Lower interest rates, flat house prices and slowly rising incomes are turning Auckland's housing market more in favour of first home buyers

Lower interest rates, flat house prices and slowly rising incomes are turning Auckland's housing market more in favour of first home buyers
Photo: www.goodfreephotos.com

By Greg Ninness

The Auckland housing market may be at an important turning point with a significant improvement in affordability for first home buyers, according to interest.co.nz’s latest Home Loan Affordability reports.

The improvement in affordability has been caused by three important factors:

  • Flat housing prices which have remained basically unchanged in Auckland for almost three years.
  • The ongoing decline in mortgage interest rates.
  • A slow but steady rise in the median after-tax pay for typical first home buyers.

House prices flat

Interest.co.nz’s Home Loan Affordability reports track the Real Estate Institute of New Zealand’s lower quartile selling price for residential property sales throughout the country. Although there are monthly fluctuations up and down in Auckland, these have mostly been modest.

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

Auckland’s lower quartile price has remained between $630,000 and $680,000 since July 2016.

It briefly looked as though it would test the upper limit of that price band in February and March this year when it hit $680,000. But then it dropped back to $670,000 in April, leaving it virtually unchanged from where it was in October 2016 when it hit $669,000.

That trend is now evident throughout the Auckland region with the exception of Franklin on Auckland's southern rump, where the REINZ lower quartile price set a record high of $635,000 in April.

It will probably be a couple of months before it is known if the April’s spike in prices in Franklin will be sustained or was a one-off aberration.

However the trend throughout Auckland has been an extended period of relative price stability since late 2016.

Mortgage rates down

The average of the two year fixed mortgage rate offered by the major banks was 3.97% in April, which was a record low and the first time it has been below 4% since interest.co.nz started collating the mortgage rate data in January 2002.

That means mortgage interest rates are now less than half what they were when they peaked at 9.64% in March 2008.

Incomes rising

The Home Loan Affordability reports track the combined after-tax pay for typical first home buyers (a couple where both are aged 25-29 and working full time) and in April this was estimated to be $1666.08 in Auckland, which was up $33.04 a week (+2%) compared to April 2018 and up $68.96 (+4.3%) compared to April 2017.

Those three things combined have led to a significant improvement in housing affordability for typical first home buyers in Auckland.

Interest.co.nz estimates that lower interest rates have seen the mortgage payments on a lower quartile-priced home in Auckland decline from $715.11 a week in April 2017, to $687.37 in April last year, and to $651.42 in April this year.

That means the mortgage payments on a lower quartile-priced home in Auckland were $35.95 less a week in April this year than they were in April last year, and $63.69 a week less than they were two years ago.

Over the same period the after-tax incomes of first home buyers has been rising modestly but steadily, leaving them with another $33.04 in their pocket (per couple)  compared to a year ago, and $68.96 a week better off compared to two years ago.

That combinations means that the mortgage payments on a lowers quartile-priced home would have been eating up less of typical first home buyer's take home pay.

Interest.co.nz considers mortgage payments affordable if they swallow no more than 40% of take home pay.

In April 2017, typical first home buyers in Auckland would have needed to set aside 44.8% of their take home pay to meet the mortgage payments on a lower quartile-priced home, which is considered significantly unaffordable.

By April 2018 that had dropped 42.1%. In April this year it was 39.1%, putting Auckland housing solidly back into affordable territory.

North Shore solidly unaffordable

Of course there are still parts of Auckland where typical first homes buyers would struggle to find something affordable.

The North Shore remains solidly in unaffordable territory with the mortgage payments on a lower quartile-priced home there eating up 46.5% of a typical first home buying couple’s take home pay. That is, however, a considerable improvement compared to the end of last year when mortgage payments on the North Shore would have eaten up more than half of their take home pay.

However Auckland West (Waitakere), Auckland South (Manukau), Papakura and Franklin are now all considered solidly affordable for first home buyers because the mortgage payments on lower quartile-priced homes in those districts would take up less than 40% of a typical first home buying couple’s take home pay.

And even Auckland Central and Rodney are now on the cusp of being considered affordable, with mortgage payments on lower quartile-priced homes in both districts within striking distance of falling under the 40% income threshold for first home buyers.

However the most unaffordable place in the country is Queenstown, where the mortgage payments on a lower quartile-priced home would take up 49.2% of typical first home buyers’ take home pay.

All other parts of the country remain well within affordable limits and typical first home buyers should be able to manage the mortgage payments on a lower quartile-priced home.

*This article was first published in our email for paying subscribers. See here for more details and how to subscribe.

The comment stream on this story is now closed.

You can receive all of our property articles automatically by subscribing to our free email Property Newsletter. This will deliver all of our property-related articles, including auction results and interest rate updates, directly to your in-box 3-5 times a week. We don't share your details with third parties and you can unsubscribe at any time. To subscribe just click on this link, scroll down to "Property email newsletter" and enter your email address.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


This headline is going to set some people off.

Exhibit A: Ocelot's response below :) Which was so outrageous that it has now been deleted :)

Like a mirage in the desert.

Lost and gone forever.

Plus my comment and others.

What is happening with this site?


Sadly, it has always been heavy on censorship.

Sadly, it has always been full of rude, envious, ignorant commenters

Yes plenty of comments vanish on here. The changeover on this site saw my comments posted being delayed for a while but now they pop up straight away. I must be behaving myself now.

Lest we forget the brave keyboard warriors that have been lost in battle - now resting peacefully in 403 land. saving4AUhouse, PropertyPrices2Fall, Nic Johnson & Eco Bird.


I didn't realise all those people had been banned.

Don't worry, some of them have done a Lazarus of Bethany.
In fact I think they are all reincarnate.

Nic Johnson was my favorite.

Along with predicting a price crash in NZ by end of last year he also gave specific bearings for interest rates, I believe ocr over 4%, together with rapidly rising unemployment, as in the rbnz will be putting on the breaks on th economy if those prices were falling and unemployment rising.

What's the bets he's now bought a house

Being wrong isn't against Terms of Service, so that surely wasn't the reason. Almost every leading economist and central banker was wrong before the GFC.

Pretty sure Nic Johnson = Joe Wilkes.

Yep I think so

No comment Joe?.....

He also predicted the demise of Westpac I think. 7 months to go before Westpac goes under.

He owes me, where he at???


Interesting, Have any spruikers ever been banned? Ecobird survived for ages until he turned bearish/got an understanding that actually we just have a credit bubble, propping it all up. Tony Turner disappeared without a trace too, Anyone checked the disavowed register to see if any spruikers have ever gone missing?

That is a very good question Joe.
And what I would like to see on here, in the interests of balance, is a guest article by you. You are eminently qualified to formally state your case.

The not so subtle insult that interest.co.nz moderators are bias towards spruikers is a further example of ad hominem. I would ban you for the above statement and make you get a new email and pseudonym.

Just as well you aren't running the show, eh?

Was meant for Greg. Thanks for your 2 cents though, value added as always.

Resorting to the Ad Hominem that you abhor so much, nice!

It's your comments that are being judged as having no value, not you MTP. I am sure you are lovely.

BLSH -Hah I wondered where those names mostly DGM's had gone ! Maybe RP might be RIP ?

This link that I think David put up is very informative around affordability

I think there is a big variation on here re - knowing people that fall in or out of the affordability zone.

It appears to me in Auckland atleast from living and investing in $1-2 mil North Shore suburbs that there is a surprising amount of younger families ( 35-45) succeeding in owning well positioned real estate.

Not everyone has the same ability to generate that sort of income for sure but I still see 'land and home' packages in the fringes particularly south Auckland for $550k - better than KB ?

One of our off spring bought their first home at the end of 2018, paid $700k seems quite manageable for them.

My feeling from being in the Auckland market since 1983, is that this winter will probably be the low spot for Auckland prices hence encouraging off spring to move sooner than later.


I didn’t think it was that outrageous BLSH. But I guess it depends on how sensitive you are. For example Mark Richardson holds a position on property and regularly voices his views {like them or not) about capital gains, negative gearing etc etc. He has an influence in the media. But what is transparent with him, is that his personal/business position is clear and he doesn’t hide his interests as a landlord/investor which allows people to consider his views and whether self interest or confirmation bias could influence his story. But he’s not sensitive to opposing views. I like that transparency and he takes the flack from those who disagree without extinguishing their right to question. Similarly we know your bias as a landlord, Zachary as an agent and the numerous first home buyers here on interest. What we don’t have in NZ (and some of the press beyond interest.co.nz is woeful and often lopsided) is an understanding of the positions that our authors hold when controlling a narrative. For example Corelogic have a number of banks as major shareholders.. We don’t know if the writers of property articles at stuff are multiple leveraged property owners. Who owns stuff?, who owns oneroof? Perhaps Ocelot raised his point the wrong way and a bit abruptly, but we’ve all been guilty of that from time to time and isn’t wrong to question the narrative, if that starts being a problem we may as well move to Chinese style media censorship. The disagreement and questioning is half the fun of coming here after all.

All hail our dear leader.

Play the ball not the person. DGMers predominantly rely on personal attacks which likely stems from pent up anger with either low TDs (the old timer DGMers) or high housing costs (the wannabe FHB DGMers). That makes them a little tetchy and prone to ad hominem.

Who cares what bias a commentator has, focus on their ideas or position rather than their motives. This will ensure you don't have to keep coming back here with new pseudonyms every couple of months.

I’m not the one hiding behind a pseudonym.

Of course you're not;)

Actually, other than me, Mr Chaston and the author, I can’t find anyone else on this stream standing behind their comments with their own name.

Way to miss the point Joe. My comment was don't worry about who wrote the comment or their motive, focus on the substance rather than insulting the author and risking a ban. Your response, "Joe Wilkes" is my real name. SMH.

Comment of the year

I am pleased for FHB looking to fulfil their aspirations of homeownership and the intrinsic value and security that goes with it.
The DGM will advise holding off until the market bottom outs (some are saying eight plus years) but Adrian Orr with a thorough understanding and ability to influence the market sees it as being relatively flat with some growth. Irrespective of what happens to the market, it is like one’s KiwiSaver growth fund, you are a homeowner for the longterm and short term fluctuations in the market are not important.

"Intrinsic value" is the key there. Is the intrinsic value of NZ homes really what they are being valued at now? Are very average houses in Auckland really worth what they are being valued at? The whole market looks very expensive. As a value investor, fluctuations in any market are important in terms of when you buy (Mr Market is very emotional). You certainly don't want to be paying way over intrinsic value, if you are interested in capital gain. I think the current situation is extraordinary, in that it is a bubble. There is no hurry to buy in the current market.

The day you can buy a piece of land and build a house on it for cheaper than you can buy a similar existing house in the same area, then the existing house will be overvalued. This is clearly no the case today, so the answer to your question is "NO houses today are not overvalued" (although I agree they are extremely expensive to buy vs income, but few people understand this is a separate issue)

You are not accounting for the situations in which entire markets can be overvalued, which we sometimes also see in sharemarkets indexes, and they eventually correct (and indeed go below intrinsic value for a while). In property markets in this case, you can't compare houses in the same area like that, if the whole area and city is overvalued. We occasionally get times of collective insanity in which it's difficult to see the bubble from inside it; this is one of them.


Overvalued...compared to what? To new builds, no. To income, yes. To rent, yes.

Given that the price of land tends to rise to equal the value of the finished house - the build costs, you'll be waiting a long time. The real question is whether the land is overvalued.

When I say house, I really mean mostly the land that’s overvalued. Half a million or more for an average sized section on the outskirts of Auckland is overvalued. The section prices in Melbourne and Sydney are too, and many people are currently going through the financial pain of finding that out.

Given that the Auckland land price is falling now, it might have already happened.

Section prices in Auckland have been on the slide for about 2 years now and in the same period Auckland has almost doubled the rate at which it builds housing. "Maybe, Auckland houses today are not overvalued"

Well said, our land prices and building costs are too high.


First Home Buyers are about the only buyers in the market at all.
But they have strict financial limits.
Anything much over $750K cannot be considered.
The Auckland residential market cannot survive on naive FHBs who will be the first to be dragged down as the market slips further.
Affordable it may be, but sensible it is not.

That's arbitrary nonsense, BigDaddy.

FHB's vary enormously in what they can afford to purchase - and the amount of debt they can afford to service.

Plenty are purchasing homes far in excess of $750,000. Take, for example, double income with no children - with each earning in excess of $200,000 per annum. Among professional couples, that's not at all uncommon these days. And then there are FHB's with parents/families who are willing and able to make a sizeable contribution to the deposit.

As well, there are plenty of people aside from FHB's who are active in the market. Right now, with the denouncement of CGT, there is renewed investor interest in the market. And there are always people re-locating, or wanting a larger/smaller home and so forth.

Your post is hardly balanced or insightful.



Double incomes, both over $200k a year and no kids.. and "that's not at all uncommon these days"

You get more absurd by the day.


....needs to get out more. Spending far too much time at Nat Party fundraisers..

Don't agree with TTP's numbers but worth remembering that a FHB in Auckland is likely in their mid 30s.

Indeed, several of my friends became FHBs in their mids 30s and early 40s. But even then, a total household income of $200k is on the high side, let alone 2 x $200k incomes.

I'm wondering if TTP is typing $ which we all assume to be NZD, but actually he means Hong Kong Dollars. Thats about the only way I can see FHB with a $400k household income not being that uncommon.


The penny has finally dropped on TTP's posts. They are all,without exception idiotic and designed to wind people up. So,I have concluded that this Has To Be deliberate on his part.
I looked at the last Law Society Hays report on incomes and in Auckland the typical income for a lawyer with 10 years' experience in a large(20+) firm,is $141,000.That was 4 years ago,so the figure will be a little higher now. Now,it does show a wide range,with $250,000 at the top end. Thus,it is not outwith the bounds of possibility that TTP does indeed know of a couple both earning at the higher end of the scale,but "not at all uncommon"? I don't think so.


This sounds like arbitrarily made up nonsense.
Given that the average wage for a man is $56,700 and for a woman is $47,500. I would say that a couple both earning $200,000pa is as rare as rocking horse manure.

Couples earning big money are none existent. There is also a big difference in someone telling you they are on big money and them actually earning that much. To many people in the country are full of s*@t. Have you actually seen their pay slip or banking records ?

"Plenty are purchasing homes far in excess of $750,000. Take, for example, double income with no children - with each earning in excess of $200,000 per annum. Among professional couples, that's not at all uncommon these days."
Really? Not uncommon? Purposefully vague?
It's odd that if this was "not uncommon" median household income in Auckland is (by memory) ~$120k pa. Now I don't know what the distribution is, but that doesn't in any way suggest that >$200k is a "not uncommon" income figure..

Go find out what young lawyers, accountants, financiers, doctors, PR specialists, IT specialists, marketing/advertising people, HR people, property gurus etc, etc, etc can earn in their 20’s and 30’s - especially in the main centres. You’ll be in for a big surprise. There are plenty of young professionals on very large incomes these days.

They are frequently buying in top suburbs like Ponsonby in Auckland - and Kelburn, Brooklyn & Thorndon in Wellington. In Palmy North, they prefer the likes of Hokowhitu.

The DGM need to get real. There are many young professionals with flourishing careers - and highly paid jobs........ Just because you haven’t made it into their ranks doesn’t mean the young/successful/rich don’t exist (and in ever-swellings numbers).

Often, higher-income FHB’s choose to sink there money into upper-echelon housing. And who can blame them?



So no facts then, just babble?

Hi Mrs The Point,

If ever there was a comment fuelled by envy & ignorance, it’s yours (above).



Sorry TTP, the stats don't agree with you.

I was generous and went with 30-34 year olds. It's less for younger cohorts. There are only about 28,000 people in this group earning over $94k nationally (the top decile). The over $200k would be a tiny subset of that.


There you go spoiling the story with all those facts kiwimm.

Apologies to those of you who prefer a folksy story of facts


Let's take this a little further and make a guess that the subset of people earning over $200k is 1,000 ppl (totally made up, use any number you want). They then all get married to each other and have no kids, which gives us 500 households in the whole county with this >$400K income. Sounds pretty uncommon to me.

You need to be very cautious in your acceptance of statistics - including those from non-official sources. Plus, there’s a big question mark hovering over Statistics NZ (and its management) these days.

Plenty of people see an incentive to under-report their income - e.g. because big brother might be watching.......

In any case, there are literally thousands of younger people in NZ (including FHBs) who generate phenomenally high personal incomes.

While this creates envy in some (such as the DGM above), it has to be acknowledged.



Do we also need to be very cautious in our acceptance of your ramblings, also?

For one, if it is survey measure, the tendency in surveys is to actually over report income.
Secondly, we don't need survey data - we have the LEED resource which is straight from IRD records.

Yes, there are 'thousands' of people who generate high incomes. No, that does not make them common in real terms.

Hi k_s,

You write: "Yes, there are 'thousands' of people who generate high incomes. No, that does not make them common in real terms."

It means they are not uncommon - and most certainly they make a difference (and a big one at that) to sales volumes/prices of upper-echelon houses in NZ.


So, as I said originally - purposely vague.
And, like I alluded to after that - It's pretty rich for you to say we shouldn't lend too much interpretation into Stats NZ data.

Plenty of people in their 30s and 40s in Auckland earn over $200K/year, but many of them will be single or have a lower earning partner.
There will be some childless couples in their 30s/40s earning over $400K combined, but not many in my opinion, and most of them would have already purchased a house so no longer considered FHB.

30s/40s earning over $400K combined, sounds like fictional rubbish to me! Were they RE's by any chance at the height of the Auckland property (money laundering) gold rush? I think you guys are completely out of touch with wage earners in this country, even in the cities people simply do not earn that much.

I personally know multiple people in 30s/40s earning over $400K. Not RE. Though I agree that this is the exception, not the norm.

I personally know.....

That's what we call heuristics.

Around 10% of income earners in NZ are pulling in over 100k a year. Only 1% of income earners earn above 200k a year. Given that peak earning power is generally 40-50, it will be even less than that for typical FHB age brackets. So 2 x 200k earners in a single household in the FHB age range would be the definition of uncommon.

But why let facts get in the way of constructing a paper thin argument eh?

Yes it's just TTP babbling RE rubbish as usual being completely out of touch with reality, trying to cover up the fact that the real reason why Auckland's property market ran out of control was mostly due to Foreign Buyers and Money laundering. Both have recently had the breaks thrown on them hence why prices are falling.

And TTP if you knew anything about the Tech Industry in this country and even around the Western World, you would have realized that most of those salaries have been 'frozen' for quite a number of years even decades, so tech salaries especially for the younger generations aren't that high really. Even Plumbers and Electricians earn more then those starting out in the tech industries these days (Because they have more control over their income being self employed).
Here's an article that will give you a bit more perceptive on global Tech Industries salaries and how extremely high house prices and cost of living can push them out.

Better Dwelling article: Vancouver’s Tech Scene Shows Just How F**ked Up The City’s Real Estate Is

Exactly right the proof is in the pudding, this has proven most of the hot air in the AKL market came from foreign buyers wanting to buy ANYTHING just to get their money out of places like China.
Hopefully people will remember how National deliberately mislead the country on this, they knew exactly what was happening, and outright refused to stop it.

Young lawyers in NZ, I read they earn less than min wage from a stuff article this week and have set up a union.

Where are they, I gotta start using them? The ones I use want my fist born son as payment.

They are the ones you're using just not the ones that sign the letters they write

Having done payroll and contracts for all those industries. I do know what they are paid, and yes I would be really, really surprised.

denouncement of CGT

There we go, its not a ban anymore its a denouncement...

Hi Sluggish,

It’s both!

People understand what’s meant by either expression - and they both amount to the same thing in popular dialogue.


Denounce - publicly declare to be wrong or evil. - What they did

Ban - officially or legally prohibit (something). - Not what they did

Wrong - what you are.

Hi Sluggish,

Seems to me that you're pretty ruffled by the government's CGT denouncement/ban......

You wouldn't happen to be a frustrated DGM, by chance??


clearly you havnt heard of the brightline test which in effect is a CGT

I don't think I've read a single post from you that is "balanced or insightful". So why are you holding others to this standard?

The reality is that the estimates are that between 50-90% of FHB's are requiring help from family/parents just go get a deposit together

And yet you claim its "not uncommon" for FHB to be earning 2 x 200K incomes and can easily afford million dollar properties? You are living in a land of make-believe.


In relation to the $200K income couple, mentioned by plenty of others as a myth; luckily for me I have access to the Nielsen demographic data tool CMI at my work.

Lets have a quick look...

All People 25+ HHI $250K+ : 97,000
Aged 25-35 HHI $250K+ : 17,000
All People 25-35 HHI $250K+ NO Kids : 12,000

All People 25+ PI $150K+ : 80,000
Aged 25-35 PI $150K+ : 4,000
All People 25-35 PI $150K+ NO Kids : 2,000

Key takeaway here; there are 4,000 total people in the whole country under 35 earning $150,000 or more

In other words, tothepoint, as usual your comments are complete tripe

Thanks for that Milky. So my guess of 1,000 ppl earning over $200K is probably not far off the mark. Which if they all paired up to get to the $400K household income would give you maybe 175 households in Auckland with that sort of income (assuming a greater proportion in AK than elsewhere). As common as...

You've missed the vastly numerous under 25 population who easily earn in excess of $250k. Very common only if you open your eyes a bit. :D :D

Please introduce me to our friends TTP, I've been looking to find myself a girl on a 200k/year income

For FHB it is hard to buy a million dollar house or even $900000 or near around and even if some does buy a house will the mortage be for 2 years or 30 years :)

On that level for FHB a saving of $20 or $30 per week does not help much. Also what about after few years when the interest shoots up and have a mortage of $500000 or $6000000 (As interest rate will not go up by $20 or $30 but in Hundereds)


As it gets more affordable by the month there is even less reason to buy now. Now shall we discuss the implications that that has on overall credit growth in the economy and flow on effects?

Perhaps consider what APRA in Australia is doing. They are looking at reducing the 7% interest rate test for mortgage approval. It's not so much to make mortgages more affordable but to bail out their economy. When we start seeing changes like that here that's a good sign of serious economic trouble. Perhaps we should consider an external economic event that occurs in Australia which would have a direct impact on our economy.


Hi Dictator
We don’t actually need an external event. The foreign liquidity tap has been turned off... there are 750,000 New Zealanders with a student loan sucking away disposable income. The average kiwisaver account (the source of a majority oF FHB deposits) is just 19k. Or in alternative affordability model just 2.2 % of the price of a median home in the city where all the work is. We’re actually very capable of having our own banking crisis without any help from the Aussies because for 30 years we have run a negative household savings rate. Even the investors have very little cash, it’s all been leveraged into the bubble no one in the media dares to speak of. So in my opinion, first home buyers should be very wary of the information they are being given and how it is positioned.

Right enough from me, time to get back to work

We may not need an external event for a financial crisis but we're going to get one anyway.

First Time Buyers who have young children who don't feel that they can wait for the Auckland property market to stagnate further until they buy a home for themselves, would do well to look a more affordable areas. It may require a bit more of a commute but you'll be surprised what you can find.

I'd recommend the West Coast of Auckland such as Titirangi, Laingholm, Parau, Cornwallis which have very good primary schools even Green Bay and Kaurilands are nice though a bit more built up. All of these are fairly close to good transport links including train services.

Totally agree with you CJ099
As when buying a house at any time, one needs to make compromises and this is especially so for FHB. The distance from the CBD is a common compromise, just as in a less than desirable area is another. However the norm is that these compromises and first homes are a stepping stone so not too far distance down the track a more ideal home is affordable.
At the moment, with overwhelming signals of continuing low interest rates, there is some certainty for FHB for stability in mortgage interest rates and repayments, and with the onset of the winter seasonal affect on the market, FHB should be considering their current opportunities.

It's getting slightly more affordable but still very unaffordable in world terms. It's still one of the most expensive markets in the world, which inexperienced first home buyers should constantly be reminded of this fact. We should also remind ourselves of how much further our neighbouring markets (Melbourne and Sydney, and increasingly wider Australia) have already fallen beyond this. NZ usually follows.

All Courtesy of an under-regulates banking sector. Who are now being looked at more closely,something that should have happened a decade ago.

I don't agree. I suspect you are using the Median Multiple definition of affordabiliy. But that is highly flawed, even if it is easy to understand. It is simplistic to the extent it takes rational discussion of affordability into a pointless place.

Buyers don't save their incomes to buy houses (the Median Mulktiple assumption). They save to get a deposit, then they use their incomes to make the payments on a mortgage (the home loan affordility measure).

Median Multiple analysis ignores taxes, and uses a broad statistical mish-mash of overall household incomes.

Home loan affordability tries to measure household stress at the family level, starting with take-home (after tax) pay for households in the 25-29 age group, and the 30-24 age group. (Median multiple metrics include 15 year olds, retired people, and all sorts inbetween in a mashed-up mix which doesn't tell you anything useful.)

Home loan affordability doesn't assume a young houysehold is trying to buy a median-priced house. That will probably be something they may do later in life when they get established. But Median Multiples makes this very assumptiion. It is just not realistic. Home loan affordability assumes FHBs are buying a first quartile house.

If you think Median Multiples, you will miss important changes in affordability.

By the way, the RBNZ also has a related series, household debt serviceability. That cannot be inspected at age levels, nor can it be inspected by city. But overall it shows houisehold debt serviecability at it best (lowest) level in 20 years. Home loan affordabiulity is only one piece of household debt affordability, but our analysis shows very similar trends.


But David, First Home Buyers are not complaining about the mortgage serviceability, they're complaining about the deposit requirements to even get themselves a mortgage to buy a house. In 1978 it would take 9 months average wage to save a 20% deposit for an average house (if no other expenses are considered). In 2018, it's roughly 4 years (average wage $56k, average house price $660k) all while TD Rates are the lowest they have ever been.

It takes more working hours to save a deposit these days, with much less assistance from the banks.

In west Auckland the affordability report indicates saving for 4 years for a deposit if you are 25-29. Rather a long time.

Most personal finance books assume saving for a deposit would take 1 year. That used to work here, and probably still works in some parts of the US. A house price fall of 60% would make deposits far more reasonable and affordable.

Just watched a Reno show on Hulu called Good Bones, they are buying do ups for $15K to $30K and selling the nicely renovated product for 250,000 freedom bucks. Kind of hard to get your head around those numbers. Sure it is not in Cali, but $15K to buy a house?

If you don't think Medium Multiple, you are missing the most important measure of housing affordability.

The medium multiple is quoted by financial and economic institutions worldwide, and for good logical reasons. And while it is not the only measure, what it shows is a correlation with those jurisdictions that have restrictive housing policies also have high medium multiples and those that have less restrictive housing policies have lower medium multiples.

Restrictions convey an unfair monopoly advantage, causing house prices to be higher than they need to.

Therefore any saving, like lower interest rates, will get capitalised into that part of the system that is restricted. In this case since we have a land use/housing policy restriction, lowering the interest rate, will almost always cause price of land/housing to go up. Any saving the purchaser makes on the interest rate they give away in multiple by 1) paying extra for the house, 2) they are paying interest on this extra and 3) their debt is locked in but not the interest rate for the term of the loan.

If the Medium Multiple measure has a fault, it is that it tends to underestimate the problem as it use to measure household income when it meant one income earner. Now household income is any income including multiple income earners under the one roof.

NZ had a very steady approx. 3x multiple up until the early nineties, from which point as land/housing policies became more restrictive so the medium multiple increased as supply of land was restricted relative to demand.

Those jurisdictions that have lower medium multiples, also have low land use restrictions, lower interest rates, and better quality housing.

Is there any FHB out there that would prefer to buy at 8x income rather than 3 to 4?

"The medium multiple is quoted by financial and economic institutions worldwide, and for good logical reasons."

No, no it isn't. Try a google search on "medium multiples" , and you'll find not much of anything useful.

If you are going to rant about median multiples at least have the courtesy to learn the bloody word, otherwise people might think you are like a medium steak.. a bit overcooked.


Well done is over cooked.

Median - there you are. Now hopefully you can put one and one together.

And that's your total counter argument,,,?

VoR, and first home buyers also needed to be reminded that in 10 to 15 years time house prices today are going to look exceptionally cheap. That is likely more certain than a significant fall in the short term.
As long as FHB can meet repayments, short term fluctuations in the housing market are irrelevant.


I do think the ignoring of the sheer amount of debt is irresponsible by Interest.co.nz. I understand the 40% benchmark but just because you can service a very large debt, does not mean its responsible for you to do so.

It only seems responsible in the current situation, without thinking about how things could change, and have frequently in the past: historical averages. Mortgages are not for the short term.

Great news for FHB : )

It is a wonderful narrative, but 25-29 year old couples are not the average first home buyer. Corelogic, last year, calculated it would take a couple 16 years to save the deposit, let alone concern themselves with a mortgage https://www.stuff.co.nz/business/102130411/auckland-firsthome-buyers-fac.... Home ownership rates continue to fall if not plunge nationally, let alone the plight in Auckland. Rather than persisting in calling it an affordability index, when the reality is , for the majority, Auckland housing is not affordable. Why not call it an unaffordability index as the hard data supports not the vacuous waffle, or alternatively call it a housing cost index or some other neutral title.

Fair comment on the naming. But while your point about Auckland FHBs might be right for many, the market is more than Auckland. And the RBNZ data we have about FHBs shows they are returing to the overall market, even in Auckland (see C30 and C31). And they are returning faster than other groups.

Also don't forget that banks have serviceability floors borrowers must meet to be granted a loan. The Aussie banks here also try to meet APRA standards, lest their parent gets tripped up by that regulator. And that means most mortagges will need to meet a 7.25% or higher interest rate in this serviceability test. Given we are currently under 4% for many, and well under 5% for Auckland FHBs, many new borrowers should be able to withstand considerable interest rate stress if it comes.

As for home ownership rates, be careful using the Stats NZ interim (between census) data. It is just perpetuating older census trends. I am not saying you are wrong, only that we don't really knoiw. If you have separate evidence they are 'plunging' that would be good to get.

David, fair comment re plunging, which should be only used with one's coffee . Perhaps, 'a long slow snaking decline' from the 1970's would be better. There is no doubt that FHB recently have increased in percentage terms , but still insufficient (using the RBNZ data) to alter the decline in home ownership rates.(( although I agree that Stats NZ (as yourself and David other) has some fundamental issues)). The recent C30 and C31 data shows that FHB have increased more as a result of increased lending in the higher LVR brackets, not solely because homes have become more "affordable." At the end of the day, its purely the naming. Interest co, obviously put in the hours collating the data , and my comment is no reflection on the numbers presented.


You would be insane to purchase in this market and its criminal how articles in the media lead the ignorant and uninformed into a life of debt. Never take advice from someone who has skin in the game. Property prices across NZ and Australia are unsustainable and unjustifiable. There is no shortage of land anywhere to build on and property is simply being used as a tool for banks and councils to support their greed, while pushing the illusion of land shortage. It's a scam that's running out of victims to take advantage of. The end of this Ponzie is coming and my money is on a massive correction based on reality. The only way to make money on property is to find some sucker that will pay more than you did, but the market is running out of suckers. There are two options now, revert to reality and take the pain of stupidity, or import more suckers to keep the scam going for a bit longer, but either way...the end of the madness is near and a dramatic fall of property prices is a certain outcome.

It's good that things are heading in the right direction, but the definition of affordability still seems off to me.
-I understand interest rates are an important factor, but shouldn't the possibility/likelihood (in historic terms) of rates rising be factored in? There's a lot more room for rates to go up than down.
-Who are the 'average FHBs'? The assumed house is the lower quartile; is the income the lower quartile too?
-how long is the assumed mortgage term?

Very good article, simple and factual.

The attached image is however a bit emotional and perhaps even tongue-in-cheek as far as most readers here would be concerned - should the FHB be relieved and happy and choose now to get on board the ladder?
Or is the general perception of home value more important, should FHB re-evaluate why they are about to purchase, and what they anticipate the future will be, if they have alternatives i.e. renting, is it wiser to wait?

I imagine the key factor is wage growth(inflation), the expectation of this is what makes a $500K mortgage suddenly make sense, believing as wages grow the mortgage burden will evaporate in comparison to property prices that build and build (keeping pace with that 40% affordability target)

"The Home Loan Affordability reports track the combined after-tax pay for typical first home buyers (a couple where both are aged 25-29 and working full time) and in April this was estimated to be $1666.08 in Auckland".

So lets take this as true. So this average couple makes about NZD86k a year after tax but not before kiwisaver deductions.

Then because they are both working they are running two cars. They are renting a place at lets say 550/600 a week. They are paying utilities, they need to eat so let's say their grocery bill is 250 a week allowing for them buying extra food to make meals to take to work. They need clothes. Let's budget 75 a month combined (* they are frugal).

They pay a small amount of student debt off each month but the balance is still several years away from being paid off.

They have been working hard and need a couple of breaks a year. One is a packaged deal foreign holiday just up to Roratonga, the other is a camping summer break up at a reasonably priced holiday rental in the Bay of Islands.

Even with a modest lifestyle can someone tell me how these folks are going to save 10% for a deposit ? I just can't see it.

They can't afford those holidays, they are clearly living beyond their means and probably have no savings with the holiday expenses (holidays often involve spending blow outs). These days people are having to add a side income on top of their job if they want to get ahead.


Affordability for whom ?

Foreign Buyers and Money Laundering in last few years took the market to a level that is hard to afford for average Kiwi and even if they do manage to buy the house are struck with heavy mortgage for the rest of their life, which is fine with low interest rate but will they remain low for the entire 30 years.

People had paid unimaginable price for a house that no rational person would pay unless has some ulterior motive and the obscene amount paid at that time led to a domino effect (If a house worth $600000 or $650000 goes for a million or 1.1 million - becomes a benchmark and rest is history- how the real estate agents used to support speculations) - Now even if the house falls from what was paid is still too much and one can look at any number of house that have been sold particularly after 2015 (After National came back to power - must have given free hand to one and all to exploit as must have realized that 3 term is good enough for them) even after dropping the price from purchase price is still high.

Checked one house which had a CV of $610000 in 2016 and was bought for 1.1 Million in 2016 as result next CV went up to 1.1million (Auckland City Council too have a Big role in inflating the CV and supporting indirectly to all so called speculators) and now even if they agree to sell for $850000/$900000 (20$ to 25% Loss) is still too expensive and this is not just a theory but reality and if I give an example will be called cherry picking and have no time to check each and every property bought after 2015/2016 and is now in the market again but just for some who have doubts can check property near Cardiff Road, Pakuranga (Full history).


Money Laundering.

NZ used to be safe heaven as earlier no question was asked, how you got the money and from where. Now with FBB and anti money laundering things have or should change and for the same reason locals are able to buy house in Auckland till $700000 to $800000 range, as a result houses in Auckland which were in 900000 Plus or Million Plus have fallen and will fall further (so all who can buy in $850000 Plus range should specially wait to get more value for your deposit after having already missed the bus of last boom) and for the same reason - outside Auckland house price were in $500000 to $800000 range as result have not fallen much parly due to low interest rate but Defenitely house which were earlier going or have been bough for a million or 1.1 million are going for mid 800s to early 900s irrespective of their CV being a million or 1.1 million or even 1.2 million).

Have seen many houses (Have too, seen in Pakuranga area) where houses which may go now in high 700s to early 800s are being listed for early 900s after the failed auction with the hope that someone may fall for it and still their are many specially FHB who having missed earlier are not taking any chances (FHB should buy but should not rush and should pay based on future fall - like earlier use to pay more for fututre rise, if not bought on that day)

This is the best time for all to wait and watch instead of rushing to buy irrespective of some positibe news that one may see in the media as many a time is fake manipulated opinion by so called experts or paid news to lift the sentiments and hosuing sector lobby is a very strong and powerfull rich lobby.

What happened to that article on here about the flat housing market this morning?

If i can find a affordable 200~300m2 section in awkland ($400k~) and get one of those bunning flatpacks for 200k seems kinda affordable right?

Why isnt kiwibuild doing that?

How much after council fees?

I'm guessing the banks wouldn't lend against a Bunnings flat pack house despite, as you have noted, 2/3rds of the value in the home is in the land.

It is legal for a homeowner to self build with the help of family. This is where in-laws and parents can come in if they dont have the cash to lend or gift. Dont have to be a registered builder just follow the bunnings plans. Result - Highly Affordable Housing even in Awkland!
House Works!

The improvement in affordability has been caused by three important factors:

Also Auckland is building housing about 75% faster than it was 3 years ago.

I'm not sure about the lowest quartile home value assumption. That will be picking up lots of studio, 1 and 2 bedroom units / apartments.
The majority of FHBs I know want a 2 bedroom as a minimum, and very often 3 bedroom.
FHB couples are often nearing child rearing ages, and in my albeit anecdotal experience they will often be thinking about bedrooms for kids.
Even one of my gay friends (who has no intention to raise children with his partner) wants at least a 2.5 bedroom dwelling. Needs the 0.5 bedroom for a work office / storage, then one of two bedrooms for guests / family.

Following from this, I would suggest finding the mid-point between the lowest quartile, and the median, would give a more realistic result.
In Auckland this is 850K - 670K = 180K. Therefore, the value would be a price of 760K.

Meanwhile the RE industry are desperate to panic FHBs into buying with headlines like this one in Stuff yesterday.

"House prices could shoot up if new building fees approved, critics warn"

Leverage and flipping houses, was par for the course since Man was a boy. Tis the New Zealand way...It is all Kiwis Build their dreams on.....The interest rates have been forced downwards to accommodate those who owe too much.

It is called...Stimulating The Market, when things get out of hand......out of pocket, out of all proportion...and things get tight.......Like 2008..all over again.

How true.

Just got an email from RE Agent that immigration moving up so buy fast before house price goes up again :)

Fear psychology.

Send that RE agent a response about sales volumes going down and RE firms losing income like there's no tomorrow. They should look for a new job fast before their income goes down to zero :)

It seems odd that people always keep on saying houses are affordable when two people ( a couple) earn sufficient to service some gigantic mortgage for life time of debt. It assumes that the couple will continue earning maximum income with no allowance for the fact that usually one of the couple will get pregnant and have income restraints as a result. Indeed sometimes both get pregnant - a phenomenon which seems all the rage these days.

Yep, no babies in the future. Ah well, back to the grindstone.

BigDaddy - yes. And as per my comments above, a lowest quartile price will be picking up a lot of studio, 1 and bedroom dwellings. Many FHBs look for 3 bedroom homes - as the majority of couples still want to have children (shock, horror in these PC times!)

There still isn't any decent property for first home buyers availbale in Tauranga just yet. The market in Tauranga is still in the holding pattern phase of a decline. Prices are slightly down, but not moving fast. Only those that want to sell are bringing assets to market. There aren't many people who "have" to sell yet, not in my area anyway.
Listing numbers for my area are down from 1320 in March to 1230 today. The numbers of houses coming to market each week are dropping too, with the good ones still snapped up quite quickly.
There won't be a rapid price fall until people "have" to sell. That's my experience from being in the Melbourne market anyway. But these falls happen very quickly. One minute you're cruising along and the next, the numbers start to go backwards, the media gets the story and the confidence is lost, prices have only one way to go, and you can actually see them dropping during your selling campaign. Very stressful.
Time will tell in NZ, but with low wage growth on already low wages, there isn't many people with the ability to pay top end prices like there was before FBB.
Sellers in my area still have an over exaggerated idea of what their property is worth, which is why auction clearance rates are between 12.5% and 25% most weeks. Listings are down. Sales are down. Prices starting to follow.

Off to Europe to escape the winter and one thing you should Google is reduced Houses in France......as they are in the RED....and dare I say it, you can now buy a Chateau, A gite Business, or a Simple House, or even a Farm for what appears to be in New Zealand Dollars...a bargain.....These are quite heavily reduced and as usual, there is a reason...

When you can buy an 8 bedroom, restored Chateau for the price of an Awkland dunger, then you will see what I mean...
And a first home buyer could buy a simple house, often with a large plot or even a lake.....for way, way less than a Kiwibuild....NOT...on top of each other...for peanuts. Very often Old and Character.....stood the test of time......Often restored, often with old or new in mind....they do not have our over priced lots, except around Major Cities.......go rural, go blissful....Go Brexit.......But bewarned it is not all rosy, read the fine print....Fees involved, etc.
If cashed up...might be an option for First Time Buyers......one slave, not two.....50-60K Euro, or even a plot for less than 20-30K Euro..
Might get a bargain......and these are just the reduced ones with one company.........I found.....
And you do not have to live beyond yer means.....for ever and a day. All work, no play, makes a Kiwi....House proud and...more...or less stuffed for life.

Likewise half of Europe....even in Italy bargains to be had...they want people to live there...but not in slavery, like us.....You can buy a house for nowt virtually but you have to live in it and restore...it ...have to spend something like 30K Euro in total.....Work it out for yourselves...
They are in debt too.......so have to know how to work .....online etc.....or accept a low wage or Tourism etc...to make ends meet.

It is not all about debt....Work the system....where it counts....................................for you...not our un-real ...Real Estate mob....and their cohorts.....Politicians and Bwankers......I could explain more...gotta pack.......

Gotta go.......Gotta fly.

The cheap houses in Europe in the likes of France have been that way for decades. I lived in the South of France for 6 months about 8 years ago and some houses even then had been for sale for 5 years. This is only in rural aresa. The reason ?? they are all old decaying rubbish that even the French don't want to live in. They are flogged off to the unknowning just like you. The French prefer to live in new modest homes which you see alot of around the countryside. Try buying in Paris nothing cheap there ! If you were to build in France be prepared for your worse nightmare dealing with French trade people, it really is something else.

Using my own name!
Affordable is a dangerous word in this field.
Did it not once refer to 30% of one earner wage? Now it’s 40% of two earners. Telling them, if reading, that market has improved enough to be tempted means that the writer considered that negative equity is not incipient or a reasonable threat. This is Pollyanna ish. Stock overhang and buyer deficit means prices have far to drop and this process has barely begun. It is little ackn that there is a surplus of stock and this will drag down prices. In addition a large share of young people would be better off avoiding buying in Auckland which is moving towards renters city for those under 40

"Interest.co.nz considers mortgage payments affordable if they swallow no more than 40% of take home pay."

I have no more to add.

Yes. 40% is high, especially in an expensive country like NZ where non-housing essentials like groceries, fuel, clothing and many services are expensive compared to many other countries.

And that is 40% of total household income, ie both parents working and increasingly kids staying at home and contributing to that household income as well. Use to only include one income.

I'm glad that I'm not the only one who sees this as lunacy.
40% - of two incomes.
It implies an enormous step back in living standards from what was normal in the past.
It implies not having children unless you're wealthy.
And what about the rest of the economy? What percentage of GDP is going to banks (and ultimately offshore) if we all sign up this shitty deal? What industries are we supposed to work in to make the money to pay the mortgage? I guess if everyone works for a bank it will balance out...

Becoming more affordable for FHBs all the time

By the end of next year it could be significantly more affordable, if the Auckland HPI keeps dropping at 5%pa FHBs would be best placed to hold on and get more for their money when it bottoms out.

If FHBs have to buy now, go in with low ball offers, there's plenty of choice out there which means you have all the power!

Shes still got a long way to drop........if you listen carefully you can hear the bubble deflating sssssssssssssssssssss

Theic you are 100% Correct.

FHB should offer and buy at future price which will be much lower than now to be safe and get maximum for their deposit $$$$

Still overpriced to hell and gone

They tried everything and nothing would slow the Auckland market down, then this government did what the previous government refused to do, and also claimed would do nothing, ban foreign buyers, and HEY PRESTO.
So are we still going to pretend that foreign buyers had no impact on the AKL market?