South Auckland House Prices Running Away #AKLPols #NZPols

Savings once made now gone

I have known for a while that people and money were following out of the prohibitive Isthmus and into South and Southern Auckland as people look for cheaper housing to purchase and live in ($1m Housing Value on Auckland Isthmus is Nothing to Be Proud Of).

Well yesterday that fear as such was only further stoked with this report out from Interest.co.nz:

South Auckland House prices wipe out benefits of lower interest

Rapidly rising house prices in south Auckland wipe out benefits of lower interest rates for first home buyers –interest.co.nz Home Loan Affordability Reports show

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PLEASE NOTE: The full suite of Reports for a) First home buyers (aged 25-29 yrs), both as individuals and as a couple, and b) Young family buyers (aged 30-34), both as individuals and as a couple (with one partner working full time, one half time, and a 5 year old child), are now published on our website.

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A big jump in the lower quartile selling price of homes in south Auckland over the last two months more than wiped out the benefits of falling mortgage interest rates for first home buyer households, according to the interest.co.nz Home Loan Affordability Report for July.

The report shows that the REINZ’s lower quartile selling price of homes in the Auckland region has dropped from $616,500 in May to $602,000 in July, and that combined with recent falls in interest rates has improved affordability for first home buyers in most parts of the region.

Between May and July the average bank interest rate on two year fixed rate mortgages dropped from 5.61% to 5.17% and that combined with the drop in the lower quartile selling price would have reduced the mortgage payments on a lower quartile priced home in the Auckland region from $821.83 a week in May to $767.89 in July, a saving of $53.94 a week for typical first home buyers.

However not all parts of Auckland benefited from the lower interest rates.

Although lower quartile selling prices in central Auckland, the North Shore and west Auckland were all lower in July, they kept rising strongly in south Auckland to hit an all time high of $580,100 in July, up from $541,400 in May, and that more than wiped out the benefit of lower mortgage interest rates, pushing weekly mortgage payments on a lower quartile priced home from $714.38 a week in May to $737.86 a week in July.

Around the rest of the region, the weekly mortgage payments on a property purchased at July’s lower quartile price would have been $739.50 in central Auckland (within the boundaries of the former Auckland City Council), $918.62 on the North Shore and $756.10 in west Auckland.

Mortgage payments are considered affordable when they take up no more than 40% of a couple’s take home pay (when both are working), and even with the latest falls in prices and interest rates, lower quartile priced homes throughout the Auckland region remain significantly unaffordable for typical first homes buyers, with mortgage payments taking up between 46.49% of their take home pay in central Auckland, to 56.09% on the North Shore and 50.32% on a region-wide basis.

That suggests lower quartile dwelling prices in Auckland would need to fall by around 20% before they got back to the upper limit of the affordability range for first home buyers.

Around the country housing remains affordable for first home buyers in all regions apart from Auckland, the Report found.

The table below shows what the weekly mortgage payments on a lower quartile priced home in each region of the country would be, and how much they have changed over the last two years.

The most expensive region outside of Auckland is Central Otago Lakes at $476.32 a week and the cheapest is Southland at $166.88 a week.

That means the mortgage payments on a lower quartile priced house ranged from 11.64% of a first home buying couple’s take home pay in Southland to 33.89% in Central Otago Lakes.

In Wellington the mortgage payments on a lower quartile priced house would take up 23.52% of a a typical first home buying couple’s net pay and in Canterbury the mortgage payments would take up 27.7% of their pay.

So lower quartile priced housing remains affordable for typical first home buyers in all parts of the country except Auckland, where high prices are putting it of reach for first home buyers with average incomes.

Weekly household Mortgage Payments on a Lower Quartile Priced Home
July 2013 July 2014 May 2015 July 2015
Northland $283.45 $301.35 $309.19 $303.24
Auckland $576.62 $690.95 $821.83 $767.89
Waikato/BoP $282.02 $307.02 $319.63 $315.72
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All NZ $330.73 $366.00 $376.15 $357.82

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Full article and further links: http://www.scoop.co.nz/stories/PO1508/S00246/s-auckland-house-prices-wipe-out-benefits-of-lower-interest.htm

&

http://www.interest.co.nz/property/first-home-buyer

I am aware of the international Stock Market and Commodities wipe outs happening in the moment and how it can impact back here including Auckland housing.

Gah.

But for the sake of this argument I am looking at the situation of pure demand and supply in Auckland.

That is we are still 12 months short of the Unitary Plan going live and hopefully with it more liberal zoning and rules to get the housing options range we need and people are demanding. However, at the same time the Council needs to take things by the reigns and also steer investment of things like infrastructure to steer the people and the market on hopefully where to go for certain periods of time.

First up would be linking the City Centre and all ten Metropolitan Centres up together with fast transit links while the five heavy industrial complexes have good access south and north of Auckland as well as to our port(s) would be a good start. From there we can work our way out in to Town Centres and the suburban residential areas.

And yes I am thankful we got our house for what we did back in 2012.

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One thought on “South Auckland House Prices Running Away #AKLPols #NZPols

  1. Hi Ben

    The systematic failure of what makes housing unaffordable in Auckland is ingrained nationwide and this spill over into South Auckland is very predictable and really all of NZ is unfortunately an Auckland in the waiting.

    For starters any land that has the potential to be developed under the UP was bought at landbanked prices ages ago and therefore costs too much to be put in the pot at the price to make housing affordable. If you want to make something more affordable you cannot do so if your input costs are too high.

    Secondly, when supply is limited relative to demand, interest rates savings get capitalized into the price which is a windfall gain that is captured by the developer first.

    Even highjacking the definition of affordability won’t change the facts.

    This 40% of two household income as the definition of whether housing is affordable or not is a crock. This was recently raised from 35% to this 40% figure for what reason?

    And the fact that a household needs both parents working to even be in game is an indictment in its self.

    For housing to become truly affordable, prices have to fall and the only way for that to happen under the present rules is for a crash to happen ie by a GFC type events, or by releasing supply a la Texas type legislation.

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