Rising housing prices and flat interest rates have seen housing affordability deteriorate in parts of New Zealand to its worst levels in almost three years in May, according to a new report.
The Home Loan Affordability Report, prepared by Interest.co.nz and sponsored by Roost Mortgage Brokers, found it now costs someone on a single median income 56 per cent of their take-home pay to service their mortgage, even with a 20% deposit.
Any level over 40 per cent of income is considered unaffordable.
It’s even tougher for those who live in Auckland. Central Auckland affordability is now at its worst level since March 2010, although it remains below its worst ever levels of 107.3% of income required in November 2007 when interest rates were over 10%.
A cheap house in South Auckland will cost a single buyer nearly 88 per cent of their wages while those wanting to buy in Auckland’s North Shore are looking at spending 95 per cent of a single income to service a mortgage.
Although affordability eased only slightly in many cities, it deteriorated notably in Tauranga and Nelson where there were sharp price rises. Tauranga rose from 51.8 per cent in April to 57.3 per cent, while Nelson grew from 53.2 per cent to 56.7 per cent.
In the other major cities, affordability was 58.1 per cent of a single income in Christchurch and 56.7 per cent in Wellington.
The report showed improvements in Whangarei (37.5 per cent), Palmerston North (38.2 per cent) and the country’s most affordable city, Wanganui (28.2 per cent).
While two incomes are notably better than one, times are still tough for working households. A household with two incomes would typically have had to use 37.1 per cent of their after-tax pay.
These figures correlate with a recent study from the Organisation for Economic Co-operation and Development’s (OECD) which ranked New Zealand 35 out of 36 countries in terms of housing expenditure.
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