interest.co.nz Home Loan Affordability report
For February 2017 - for immediate release
Housing affordability improving in Auckland as lower quartile prices slide for third consecutive month, latest Home Loan
Affordability Reports show. Rising prices and interest rates took their toll in most other places
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PLEASE NOTE: The new Reports covering a) First home buyers (aged 25-29 yrs), as a couple, b) second rung Young family buyers (aged 30-34), as a
couple (with one partner working full time, one half time, and a 5 year old child), and c) second rung older families
(aged 35-39) are now published on our website.
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Buying a home became slightly more affordable for typical first home buyers in Auckland, Hawke's Bay, Manawatu/Whanganui
and Taranaki last month, as falls in the lower quartile selling price more than offset rises in mortgage interest rates,
according to interest.co.nz's Home Loan Affordability Reports for February.
However first home buyers in other parts of the country weren't so fortunate, as the combination of rises in lower
quartile selling prices and rising mortgage interest rates took their toll.
The average two year fixed mortgage rate has risen steadily since it bottomed out at 4.35% in May last year and was
4.84% in February, taking it back to where it was in October 2015.
That is still extremely low by historical standards, however the trend is upwards and that will be pushing up mortgage
payments.
The Home Loan Affordability Reports track the REINZ's lower quartile selling prices throughout the country and calculate
how much of their take home pay a working couple aged 25-29 years who earn the median wage for their age group and
location, would have to put aside for mortgage payments to buy a property at that price, using the average of the two
year fixed mortgage rates offered by the major banks.
In the Auckland region, the lower quartile dwelling price (the price point at which 25% of sales are below and 75% are
above), has declined for three months in a row to $669,700 in February, down by $47,500 (6.6%) since it peaked at
$717,200 in November.
The combined median take home pay for an Auckland couple aged 25-29 is $1602.36 a week, and the mortgage payments on a
lower quartile-priced home would be $724.87 a week, or 45.24% of their take home pay. That's before allowing for other
property ownership costs such as rates, insurance, repairs and maintenance.
The threshold for affordability is when mortgage payments take up no more than 40% of take home pay, any more than that
and the mortgage payments are considered unaffordable.
Factoring in the rise in interest rates and the fall in prices, mortgage payments on a lower quartile priced home in
Auckland have declined from $753.53 a week in November to $724.87 in February, leaving a typical first home buying
couple better off by $28.66 a week, before allowing for movements in after tax income.
Although that extra money would undoubtedly come in handy for anyone struggling to afford their first home, it doesn't
change the fact that meeting the repayments on a lower quartile-priced home will still be a struggle for couples on
average wages.
The only other place where mortgage payments would be less affordable than Auckland is Queenstown, where a combination
of a high lower-quartile price ($729,282 in February) and relatively low median incomes ($1494.85 a week for working
couples aged 25-29, just over $100 a week less than the median in Auckland), mean the payments on a lower
quartile-priced home would take up 53.78% of their take home pay.
However in most other parts of the country, housing remains affordable for first home buyers.
In Tauranga the mortgage payments on a lower quartile-priced home would take up 33.4% of a typical first home buying
couple's take home pay, in Wellington City it would be 31.7% and in Christchurch it would be 27.5%.
Whanganui is the cheapest place in the country for first home buyers, with the mortgage payments on a lower quartile
priced home taking up just 9.6% of a typical first home buying couple's take home pay.