The recent KiwiBuild reset has shown that numerical targets alone can be misleading, and don’t always get to the heart of the matter. That is, what do first-home buyers consider affordable?
“Affordability” comes down to income, of course. As the latest home loan affordability index by interest.co.nz points out, mortgage payments are considered affordable when they take up no more than 40 per cent of take-home pay. For example, the report estimates that a couple of first-home buyers, aged 25-29 and working full time with weekly take-home pay of $1,652.24, would need a mortgage of $339,326 to buy a house at NZ lower quartile price (which was $415,000 in August). This would amount to $360.15 a week in mortgage payments, or 21.8% of their weekly income.
However, income is just one part of the picture. Depending on their location, buyers across the country have different perceptions of what’s “affordable.” Valocity data shows that New Zealand first-home buyers typically pay $400,000, but the average first-home price is much higher in centres like Auckland ($770,000) and Queenstown ($840,000) than it is in Dunedin ($410,000) or Whanganui ($260,000).
It’s also important to note that falling interest rates are pushing up lower quartile house prices in several regions. In August, Canterbury was the only region nationwide where the lower quartile price dropped instead of increasing. And in seven regions (Bay of Plenty, Waikato, Hawke’s Bay, Manawatu/Whanganui, Taranaki, Otago and Southland), lower quartile prices reached record highs – increasing the size of the required deposits.
Real estate agents and mortgage advisers are two sides of the same industry coin, and it’s important that we work together to make the property market fair and profitable for as many New Zealanders as possible. Our Mortgage Link advisers are committed to helping buyers get a foot on the ladder at a price they can afford, and make home ownership the wealth-building tool our economy needs.
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