Barrier for home buyers softens

01:47, Jun 02 2014

House hunters looking for a typical Palmerston North property may be finding it tough, but things are easing slightly for first-home buyers, according to a survey into housing affordability.

But no matter what market you are in, affordability is improving for buyers.

The latest Roost home loan affordability survey shows it would take 41.5 per cent of the median income to pay the mortgage on a median-priced house purchased in April.

While a slight improvement on the 41.7 per cent result from a year ago and 44.1 per cent from March, any percentage above 40 is considered to be unaffordable.

A 5.9 per cent drop in the median house price from March to April and a light rise in the average wage saw improvements, but higher interest rates cut into most gains.

The average floating mortgage rate was up by 29 basis points to 6.05 per cent.


First-home buyers are in a better position than those looking higher up the property ladder, as it would take 37.8 per cent of the average income of someone aged 25-29 to pay the mortgage on a cheaper Palmerston North house.

That was also a monthly and yearly improvement.

The price on cheaper Palmerston North houses dropped 1 per cent in the past year.

Average incomes for first-home buyers were also up slightly, but most would find they only had $486.98 after paying their mortgage payments.

"This measure shows why current property prices exclude so many potential buyers," the report said.

Rising interest rates were also what kept any affordability improvements for first-home buyers low.

But improvements in affordability for all buyers are likely to be shortlived.

Interest rates have started to climb after the Reserve Bank put the Official Cash Rate up 0.25 percentage points in April.

The report said it was the start of a series of increases.

The OCR is predicted to climb by about 2 percentage points in the next two years.

"When that is done, it will have had a substantial and negative impact on affordability."

Interest rates would rise with it, so people should look into fixing mortgage rates, the report said.

The Reserve Bank will next make an announcement on the OCR next week.

First-home buying couples - those working fulltime with no children - would have a better go at getting a property, though.

It would take 18.3 per cent of their take-home pay to service a mortgage on a cheaper Palmerston North house.

An average couple - a male working fulltime, a female working part-time, who are parents to a 5-year-old - would have to spend 27.5 per cent of their take-home pay on the mortgage.

Manawatu Standard