Drop in housing affordability unsurprising
Home loan affordability worsened in August while house prices rose again, according to the latest Roost Report.
Mortgage brokers report banks lending to those with a deposit of less than 20% of the value of a home has virtually ground to a halt following the Reserve Bank’s new LVR ‘speed limits’.
The Reserve Bank’s measures officially kick in on October 1, and it hopes it will take the heat out of Auckland and Christchurch markets within six months.
National affordability worsened to 56% in August from 55.4% in July after the national median house price rose to $390,000 from $385,000 the previous month.
It is toughest for first homebuyers in Auckland, where affordability on the North Shore is at its worst in more than three years.
It took 92.2% of a single median after tax income to afford a first quartile priced house in South Auckland in August, while it took 102.1% in the North Shore.
REINZ chief executive Helen O’Sullivan says the figures are “not enormously surprising”, as latest data shows 7% of North Shore properties are priced under $400,000 while in Papakura is about 60%.
Regionally only 26% of Auckland house prices are under $400,000, while in Wellington it is 47%, and 61% for the Canterbury Region
Ms O’Sullivan says Reserve Bank measures will take a slice off demand and prevent really speculative behaviour seen during the 2007 boom.
“The concern of course is does hurt first home buyers which are genuine purchasers.”
“I’m expecting to see an impact on volume but not necessarily prices. Perhaps within 6-12 months, but the impact will be short term as people find other mechanisms to work through it such as to using non-bank lenders.”
Massey University Real Estate Unit director Bob Hargreaves says the latest Roost Report reflects the University’s research in the area.
He says interest rates are also pretty low so in the not to distant future this will put affordability back into the "more difficult basket".