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Interest rates key to affordability

Housing affordability remains at the forefront of public consciousness, but Massey University’s new affordability data shows there has been a year-on-year improvement.

Tuesday, July 12th 2016, 1:30PM

by Miriam Bell

The latest Massey University Home Affordability Report shows that, despite some pockets of volatility, housing affordability for most regions around the country improved year-on-year,

While New Zealand’s median house price in May was $506,000 – which was $46,000 more than it was in in May 2015 - actual affordability improved by 6%.

All regions except Central Otago Lakes and Waikato/Bay of Plenty showed an improvement in affordability since the same time last year.

However, the quarterly figures showed a reversal in the trend. Between March and June this year, affordability declined by 9.2%.

Much of the concerns about housing affordability have been focused on Auckland.

But, according to the Massey report, the Auckland region’s median price in May was $805,000, which was a decline of $15,000 since March.

This means affordability in the Auckland region showed an annual improvement of 8.2% - although it also mirrored the national quarterly deterioration with a 4.4% quarterly decline.

In the report, author Susan Flint-Hartle said it was better to suggest that Auckland is slightly less unaffordable than at this time last year (38.46 versus 35.32).

“For those wanting to access the Auckland house market even a slight decrease in the median and lower than usual mortgage interest rates is hardly helpful in a market characterised by intense competition and an endemic lack of supply.

“However, if wages increased by 2.5% and mortgage rates decreased by even 1%, the latter of which looks increasingly likely, affordability in Auckland would improve considerably.”

Meanwhile, the Central Otago Lakes region recorded a significant year-on-year decline in affordability of 19.6%, while Waikato/Bay of Plenty’s year-on-year showed a slight decline of 2.6%.

This means the Central Otago Lakes region is now 66% less affordable than the rest of New Zealand – and has displaced Auckland (52% less affordable) from the top position.

Flint-Hartle said the Central Otago Lakes region was alone in consistent monthly value increase over the current quarter.

“A booming tourism industry and low median wages could underlie the regional picture in Central Otago Lakes.

“While the close proximity of Waikato/Bay of Plenty to Auckland suggests evidence of the much touted ‘halo effect’, as investment swings southward.”

Affordability issues have seen the government under significant pressure from all sides.

Accordingly, Building and Housing Minister Nick Smith said Massey University’s data showing a 6% improvement in housing affordability nationwide was welcome.

It highlights that, in the debate over house prices and income-to-house ratios, the lowest interest rates in 40 years are being overlooked, he said.

“Interest rates are absolutely relevant to the debate on housing affordability. People very rarely buy a home with upfront cash, instead paying for it over many years out of weekly earnings through a mortgage.

“The monthly repayments on a median home of $346,458 in 2008 would have cost $603 per week at the floating rate of 10.88%, while a median home today, worth $506,000, would cost $538 a week at today’s floating rate of 5.64%.”

 

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans 6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 4.29 5.09 5.35
Kainga Ora 5.43 4.57 5.58 5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - 4.19 - -
The Co-operative Bank - Owner Occ 5.45 4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 4.79 5.69 5.95
TSB Bank 5.59 5.14 ▼5.79 6.15
TSB Special 4.79 4.34 ▼4.99 5.35
Unity 5.65 4.80 5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

Last updated: 19 May 2022 10:42am

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