Key Facts

  • Home ownership is currently the most unattainable it has been for first home buyers since 2004.
  • The national lower quartile selling price was $599,000 in October, a drop of $71,000 from the peak of $670,000.
  • The deposit required to buy a house has decreased alongside the lower quartile selling price.
  • National median after-tax pay for couples aged 25-29 has risen 9.5%.
  • Rising mortgage interest rates have drastically impacted affordability.
  • Mortgage payments have increased, even though house prices and the amount needed to borrow have decreased.
  • Housing costs should be no more than a third of gross income to be considered affordable but rising costs push this threshold.
  • Potentially affordable housing for first home buyers with a 20% deposit excludes areas like Auckland and Bay of Plenty.
  • An estimated six years would be needed to save a 20% deposit, if saving 20% of after-tax pay weekly.
  • Lower deposits entail unaffordable mortgage payments and higher interest rates and/or fees.
  • A smaller, low equity loan pushes housing into the unaffordable category for first home buyers.

Article Summary

For the first time since the Home Loan Affordability Report started in 2004, potential first home buyers face the most challenging conditions yet in achieving home ownership. Despite a significant drop in house prices from a couple of years ago, rising mortgage interest rates have severely impacted affordability, making home ownership still out of reach for many.

Lower quartile selling prices have decreased by $71,000 since their peak in November 2021, reducing the necessary deposit to buy a house. Simultaneously, median after-tax pay for typical first home buyers has seen a reasonable increase. Despite these changes, which should have made home ownership more affordable, the opposite effect has occurred due to the mortgage interest rate increase from 4.08% to 7.01% since last November.

Subsequently, mortgage payments have surged, and even with a lower housing price, resulting in a lesser loan, first home buyers can expect to pay more now than at the market peak. Outside of Auckland and the Bay of Plenty, it may still be possible for first home buyers to afford housing if they have a 20% deposit. However, gathering a 20% deposit presents its own challenge, as it would require almost six years of saving, based on saving 20% of after-tax pay each week.

Lower deposit options aren’t a practical solution, as these mortgages are considered low equity loans, and typically come with higher interest rates or additional fees. This results in mortgage payments consuming an untenable portion of first home buyers’ pay, pushing it well into the unaffordable category. Hence, New Zealand’s first home buyers find themselves lodged between the predicament of unachievable deposits and unaffordable mortgages.

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