Falling interest rates, easing house prices and rising incomes have improved the lot of typical first home buyers in Auckland by nearly $90 a week since March 2017

Falling interest rates, easing house prices and rising incomes have improved the lot of typical first home buyers in Auckland by nearly $90 a week since March 2017

By Greg Ninness

Falling mortgage interest rates, slightly softer house prices and slowly rising wages are all helping to make the dream of home ownership more affordable for Auckland's first home buyers.

Interest.co.nz's Home Loan Affordability Reports for September estimate that mortgage payments on a lower quartile priced Auckland home would eat up 41.8% of a typical first home buying couple's take home pay each week. This is still considered unaffordable but is well down from where it was in March last year, when mortgage payments on a lower quartile-priced home would have chewed up 46.1% of a typical first home buying couple's take home pay.

Housing's considered unaffordable if it takes up 40% or more of take home pay.

Three factors have worked together to drive that improvement in affordability:

  • Mortgage interest rates are down. The average of the two year fixed rates offered by the major banks has dropped from 4.84% in March last year to 4.51% in September this year. That on its own would reduce the payments on a $500,000 mortgage from $608 a week to $585 a week, leaving the borrower better off by $23 a week.
  • House prices have eased back. In March last year the REINZ's lower quartile selling price in Auckland was $680,000, but in September this year it was $657,000, making a lower quartile-priced home $23,000 cheaper. The lower quartile price is the price point at which 75% of sales in a month would be above that point and 25% would be below, representing sales at the bottom quarter of the market where first home buyers are most active.
  • Incomes are slowly rising. In March 2017 the estimated, combined, median, after tax pay of an Auckland couple where both were aged 25-29 and working full time, was $1598.04 a week. In September this year that figure had increased to $1628,22, leaving them better off by $30.18 a week before allowing for any increases in living costs they may have faced.

When all of those factors are taken into account, the amount that typical first home buyers would need to set aside each week to meet the mortgage payments on a lower quartile-priced home has dropped from $737.24 in March last year (46.1% of their take home pay) to $680.34 in September this year (41.8% of their take home pay), leaving them better off by $56.90 a week.

When that is combined with the increase in their take home pay they are now better off by $87.08 a week compared to 18 months ago.

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 assumes they would have saved 20% of their net income every year for four years to put towards a deposit.

Auckland not the only region with improved affordability

Affordability also improved in Taranaki, where the mortgage payments on a lower quartile-priced home dropped from 18.2% in March 2017 to 14.8% in September this year, and in Canterbury, where it dropped form 21% to 20.1% over the same period.

And in the Bay of Plenty the difference was so small, with mortgage payments' percentage of income rising from 27.6% to 27.9%, that affordability in that region was almost unchanged.

However homes became less affordable for first home buyers over the last 18 months in all other regions of the country.

In Manawatu/Whanganui the mortgage payments on a lower quartile-priced home increased from 11.8% of income in March 2017 to 14.3% in September this year, in Nelson/Marlborough it jumped from 25.7% to 34.8%, and in Otago it rose from 17.3% to 19.5%.

So although housing remains well within affordable limits for typical first home buyers in many regions, in most cases it is not as affordable as it was 18 months ago.

The full regional and district reports are available by clicking on the appropriate links in the box at left.

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Were rate increases and insurance increases as well as fuel taxes taken into consideration.

There was a corresponding rates decrease with the fuel tax increase remember (transport levy on rates was removed). I love it how the National party seem to ignore that when they say how much the fuel tax is costing people...

I somehow doubt the landlords passed through the drop in rates to their tenants. So I think it is safe to assume the majority of people are paying more.

Nothing is certain but now would seem to be an opportune time for FHB
Arguably an immentent major correction seems currently off the cards. Low interest rates and continuing historically high immigration rates are currently supporting the market (and the winter season has passed without significant concern).
Any significant correction unlikely unti there is significant change in these two drivers. That is likely to provide a window of an assured couple of years to get on top of challenges - including financial - common in owning one's first home.

If there is an imminent major correction, a lot of people will lose their jobs.

Thanks for pointing that out. Most people when arguing about the impact of a crash or correction on leveraged home ownership simply glide over the fact that such an adverse event is correlated to or caused by a recession, where thousands of jobs are lost. They fail to assess the impact of an economic downturn on their income and therefore their ability to service debt.

Hi saving4Uhouse
Yes there is always risk of a worst case scenario.
As mentioned, there seems a period of stability for FHB and if I was in that situation I would get in and take the opportunity to pay down debt as much as possible to weather an increase in interest rates.Once on the property ladder, as long as one can service debt, movement in house prices is not a significant future issue as one will be in for life and selling and buying on the same market.
There may be a correction but there may not be. Does one puts one life and lifestyle on hold?

" as long as one can service debt, movement in house prices is not a significant future issue"
Quite right!

So if house prices halve, which they very well could, is not a significant future issue.

Let's recall they have already doubled, and doubled, and doubled and...well, doubled over the last 40 years, so a solitary halving seems more probable than not? It's not about 'putting your life on hold'. It's about 'what if', and there are a lot of negatives to that question at the moment!

A lot of what you refer to is actually just inflation, particularly from the 1980's.

Not when compared to wages!
Wages kept up in the 70's with 'inflation'. But after that? House price inflation saw price double (100%) in the 80's and wages went up 50%; the 90's doubled again and wages - 25% and in the 00's doubled again and wages? Maybe 10%. A cleansing 50% reduction to restore some semblance of wages/property prices parity is long overdue. Will it be 'this time'? Who knows! But one day....it will.

Yeah i dont think NZ living standards fared very well and we also experienced two very serious declines in productivity. Never the less house prices havnt risen nearly as much as people think. About 3.65% p.a. if you adjust out the inflation. So assuming 2% inflation moving forwards youd expect only about 5.5% p.a. over a long period of time.

Hi bw
You are partially correct. Yes, ever since the Wellington Company purchased the whole of Wellington block for "a couple of muskets and some beads" property prices have been increasing (and yes, they can be said to double wether that be over a period of some or many years).
To my knowledge property prices have never halved as you say is probable (not possible).
Please enlighten me as to
1. when property prices have ever halved, and
2. Provide a rationale explanation - rather than a glib comment - as to why a halving in property prices are most probable (given that declines in house prices have usually declined in the order of 5 to 10 percent after periods of rapid inflation).

As noted, there may be some correction, as long as a person is able to service their loan there is no issue. In fact for a property owner looking to trade up, a price correction would be great as it is not the sale price but rather the price differential which is important (and would be a lesser amount in a correction).

If you buy a $800k house and it falls by 10% that $80k is equivalent to 920 weeks savings.

That figure is a bit more sobering

The number is sobering but the process is bunk. How much house do you have before and after? The same amount of house. How much will the house sell for in the future? Probably more than you bought it for. What do you do if your house drops in value? Forget about it and get on with your day.

The same amount of house with its mortgage and the attached $5k or so of annual spending (rates, insurance, maintenance, etc) in a time when you are quite possibly going to be on reduced hours or down an income.

Those risks are baked in the cake, its why banks use higher than actual rates and require decent surplus.
People who tend to just get on with it, keep accumulating and dont worry about timing the market tend to do very well over long periods of time. Sometimes life is easier, sometimes its harder, but if you keep working hard and you keep accumulating, then youl be smiling at 65.
A majority of people i know who obsess over timing are doing no better than than average.

The majority of people I know who obsess over timing are incredibly wealthy... and I don't even know John Key and Mike Hosking.

An imminent correction to what?
Sales pay out commission. Sales are where they were in 2011, with about 12% more stock.
You and others might also (when considering "affordable") look at what people are paying in terms of dollar per metre square of land. It is up a lot in last 2 years, esp in Rodney. People are paying same or more in Rodney for LESS land. That to me means there is still ample house price inflation, except it is the price of land that is rocketing. This destroys disposable income. By the way, the article quotes a $30 a week increase for the theoretical couple, in 18 months. That is 1.87% in 18 months. And inflation is....? Land inflation in Rodney in last 2 years is about 22%. Need to take a look at size of plot and what is paid for it. Plots are shrinking. Developers will struggle next year and over-stocked market will press fire sales. Sales are crux, NOT prices


The previous government encouraged a number of gullible people that the only way for house prices is UP. Sad some fell for it

Thats laughable as houses had a decent fall in 2008, that was only 10 years ago. This idea that lots of people think houses 'only go up' is fake news. Most people think houses will go up over long periods of time, and thats a pretty solid position to take.

Ridiculous comment.
House prices went up faster under 1999-2008 Labour than they did under 2008-2017 National.

As did wages

As did inflation

What matters is which is increasing faster wages or inflation. Last government had inflation consistently ahead.

Yes - so in real terms (after inflation), houses went up less under Labour than National.

You should show your working or link your source as thats actually interesting to people.

"Since 2007, average annual household income is up just over $35,000 (50.5 percent), to reach $104,583 (before tax) in 2017. Over the same 10 years, average annual housing costs increased from $10,658 to $16,478 (up 54.6 percent), according to the latest household income and housing-cost statistics. Inflation, as measured by the consumers price index, increased 20.2 percent."



I love numbers but i dont understand what your point is?

What did price of land per square metre increase, in selected suburbs of Rodney and Auckland? A LOT more than 50%.

I'm too lazy for that...
Here is my working: House prices went up almost the same amount (percentage wise) with both governments. But inflation and wage increases were significantly higher under Labour. Hence I'm pretty confident that real house prices would have gone up more under National than Labour.

From link above: “Data from CoreLogic shows house prices grew 49 per cent from 1990 to 1999, under National-led governments. Then, from 1999 to 2008, prices rose 113 per cent under the last Labour-led government. Through the most recent government's term, there was 69 per cent growth in house prices nationwide.“


I see, you mean house prices increased much less under National. Well your data looks good. Working for families is probably a big part of the rise from 2005 to 2008 and would have spilled over in to Nationals reign as well. And you cant really blame National for the price gains after 2010 as it was in principal the mathematical consequence of the US/EU rate policy forcing global interest rates to the floor.

And National campaigned on the fact that was a major problem and they needed to be elected to as to solve that problem.


FHB should wait as there is a long way down for prices from here. With the debt laden turmoil in the world, interest rates are likely to stay low for longer, infact low rates could just become the new normal. Advice to FHB WAIT, this in the coming months will change to a weekly saving of $200 so be patient.

so, if $90 / month ($4500 / year) is going to be a 'deal maker' for people to buy the house than it means that they are stretched to the maximum. Being that stretched - i would not even considering buying...

Lol, what about the people who were a little stretched but are now not stretched? You see it shifts the whole curve of FHB to been less stretched, not just those 'stretched to the maximum'.

Hi printer8,

Agree with your sentiments.

Certainly, there's strong underlying demand for dwellings by FHBs - a demand that's increasingly backed by money. That's largely because the labour market remains strong, with good job/career opportunities for young workers.......

Despite businesses being despondent about the current Government, most are busy enough and many are struggling to recruit staff. Clearly, low borrowing costs and the lowish dollar are providing a boost to business activity, as is increased government spending.

In any case, a number of key sectors are thriving, including tertiary education, healthcare, aged care, building & construction, digital technologies, transport and tourism.

As for the housing market overall, we can expect much the same for the foreseeable future: modest sales volumes and relatively subdued activity - but with prices generally holding firm, albeit rising a little in the most sought-after, best-located areas......

Prospects for capital growth in Auckland housing remain excellent in the medium/long term - or from about 2021-onward. There are some signs that the Auckland market might gather pace before then - but that might well be confined to Central Auckland as people try to locate there to mitigate transport/travel hassles.

All up, the housing market has remained stable through 2017/18 - a period through which people have adjusted to the higher prices brought about by the upswing of 2014/16.


Good news, a lower cost of living and more able to buy their own homes. Lets hope this momentum continues.

Unfortunately the few FHB's that could have accessed a mortgage to buy in a tighter lending environment, have just had their deposits reduced by 10% in the stock market (kiwisaver). Sadly this deposit reduction effects their mortgage ability which is also significantly reduced.... previous 600k mortgage offer becomes 540K purchase ability... And it all happened in a month.... Interesting summer for property by the looks of it. Where will we find these buyers?

People shouldn't be using their retirement savings for jacking up house prices anyway.

agree, but those deposits have to come from somewhere and the banks have far more incentive to encourage the young to take on 30 years or debt than to save hard. $900,000,000 lent to First home buyers last month, and a larger number of the deposits so secure that debt will have been saved in kiwisaver. Like I said, the stock market having a tumble could really impact the number of kiwisavers with enough of a deposit to buy, that reality should spare many of them from the heavy initial falls that usually accompany a property crash.

That's the risk you take if you invest a deposit in the stock market. Most wouldn't be doing this and would have their kiwisaver in a defensive/conservative fund and wouldn't have taken more than a 1-2% hit in the last week month (edit - my mistake).

Even the recent drops have only really taken off the previous 9 months gains, most markets are basically back to where they were at the start of the year.

I dont have any stats on this but if they are filling out the risk questionnaire then most young people will likely be in balanced or growth funds, so they would be pretty exposed to the correction.

If they've been poorly advised or didn't know at the time that they'd want the money for a house deposit, then yes.

The majority will indeed have received poor advice. Robo advise for example asks the opaque question: 'how many years until you plan to withdraw the money.' The majority of young people will put in something like 40 years.

Maybe you're right, I don't have data either. My anecdotal evidence is of 3 people in this position I know well enough to discuss such things who are in defensive funds. Personally, I still own a house in the UK so my Kiwisaver is locked up for 30+ years, so I've gone pretty aggressive.

I've said this before, and it's getting more obvious every week now. Don't underestimate the impact of what's going on, and the contagion, in the Australian property market, especially Sydney. I see FHBs are still being encouraged to buy there now because the market has dropped, even after it's dropped about 8% so far with no sign of turning around. The decline is accelerating if anything. More analysts there are now predicting a 20% drop or more, after previously saying 5-10% at most. Auction clearance rates are still higher than Auckland in most places. Don't get a false sense of security just because the market has slowed a bit in Auckland, it's still way inflated in world terms. Immigration can slow right down in NZ fairly quickly, and there's a lot of building going on. The FHBs who bought in the past 18 months in Sydney will be losing big time, and the market could eventually be wound back years, with a LOT of people in negative equity. Could easily spread to NZ.

If the crude oils trend is right. While FHBs can save $90/week, a good $40-50 of it will be eaten up on high petrol prices.

Geez how much petrol do you guys use? If you use say 25 litres a week, petrol would have to go up $2 a litre to cost an extra $50 a week!

Shhh we all know the increased fuel tax is to blame for absolutely everything now, especially if something is not affordable. Even if it wasn't affordable before it came into play.

When FHB bought a used Jap imported BMW 540i from all the capital gain they made on their house (on paper) 18 months ago.

Greg's articles always seem to talk up the Auckland property market in some way, shape or form.

Where are you reading that? Looks like a pretty simple presentation of their regularly collated statistics to me. The data is all right there to analyse if you don't like the interpretation.


Heading in the right direction however FHBs should avoid the market right now and wait out another 12 months (especially in Akld)

The main points being

world economies are on the brink ATM and 2019 has huge amounts of corporate debt coming due which could result in a meltdown, any international stock crash will impact on NZ not only through industry & stocks but also the housing market.

FB ban has only taken effect, the impact could be very understated

House values are already regressing in Auckland

Sales volumes are still dismally low and the pressure will be building on the unsold inventory which is increasing day by day even into the peak selling season.

Immigration is on the downturn and reducing demand

Auckland exodus is also reducing demand

Buying now for FHBs can easily result in a negative equity situation and given the lower quartile are quite often areas that FHBs would not ordinarily choose to live in, they could easily become imprisoned in that home for a lot longer than they had planned.

Thats my opinion anyway

Judging the trend on house prices across Sydney and Melbourne, I think you are on the right track.
Sydney and Melbourne have been the trend setter for Auckland in term of overseas buyers. Even without much restrictions, we are seeing a big drop in demands and it's just a matter of time for market
in NZ to follow.

I agree on all points here. Also, I see pretty much a perfect storm coming with that and more. What's going under the radar a bit is that the Shanghai stock market is down about 30% for the year so far, Germany (DAX) down over 16%, and now starting to hit US, Australia, and NZ markets. AMP in Oz had a shocker -25% yesterday, in one day, related to the banking royal commission and the property market. That effect is only getting started. The hard landing of the Oz property market is just getting started. If people don't think all this will impact NZ soon, well that's just ignoring to obvious.

Next step for Australia maybe the swallowing of a political dead rat. Message to the Chinese. Come back all is forgiven . We didn't mean it, buy whatever you like as long as you have the cash we don't care. Our major city voters have all lost 100 - 200k in equity and they are all pissed.

Hi theglc
While not necessarily agreeing with all your comments really great to see a reasoned position.

One point that is overlooked with regarding FHB and buying a home is that is what it is - a home. It is not just a financial decision as there are many intrinsic reasons involved. In comparison, purchasing an investment/rental property is quite different; it should be regarded simply as that; an investment in which intrinsic values should be of minor importance.
FHB need to consider what are their intrinsic reasons for wanting to buy a home; those are factors which are not going to have a dollar value.
Given the currently very low yields and unlikely capital gains (and a downside risk) and likelihood of mortgage rates in the medium term, in general it is not the time to be buying an investment/rental property unless it has unique potential or it is a cash flow positive rareity.

A FHB should definitely be buying a house for a home. The problem is that prices have become so disconnected from earnings, that they are eclipsing all/any intrinsic values to consider. If a young couple is spending 40-50% of their dual net income just to service the mortgage (the article says it's come down a tad, but it's still in the unaffordable range), is it still a home? Or is it just a debt trap?

One thing that worries me are the market jitters around the world at the prospect of rising interest rates. If the economy can't handle a rise of 0.5% from historic low interest rates, then it's probably a sign that the economy had never actually recovered from the GFC, and were just running on pain meds.


NZ Govt should buy up this village, a ready made Kiwi Build...only 85 years old...Free cafe plus plenty more room to expand.

Hi thegic,

You make things sound so terrible......

People all across the developed world are now going to have a miserable weekend. )-;


Off the subject but does anyone know why homes has updated its october prices already?Plus hamilton has gone up second month in a row.Its been going down or static for ages and now an up tick.

Yes, it's a funny ol' world right now. A variety of different drivers will appeal to those to whom they appeal. That's what makes it exciting, everyone's reading it slightly differently. Two things stand out for me.
Globally, the home team have slowed the exodus (of money & people) from the east. Well done Mr Xi. We're also getting wiser to the cultural shifts taking place right under our very noses. They are related. It is oil & water stuff. It doesn't mater how much shaking of the glass you do, it's always oil & water. And secondly, debt, specifically American debt. Or debts perhaps is a better words. You can argue that the Fed can buy your debts & even pay you to do it forever, but as Japan is showing us, it's still a tough gig. If the Fed has something else up its sleeve, well good on them, but as yet, their current journey does have a precedence in Japan & therefore is a risk (or known unknown as the article said) as opposed to an uncertainty, & thereby, in my opinion, doesn't solve very much at all. What that means for the price of NZ homes & houses is for me, a period of settling down & a catching up phase. I hope this plays out softly & calmly & carefully but I'm not going to hold my breath. It doesn't seem to be that sort of world does it?

Patience will be rewarded

“Those who hesitate are lost.”


in the current housing environment, i presume you're referring to home sellers!!!

“Those who hesitate are lost.” As spoken by someone needing rescuing themselves. Someone who fires off distress flares willy nilly. He/she is rendered solo beating what brains remain......

Agent TTP, FHB's who follow your advice at this juncture would likely become disillusioned. You've been saying the same thing since April 2017 and many areas in Auckland have dropped significantly since then! Here are some examples.

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


To again disrupt your utopian denial, theres ample evidence weakness has spread to the upper quartile here; https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=121...

If you adjust these falls for inflation, the falls are considerably larger. Don't you think it's time to call it a day to save yourself further embarrassment?

Hi Retired-Poppy,

As usual, you're struggling to find evidence of your much-yearned-for housing crash. That's a short, cherry-picked list if ever I saw one. (Surely, after all this time, you can come up with something better than that.)

What happened to the crash you so fervently declared would occur by the end of 2017? And then 2018?

Retired-Poppy: the DGM's old "Crash Crusader".......... who lost his way.


Agent TTP, as usual, youre downplaying credible evidence of evaporating equity and fabricating lies to mask your embarrassment.......

Yes, I will take 9 per cent rental returns guaranteed over money in shares any day!
You also have the surety that you will have something to sell that has appreciated in value should you wish to sell, whereas with shares they can be wiped off the board and not be worth a brass razoo!

What makes you think your rental with a single customer is more robust than a company with thousands if not millions of customers? Neither guarantees anything.

People always need shelter and we have absolutely no trouble renting any of our properties to good tenants.
We actually have more than we actually need but the fact that there are positively geared properties at good prices available, it is too tempting for me at times!

Just thinking about that headline again, if FHBs think an improvement of $90 a week is good now, with prices a bit lower, take a step back and think about the real potential in Auckland for what's happening in Australia as wee speak. What's $90 a week when the negative equity will end up being quite large if buying now. Could be many years before the market recovers, and will likely go way lower.

Ohhh lordy. Smashed avacado on rye for all FHB.

interest rates are sky rocketing, so you offer the lowerest rate ever for one year /18 months. the you do them over the desk for the new contract. Why no wise owls call this out today?

Because that probably won't happen. Interest Rates and so Property Prices are going...a lot lower.
Fix now, if the rates suit you, but don't be surprised when they go lower - a lot lower.

As always The Boy is showing his lack of financial acumen. Despite the Dow being 2000 points off its all time high at the end of Thursday their time, it is still 38 per cent higher than the the day Tump was unfortunately voted in as President. Sure beats property in certain parts of New Zealand. And there is dividends on top of that 38 per cent. Shares sure beat property.

Interesting how someone has decided that the definition of "affordable" is 40% of the total household income, that's now with the current lower interest rates, who cares about the future? And that's for a 30y mortgage! We have become completely nuts, just so banks can keep making up money until things make BOOM!
Affordable used to be a 15/20y mortgage using 25/30% of your income, I guess someone has to pay for the high returns of housing investors right?

And 'household income' used to be the income from the one paid partner, now its mainly two working partners, and income from working kids that can't afford to move out, flatmates, airbnb etc.

'Affordable' has become, 'whatever we can get out of the homeowner without them defaulting.'