Home Loan Affordability Reports show a rise in prices and interest rates at the end of last year made it harder for first home buyers to get their own home

Home Loan Affordability Reports show a rise in prices and interest rates at the end of last year made it harder for first home buyers to get their own home

By Greg Ninness

Rising lower quartile selling prices and higher mortgage interest rates pushed the dream of home ownership further out of reach for aspiring first home buyers at the end of last year, according to interest.co.nz's Home Loan Affordability Reports for December.

The reports found that the Real Estate Institute of New Zealand's lower quartile selling price hit record or record-equalling highs in five regions in December: Auckland, Bay of Plenty, Hawke's Bay, Wellington and Canterbury, while the average of the two year fixed mortgage rates offered by the major banks rose for the second month in a row.

That combination of rising prices and rising mortgage interest rates meant home loan affordability worsened in seven regions in December: Auckland, Bay of Plenty, Hawke's Bay, Taranaki, Wellington, Nelson/Marlborough and Canterbury, compared to November.

However lower quartile prices went against the trend and declined in five regions in December compared with November: Northland, Waikato, Manawatu/Whanganui, Otago and Southland, which improved affordability for first home buyers in those regions.

The lower quartile price falls were substantial in three of those regions, Northland where it dropped from $385,000 in November to $342,000 in December, Otago where it dropped from $348,000 to $306,000, and Southland where it fell from $205,000 to $174,000.

In Waikato and Manawatu/Whanganui the lower quartile price falls in December were minor.

Overall, the figures suggest a worsening situation for typical first home buyers on average wages.

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

In Auckland, where housing pressures are greatest, the lower quartile selling price rose for five consecutive months, from $654,000 in July to $680,000 in December, which equalled the record high set in March 2017.

In the Waikato, the lower quartile price dropped marginally from November's record high of $414,000, to $412,500 in December, suggesting prices there remain around their record.

In the Bay of Plenty the lower quartile price rose steadily last year to finish at a record $458,000 in December compared to $400,000 in January, and in Wellington the lower quartile price also rose steadily last year, from $370,000 in January to $468,000 in December.

Even in Canterbury, where the market was flat for much of last year, the lower quartile price finished the year on a record high of $365,000 in December.

Those prices have not done typical first home buyers any favours.

However their effects have been moderated by mortgage interest rates which were falling for most of last year.

According to the reports, the average of the two year fixed rates charged by the major banks was 4.61% in December 2017, and ended last year at 4.33%.

The effect of lower interest rates moderated the effect on higher prices on mortgage payments for anyone buying a home, and in most regions the difference in the mortgage payments on a lower quartile-priced home in December 2017 and December 2018 was less than $10 a week.

However in Auckland the scale of price rises in the second half of last year meant mortgage payments on a lower quartile-priced home rose by about $14 a week betwen December 2017 and December 2018 and in Canterbury mortgage payments on a lower quartile-priced home went up by around $17 a week over the same period.

At the other end of the scale, first home buyers were substantially better of in Northland, Otago and Southland at the end of 2018 compared to the end of 2017.

In Northland the mortgage payments on a lower quartile-price home declined by around $46 a week over that period to $313.36, in Otago they dropped by $37 a week to $280, and in Southland they fell by about $28 to $159 a week.

Looking forward, it is difficult to pick market trends at this time of year because sales volumes are so low.

But one way or another, interest rates will have an effect on prices and affordability this year.

Last year potential first home buyers were aided by falling interest rates, but that trend appeared to bottom out in October when the average two year fixed rate hit 4.23%.

In November it rose to 4.29% and in December it rose again to 4.33%.

As sales start to gradually pick up again, it is likely to be another month before we begin to get a clearer view of where the market is headed and the outlook for first home buyers in 2019.

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71 Comments

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10
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FHBs - don't waste your life in NZ buying the worlds most overpriced housing. By all means come back if housing gets more in line with incomes, but for now... GO NORTH WEST YOUNG MAN

North east from Auckland will take to Columbia, Mexico..???

Venezuala, the socialist paradise with the largest oil reserves in the world, rich beyond belief.

I will blame the painkillers for that one.

Roseanne? Is that you?

No my dentist is too damn stingy to give me prescriptions for the roseanne special

Looks like it's cheaper to pay a mortgage than it is to pay the average rent in NZ, wonder why there are so many renters in NZ, and home ownership rates are declining. People are just too lazy and carnal to make the sacrifice to get into the housing market. Thank god for the CoL and kiwibuild where they are going to build millions of homes for all those renters.

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People like skudiv are either too stupid to read the article which says lower quartile prices are rising (i.e. not enough quality stock at that price) or have so much skin in the game, they'll keep shouting baby boomer talking points into the breeze right up until their sixth mortgagee sale.

Of course they are rising, they are in demand, by all means rent for life, it's more than paying the interest on the mortgage, and in 10 years it will be churning out a very tidy return. Most likely you can't think beyond the next paycheck and in your tiny brain renting is the smart move because you never have to sacrifice to get a deposit. Very clever.

You sound like Marie Antoinette "let them eat cake" or Lara Trump recently in regards to furloughed government workers ("don't let the lack of pay get you down, you are doing it for America!").

Some people can work their entire lives and not be able to save enough for a deposit. Sacrifice might mean not eating to ensure their rental is paid, kids fed and clothed and given the opportunity the parents were not - raising a deposit might be the least of the challenges they face. Our ridiculous property market is the biggest threat to our way of life we have. It has been bid up by greedy Boomers and Foreign buyers and protected by successive National & Labor Governments (neither party have been devoid of guilt in this) through uneven tax policy & lack of understanding of the underlying problems causing it.

But hey feel free to keep looking down your nose at people....you will never need to concern yourself that the kiwi dream (as you call it) is already dead for many people.

Right, it's all a big conspiracy to push up house prices and at some time, waay back in the past, everyone could afford a house because there were no boomers and no foreigners, no National or Labour parties either. It was a garden of eden until the foreigners and boomers came with their house price pushing ways.

The biggest threat to 'our way of life' is people who replace hard work and sacrifice with moaning and blaming. I despise people who engage in that type of hypocrisy.

Easy credit there skudiv....lets flood the world with money after the GFC. Where should we park it? Umm which investment vehicle is the most tax efficient in NZ...housing...great everyone buy houses and pay minimal tax while creating another bubble...

Why do you want so many people to buy into the market at a time that you're selling?

If you think it is smarter to pay a rent that is higher than the interest on a mortgage and can't see the long term benefits of home ownership, then go ahead and talk as many aspiring kiwis out of it as you can. Make killing the kiwi dream, your life's work. You should feel very proud of yourself for such a selfless endeavor. The less kiwis that own their own home, the more company you will have.

Those that can't afford to buy haven't killed the 'kiwi dream'. Its those who are greedy and have decided they need to own 2, 3, 4, 5....rental properties who have.Which side are you on?

You idiot. You killed the Kiwi dream. People can't afford families AND home ownership, and you have the stones to lecture other people trying to make sense of an absolutely massive asset bubble; You are literally making people choose one or the other, because you think things don't change when house prices go from 4x incomes to 9x incomes. But sure, the actual consequences of things don't matter, as long as you get your sweet infinite capital gain.

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House price have reached to such a level that even if it falls slightly is not going to help much to FHB, unless it falls much.

Forign Buyers / Speculators added by 2017 CV which shot up by 40% to 65% is beyond reach to average FHB.

Many houses are in the market which will sell for much low than the CV but the CV is so high that vendors are holding to it (Rightly so) or ready to take a beating at this stage by 10% or 15% but no more. Have seen few properties in Pakuranga and buckland beach and near by area that would have sold for near around 900 to a million but with a CV of 1.1 Million to 1.3 Million are in the market but unable get sold sticker.

For real estate agents which was a boon earlier to sell with high CV has become an issue to convince the vendor to sell much below - Net result house not being sold for long or taken off the market.

agree, even a 15-20% drop won't make enough difference
The only solution is for the govt to get a lot more active, build and sell houses on a shared equity basis.

Far too much time has been wasted avoiding the only real solution.

Why not just give houses away? Make the people who worked hard, saved and sacrificed, pay for other people to also have a house that they did not earn, but really really deserve because they can't afford one.

That does not even deserve a reply.

Said as if previous generations did not benefit from government efforts to increase access to home ownership. Suggest reading up: https://www.bwb.co.nz/books/home-truths

We do. Its called a state house with token rent/benefit deduction.

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2019 is going in one direction, down. That’s why the likes of skuldiv are so agitated on here posting 20+ times in a few days preaching to all in sundry about his IQ and how lazy everyone is because they are not property owners. It puts a smile on my face.

"2019 is going in one direction, down....It puts a smile on my face."

Yep that would be right

I was wondering what his problem was. Normally his comments can be a little edgy but now he’s acting like a 10 year old autistic kid jacked up on a bottle of coke about to have their Xbox controller taken away from them.

Are you talking about yourself? Or your kids?

Mine throws tantrums all the time without the coke and Xbox, too young for that crap. Probably going to grow up to be a gothic hair stylist or something crazy like that.

Well it has been said many, many times before on this site, but this year is the one, this year you hope you will be right. You will finally be the one to predict the crash that actually happened! Good luck mate.

He does sound a bit like the guy who bought Bitcoin at $20,000. His mates were just lazy as he told them what a great investment it was.
Funny how the stories are changing now. I've got a friend who lives in the North Shore, bought his place for $1,200,000 in 2016, moving abroad for work, best and only offer after three months is $975,000. He could take it, but that wipes his equity down to just $200,000. If he rents it, the expected rent at $800 doesn't go anywhere near covering the cost of the mortgage. He's going to give it another 3 months with a new agent and try $1.1 instead. $965,000 was what it had been bought for in 2015..... we're going backwards rapidly in some places.

Which explains the temperament of some of the later entrants to the 'bankers' trap.

All I can say is, either your friend is really really stupid which goes to explain why he is your mate or this story is another of your fantasies nic. We also bought a property in auckland in 2016, we bought well and the value is up 50 percent from under 600k to the latest CV of 900k. It wont sell for cv I hear you say ...

Houseworks, yes, speaking of fantasies. On an anonymous forum, everyone believes you.

Yes a 50% gain since 2016 in Auckland seems unlikely.

Ok we had to spend 50k on repairs (not charged to taxman because that wouldn't be right) that others couldn't/wouldn't do. Quote read recently, an investor sees opportunity where others cant.

$800 doesn't go anywhere near covering the cost of the mortgage.

If he can sell the house for 975k and come out with 200k equity that must mean a mortgage of 775k (actually less as selling costs circa 30k). A mortgage of 775k at 3.99% would cost 31k in interest while $800 a week is 41.6k which is significantly more. The rent would easily cover his mortgage interest and pay some capital too.

Come on people this comment deserves many upvotes!

First it shows how out of touch Nic is with things. Also the fundamental reality that low interest rates and high rents underpin high house prices in Auckland.

Agreed its maths. It does assume he can qualify for 3.99% - i.e. high equity requirement which banks are using to hold and attract other banks high equity players to shore up the housing exposure.

https://www.newshub.co.nz/home/politics/2019/01/idiots-in-parliament-hav...

Labour does want to introduce Capital Gain Tax or change negative gearing but the moment they come out - one should watch the reaction from all who are benefitting by avoiding tax (May be they are right as are so used to making money without paying tax so any change is bound to upset them). All so called experts and media in NZ is dominated by people who are using or misusing and making heaps without paying tax (Whereas a wage earner even if he earns $100 has to pay Tax)- Best example if one wants to see is in Newshub breakfast show - where just mention the word Capital Gain tax and see their reaction except the lady host (may be she is on the other side of the fence).

Will Labour be bold enough to put capital gain tax on the table before the election - do not think so as will not want to lose election but who knows they may come up with something like how they banned foreign buyers (National said is not possible) and prove where there's a will there's is a way.

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One gets the feeling that these issues will die with the babyboomers. Lets just keep them happy until they're dribbling into their pajamas at the Summerset Village.

Is there anyway to speed that process up?

Arsenic in the water supply of retirement villages.

Tax offset stops in April 1 2019 and will effect 19/20 tax period so a little time to run before its squeeze is felt for those that will be left exposed. Interest only, max leverage minimum equity on a market in decline. Good luck if this is you.

That same bill will cut consumers off from much needed offshore online shopping competition.

". This bill therefore proposes that from 1 October 2019, offshore suppliers will need to register for GST when their supplies of goods and services into New Zealand exceed NZ$60,000 per year."

Question: if cgt applies on realization ie sale of an asset, then who is dumb enough to sell? Answer: nobody. What this means is fewer homes for sale as the one third already owned by landlords wont be.

Fine in theory but at some stage, you will need to sell.. then boom!

Ok that's fine then pay cg tax then. I think you would have to agree that housing turnover will drop. What will be the effect of that...more people chasing fewer homes, boom

More people? Does CGT cause "accidents"? And fewer houses... More disappearing houses? Somebody should really investigate where all these houses go to.. could be a portal to a new universe or something to be found.

Yes more people, more willing buyers. You know what people are like when they see a lack of something, they want it. But that wont be till the cgt comes in, if it does. In the meantime there is the 5 year brightline test and also Winston might put the brakes on the cullen cgt

I am living in Aus and our version of Property Press is as thick as ever and we have CGT here. Even better download Domain app and have a whiz.. blue dots are everywhere (blue dot = property for sale)

You're saying capital gains tax would stop people selling?

Why has that NOT been the case in Australia or other markets with capital gains tax?

Agreed. Don't sell but that only applies to the discretionary seller. There is however compulsory sellers as well being new job, family, relocation's, divorce and or business troubles. Sales volume will continue to decline, and agents will bring pressure to lower prices so they can maintain car and squashed advo payments. As the compulsory sellers act, and CGT is factored into the return it will add to the other headwinds and continue to return prices to normal NZ levels (for clarification downwards). Banks will see these sales and review values at each lending period renewal.

It just seems obscene and unfair to me that someone working in a factory on about $60,000 a year pays nearly a third of this in tax while someone with 10 houses sells one and makes $200,000 plus pays NO tax.
Please tell me what I am missing here as most people believe this is fair.

It's not that they believe it's fair. It's that they believe they're entitled to it.

No they took the RISK so they get the reward for that risk.

Irrelevant. There's risk to every choice between alternatives. That's no good reason to tax earned income heavily and tax unearned income not at all.

That's not how tax works.

I dont believe most Mum and Dad specuvestors in the market believe there is any risk at all. Im pretty sure they werent pawing over risk assesment spreadsheets when they decided property was the correct risk for them. Property goes only one way. These government people are taking away my God given right to tax free money.

'Idiots' in Parliament have no idea how to fix housing crisis - Eaqub
https://www.newshub.co.nz/home/politics/2019/01/idiots-in-parliament-hav...

That quote from The Sham is classic ... the economist who told people not to buy a home, then bought a home. And then upstaged twytford at a KB event by announcing 100,000 wasn't enough they should do 500,000 homes. What a plonker. I cant see how this guy gets the airtime he does, I do hope he is not positioning to make a run for the election but at least it would be very entertaining.
Duncan garner and the sham eaqub are just talking heads...talk is cheap, they have no idea how to realistically get cheaper homes.

Most experts are expert for after the event.

Correct talk is cheap...

How about a block reality show where all these know it alls are on as contestants and even better where they have to manage the new build from scratch without help from the likes of resident builder peter wolfcamp. The red team with jacinda and twytford, the blue team crusher collins and nick smith, the green team duncan garner and sham eaqub. Highest rating season

It wouldn't be a reality show without Clark Gayford walking in on Winston and Jacinda together. It's no coincidence that Neve was born 9 months after the election, a few too many celebratory drinks back at the Young Labour Camp.

Harsh

From what's been reported in the media that's more of a National party type thing to do.

Phil Goff and john tamihere, appropriately yellow team, that would be a great watch if they survive

Shamubeel has always been wrong , just as Bernard Hickey was about housing!
How these so-called ecomists/ experts get air time is hard to understand, although Bernard is the brother of a previous weatherman on TV1 which is probably the reason!
Reality is that you can normally just dismiss economists opinions as if they knew anything g they would be financially independent and not needing to be in paid employment.

Yes they're were wrong but the market doesn't stop. Time will tell...

I note that Christchurch Lower Quartile Prices continue to rise, up $15k from November to December!
This is despite Gordon saying that ChCh prices are dropping?
Interesting that once again “The Man” is correct and Gordon continues to be incorrect!
Reality is that the first home buyers are awake to the fact that as ChCh continues to grow then prices are going to continue upwards!
No skinheads etc. just a quality lifestyle that is still very affordable.

Eaqub also paid 1.6 in June 2017 for his house. Currently valued at 1.35.

Dp

I am not always a Sham fan but he's on the money here. He's right to call them all idiots, because they are. Right and left, they are tinkerers. Useless.