Home Loan Affordability reports

Home Loan Affordability reports

The dream of home ownership was pushed a little further out of reach for many first home buyers last month, as rising property prices in February eclipsed the benefit of falling mortgage interest rates.

However there were a few bright spots for first home buyers, with prices falling in some parts of Auckland.

Interest.co.nz measures changing housing affordability for typical first home buyers by tracking the monthly changes in the Real Estate Institute of New Zealand’s lower quartile selling price, the average two year fixed mortgage rate charged by the major banks, and the median after-tax wages of people aged 25-29 in each region.

Those figures are then used to calculate how much of a typical first home buying couple’s after-tax wages would be eaten up by the mortgage payments on a lower quartile-priced dwelling in reach region.

The mortgage payments are considered unaffordable if they take up more than 40% of take home pay.

In February the average mortgage interest rate eased back slightly, to 4.72% from 4.74% in January.

But the benefit of that drop was more than wiped out by rising lower quartile prices in most parts of the country.

The REINZ’s national lower quartile price increased from $350,000 in January to $360,000 in February. Around the country it rose in 10 regions and declined in just two – Nelson/Marlborough and Otago.

However although lower quartile prices rose in most parts of the country, they were only at record prices in three regions, Hawke’s Bay, Manawatu/Whanganui and Southland, which were three of the cheapest regions for housing in the country.

In all other regions, February’s lower quartile prices remained below the all-time highs that were mostly set last year.

And the lower quartile prices remain low enough for mortgage repayments to still be considered affordable in all regions of the country except Auckland, which is the only region where mortgage payments on a lower quartile-priced home would take up more than 40% of a typical first home buying couple’s take home pay.

And even in Auckland there were some bright spots.

Although the region’s lower quartile price increased from $650,000 in January to $668,888 in February, the increase was driven entirely by rises in Central Auckland, Manukau and Rodney, while lower quartile prices declined in West Auckland, the North Shore, Papakura and Franklin.

Some of the price movements were substantial.

In Central Auckland, which includes all of the suburbs contained within the old boundaries of the former Auckland City Council prior to the formation of the Super City, the lower quartile price increased to $695,000 in February from $620,000 in January.

In Rodney it increased to $740,000 from $700,000 and in South Auckland, which includes all the suburbs contained within the former Manukau City Council boundaries, it jumped to $665,000 from $585,000.

Going against that trend the lower quartile price on the North Shore dropped from $820,000 in January to $781,000 in February. In Papakura it fell from $590,000 to $545,000, and in Franklin it dropped from $600,000 to $573,000.

In West Auckland it fell slightly to $649,000 from $649,786.

That means Papakura and Franklin are the only parts of Auckland considered affordable for typical first home buyers.

In all other parts of the city it’s likely that typical first home buyers will have been priced out of the market, unless they are earning higher than average incomes.

Auckland’s North Shore remains the most expensive place in the country for first home buyers, even though the lower quartile price dropped to $781,000 from $820,000 last month.

The most affordable place is Whanganui, where the lower quartile price hit a record high of $175,000 in February, followed by Invercargill at $185,000.

Whanganui and Invercargill are the only major towns or districts where the lower quartile price is under $200,000.

Lower quartile prices in other major centres such as Hamilton, Tauranga , Wellington, Christchurch and Dunedin remain well within affordable limits for first home buyers.

The only significant centre outside of Auckland where housing is unaffordable for first home buyers is Queenstown, where the lower quartile price was $739,000 in February, down from $767,000 in January.

Queenstown’s affordability problems are compounded by the fact that the nature of many of the jobs in the town means median wages are lower than many other places.

The median after-tax pay for a couple where both are aged 25-29 and working full time in Queenstown was $1517.55 a week in February, compared to $1622.72 in Auckland and $1670.40 in Wellington.

Home Loan Affordability reports – Hastings District

Home Loan Affordability reports – Napier City

Home Loan Affordability reports – Hawke’s Bay

 

– interest.co.nz

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