The $1 million average Auckland house means interest bonanza for banks
The average sale price of Auckland homes is now believed to be more than $1 million - but the interest paid on a 30-year mortgage means the real cost is closer to $1.9m.
That's because every dollar extra borrowed by desperate families getting their toes on the housing ladder, means roughly a dollar in interest paid to the banks.
On a 30-year mortgage, the real cost of borrowing could be conservatively estimated at between $1.7m and $1.9m.
The average Auckland house price, as tracked by property data company QV, is believed to have topped $1m for the first time, though official figures haven't yet been released.
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In July 2013, the average home in the Auckland area sold for $644,973.
A family who bought that average Auckland house with an 80 per cent mortgage at the prevailing 5.7 per cent two-year mortgage rate would have faced a 30-year interest bill of just over $562,000.
That assumes the interest rate would remain the same over the 30 year lifetime of the mortgage.
But a 30-year mortgage of $800,000 to buy today's average Auckland home at the current prevailing 5.1 per cent interest rate would result in an interest bill of about $764,000.
The buyer of an average Auckland house today would have to pay $355,000 more than they would three years' ago, as well as facing paying nearly $200,000 more in interest.
Over the long term the average mortgage interest rates paid by the two borrowers will be similar.
Assuming a low average of 6 per cent on each loan shows the 30-year interest bill for the 2013 average Auckland house buyer would be a little over $597,000.
For the buyer today of the $1m average house in the Auckland area, the 30-year interest bill would be just shy of $927,000 at that 6 per cent average rate.
High Auckland prices have trapped many families into being perpetual renters, and the political pressure is building.
One vocal housing campaigner Hugh Pavletich has predicted prices in Auckland would be so high on the eve of the next election, they would prove to be prime minister John Key's "Waterloo".
People hunting for homes in Auckland are facing up to the reality of the $1m price-tag on the average home.
Jaspal Sing has been looking to buy a house for his family for the past two months.
It's the first time for several years he's been in the market looking for a home.
"These houses are going very high this time. Last time properties were like $500,000 or $600,000. This time, every house we're looking at is over a million," Singh said.
There aren't many holding out hopes for price falls in Auckland making homes affordable again.
There simply aren't enough houses being built, and engineering a price fall isn't an objective for the government.
Housing Minister Nick Smith was dubbed "The Million-dollar Minister" by Patrick Gower on TV3's The Nation on Saturday as a result of Auckland house prices having hit such spectacular heights.
But when challenged on whether the government wanted to see prices fall, Smith said the objective was to see house price inflation in single digits, arguing that falls would tip some home-owners into negative equity.
Robert Tulp, Harcourts branch manager Manakau, is the auctioneer for a lot of properties, and is confident there will not be a dip in the Auckland housing market.
"There's too many people feeding from the Auckland trough. There's still great opportunities here. It's a great place to live," Tulp said.