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GOOD NEWS FOR FIRST HOME BUYERS

20-Apr-2017

Spread the word! If you or any of your loved ones have been saving for a first home, now could be the perfect time to strike. Last month we saw homes become slightly more affordable for first home buyers in a handful of key locations - Auckland, Hawke's Bay, Manawatu/Whanganui and Taranaki. 

This improved affordability is thanks to a lower quartile selling price (that is the selling price of the cheapest 25 per cent of sales) more than offsetting the rise in mortgage interest rates. This is measured by the Home Loan Affordability report, which uses the REINZ's lower quartile selling prices and calculates how much take home pay a couple (aged 25-29 and earning median wage for their location) would have to allow for mortgage payments to buy a property at that price. It is based on the average of the two year fixed mortgage rates offered by the major banks. 

A home is deemed to be 'affordable' when mortgage payments take up no more than 40 per cent of take home pay, any more and the property is considered unaffordable. It will be no surprise to many that Auckland has long been considered 'unaffordable" for first home buyers. The combined median take home pay for an Auckland couple aged 25-29 is $1602.36 a week, and the current mortgage payments on a lower quartile-priced home would be $724.87 a week, or 45.24 per cent of their take home pay. While this is still above the suggested level of affordability, the good news is, it is on its way down (and considerably lower than the 53.78 percent in Queenstown!).

Things are especially rosy in other parts of the country. First homes remain particularly affordable in Tauranga, where mortgage payments would consume 33.4 per cent of a typical couple's take home pay, in Wellington City where it would take 31.7 per cent and in Christchurch where it is 27.5 per cent. The most affordable place for first home purchases is undoubtedly Whanganui, where mortgage repayments on a lower quartile priced first home take up just 9.6 per cent of typical couple's take home pay.

For first home buyers priced out of the larger cities looking to more affordable regions such as Rotorua, Whakatane, Taupo and even Kawerau can be a great option. However, some suggest that first home buyers in these regions should act now, as investors are increasingly spreading their wings and driving up prices in these areas. In Rotorua, the median house value has jumped 15 per cent in a year, Whakatane saw an increase of 13 per cent, Taupo increased by 12 per cent and Kawerau had a whopping 23.5 per cent increase - driving median prices up to $128,060. 

If you, or any of your loved ones, are after more personalised insights into first home affordability and the best way to make a first home purchase fly we're here to help. 


* Based on QV statistics.