live in Christchurch ( now!)

"Christchurch's property market is oversupplied and freshly-built terraced houses are sitting empty and unsold in the suburbs. How did the city with the real estate market decimated by the earthquakes get here?

Last month, Mike Blackburn bought a house. He and his wife looked at about 40 properties before settling on one. As they traipsed through the preceding 39, a pattern emerged.

"Every second house we looked at was empty," he said.

"That's just a telling figure. Where have all these people gone?"

"There was a major rush, mostly by the group home builders, to build a lot of houses really quickly,"

"What's happened is now everyone who's needed a house has pretty much got one and they're still building them. They're building them flat out . . ."

(NB: I'm interested as our son is looking about down there and the auction due tomorrow has been cancelled on 'his one' due to ...lack of interest)

Classic case of overshoot. I was living in Christchurch up until 3 years ago and it was obvious that's where Christchurch was heading. Big mad rush to free up banked land to get on the house building gravy train. All this land being freed up, but who's talking to who as to what's actually required?

I thought that we'd end up with a situation where we have huge chunks of bare sections fully serviced (road, water, sewer) with no houses because no builder would be stupid enough to go build a heap of spec homes just to fill the subdivision, but I was obviously wrong.

Suggests we need pressure on Twyford to push for an end to the RUB. Free up land, watch one issue in the housing crisis start to resolve itself.

Terraced houses are so overrated and are not popular with people who are looking for an investment!


Once more into battle comes TM2,with his ignorance on full display. Terraced houses are for people to buy and live in-not for speculators. In the UK,many live perfectly happily in terraced houses-my grandmother's had 15 rooms and servants' quarters. Further along lived one of the Coats'(of Coats and Paton threadmakers) family My first home was a very small terraced house in a very good area just outside Glasgow.
Well built terraced houses can cut building costs. .

Reality is that there are successful people in all fields!

Affordable my arse. Winter is coming, as are the clowns.

FHB have already missed the bus so now should wait and watch.

As it is, house price may fall or may not fall (Though will fall and by what percetange has to be seen) but one thing is for sure that in near future are not going up.

For long term, FHB should buy a house but now all indicators are that should wait and watch for few months atleast.

As it is, house price may fall or may not fall

At least someone is bloody honest around here. The crystal ball readings in these comments - from both sides - are a bit much.

"As it is, house price may fall or may not fall" it's 50/50 chance!

Much of what's written above is misleading/deceptive at worst - and unhelpful at best.

That housing in NZ has become more affordable is a very good thing indeed........ because the sooner a family owns the roof over its head, the better.

Nobody that I know has ever regretted purchasing their first home. (And that's several hundred people, including numerous who have bought within the last couple of years.)

Not only are there the long-term tangible/financial benefits but there are a plethora of intangible/subjective benefits. Add all the benefits together and the decision is a no-brainer.

One really has to question the personal agendas/motives of those here who are discouraging young people from purchasing their first home...... Some, no doubt, are attempting to temporarily force down property prices - so that they can grow their own property portfolios. (Remember that you don't need to disclose your property interests/activities to contribute to blogs - so beware.)


I think what you mean is much of what is written above doesn't suit your narrative that things are just tickety boo in the market and its about to take off again.

Tough, someone needs to counter the spin from the RE industry and the Debt stackers.

Hi Pragmatist,

That's BS.

My argument for the last year has been that the market (especially Auckland) is flat - and destined to stay that way for the foreseeable future.

If you're going to represent people, then at least do it accurately.


Then why on earth would you encourage anyone to buy.. financially it makes no sense. Pay $750/week servicing a mortgage on this place, plus all the other bills that come with ownership (rates, maintenance, extra insurance), so call it $850/week or rent the same place for <$600 per week, let teh landlord take care of fixing stuff and invest the difference.

Yes, I’ve never met anyone that regrets purchasing their first home. But I know plenty that regret not getting into the market.

Yet the advice from most here is to not buy. Those that take this advice from the misinformed, envious doom and gloomers will no doubt regret it.

Most readers here understand the perspective of those buying property at current price levels:

1) owner - occupiers - first home buyers, upsizers, downsizers
2) those engaged in the long term residential leasing business generating positive cashflow
3) those engaged in the long term residential leasing business with negative cashflow
4) property traders - who buy, renovate and sell

Many readers here also understand what a credit bubble is and the ramifications of that. Some however do not understand what a credit bubble is and the ramifications of that. My sister in law who works in a bank and has a university degree doesn't know what a credit bubble is. Many of the public population do not know what a credit bubble is, and that is potentially the reason they remain unaware of the risks. What proportion of your friends who bought their first home know what a credit bubble is and the risks associated with one?

It is interesting that some of those that were former property bulls, who became informed about a credit bubble and the associated ramifications subsequently became cautious on the property market. To my knowledge, there has been no property bear on here who understands what a credit bubble is and the ramifications who has subsequently become a property bull - isn't that interesting?

I know plenty of stories of people regretting their home purchases - they always regretted it after the property price fell substantially, they never regretted it when prices were rising before property prices fell substantially. These were people who got caught up in a credit bubble - people who were highly leveraged, whereby property prices subsequently fell, they lost their jobs and were forced to sell their houses. They lost all their equity.

You strike me as the type of fellow that is scared of his own shadow.

Pretty much everyone knows what a credit bubble is - it isn’t rocket science. New Zealand’s housing market isn’t the credit induced bubble you think it is. House prices have been supported by credit availability, but there is strong latent demand and lack of supply (among other factors) underpinning land values, which isn’t going away. NZ’s economy also isn’t as fragile or incapable of dealing with an external shock as you may like to think it is.

Commenters resort to ad hominem comments when they have poor quality arguments to defend their viewpoints, or do not understand the points made about the discussion.

That response clearly demonstrates the lack of an understanding of how to recognise a credit bubble.

That shortage of supply of housing and high housing demand argument was used here and look at how that turned out -

It was a genuine observation, not an ad hominem comment. You genuinely do come across as a very nervous individual - overly sensitive too.

New Zealand isn't Ireland. Our economic circumstances are fundamentally different.

A comment that says it is not an ad hominem comment, yet is actually another ad hominem comment.

Using your perspective and framework, I understand how you believe that circumstances in New Zealand are different from Ireland. That is the common perspective of those that agree with you - New Zealand is different. One observation is that those in this camp tend to come from a property related business (e.g residential property leasors) or have a property background and experience, giving them more of a property related perspective.

Those that use a different underlying framework, recognise and see the credit bubble and know which indicators to look at. The untrained eye may be able see the indicators, yet does not understand the significance of the indicators or the correct context to put them in. The trained eye knows the significance of the indicators and the correct context to put them in, and sees the potential risks.

That is the fundamental difference between those who agree with you and those who see that there is a credit bubble risk in NZ.

One observation is that many of the readers on here who have had experience in working in a financial institution and / or in financial markets, and understand macroeconomics see clearly the indicators and risks of the credit bubble. These people tend to have come from a finance, banking, lending and investing perspective, rather than a property perspective of the above group.

Working in a financial institution doesn't mean that they understand the credit bubble - Jim Powers, an economist and a proponent using the housing demand and housing supply framework subsequently acknowledged he had failed to see and understand the credit bubble -

"there is strong latent demand and lack of supply (among other factors) underpinning land values, which isn’t going away."

Examples disproving the commonly used argument that latent / pent up demand will continue to support house prices. Note that house prices fell nearly 40-50% from their peaks in these markets.

1) Out of the US -

2) Out of Ireland -


You forgot number 5.

5. Then there were just plain idiots who should have been locked in the pokies and never given access to leverage.

Note the prices, note the Irish Real Estate Agent Listing Site name, note the condition, note the reduced prices, note.....we am diffrunt....Cheap Houses...Irish but true.

If any FHB wants to look at the experiences of highly leveraged owner-occupiers who purchased at lofty valuations in Ireland then they can listen to these two:


Notes from Video 1
A property buyer (owner occupier) who:
1) believed that rent is dead money (comment at 3:00),
2) believe that you have to own your own house (comment at 4:10).
3) had a fear of missing out as she believed that property prices would continue rising (4:39),
4) overpaid for their home.

Video 2
1) those had continued to rent and avoided buying (3:44)
2) there were warnings by economists (9:00)

These 20 minutes could save you from financial misery.

In New Zealand look up the warnings by the following people and read what they have to say - make sure you make a fully informed decision:

1) Don Brash - former RBNZ Governor
2) Arthur Grimes - former RBNZ Chairman
3) Bryan Gould (former British politician living in NZ)
4) David Hisco (current CEO of ANZ NZ)
5) Bruce McLachlan (current CEO of Co-operative Bank)
6) Dr Michael Rehm (Auckland University property department)

Note: that these people do not appear to have any vested financial interest. One could argue that the CEO's of banks are disadvantaged by making their statements as it goes against the profit making motives of the organisations that they manage.

Links to articles

1) Don Brash - former RBNZ Governor -
2) Arthur Grimes - former RBNZ Chairman -
3) Bryan Gould (former British politician living in NZ) -
4) David Hisco (current CEO of ANZ NZ) -
5) Dr Michael Rehm (Auckland University property department) -

The message given by these people with informed viewpoints (and no financial interest in doing so) has been drowned out by the numerous and repeated messages of those with a vested financial interest in property such as real estate agents, property mentors, etc.

Thanks CN, a good couple of clips that have given me food for thought as a waiting FHB. Hopefully we won't have too many in NZ like the unlucky/naive or simply foolish buyer in part 1. :)

Myself, I'm hoping/waiting for 1-2 bedroom apartments to become affordable,maybe after the FBB?


Make sure you make an informed decision. Avoid being collateral damage if the geographical market that you are looking at buying in is at risk.

Here's a story out of the US -