Home af­ford­abil­ity im­proves

Manawatu Standard - Property Weekly - - Property -

Fall­ing house prices and mort­gage rates mean now is the best time to buy a house in nearly a year, and it will only im­prove for buy­ers, says the monthly Roost Home Loan Af­ford­abil­ity re­port. New Zealand home loan af­ford­abil­ity im­proved in July by its biggest mar­gin in 18 months to its best lev­els since Septem­ber last year as fixed mort­gage rates dropped and house prices eased, the re­port said.

The re­port mea­sures the af­ford­abil­ity na­tion­ally and re­gion­ally for in­come earn­ers and house­holds, tak­ing into ac­count house prices, in­ter­est rates and in­comes.

It said af­ford­abil­ity was set to im­prove fur­ther through the sec­ond half of 2010 if house prices kept fall­ing in a buy­ers’ mar­ket, and fur­ther con­cerns about the global econ­omy drove mar­ket in­ter­est rates lower.

Per­sonal tax cuts from Oc­to­ber 1 would also help.

The na­tional me­dian house price fell 1 per­cent to $349,000 in July from June and is now down 3.2 per­cent from a record high of $360,500 in March.

Whole­sale in­ter­est rates have fallen and fi­nan­cial mar­kets are now ex­pect­ing the Re­serve Bank’s of­fi­cial cash rate to rise just 50 ba­sis points in the next year to around 3.5 per­cent.

The av­er­age two-year mort­gage rate fell to 6.98 per­cent in July from 7.18 per­cent in June and has fallen fur­ther since the end of July to around 6.75 per­cent.

"The com­bi­na­tion of lower fixed mort­gage rates and a buy­ers’ mar­ket is im­prov­ing af­ford­abil­ity," Roost spokes­woman Mar­garet Smith said.

"Home­buy­ers are in a strong po­si­tion in a mar­ket where house prices are flat to fall­ing and the out­look for in­ter­est rates is more sub­dued," she said.

The re­port showed the pro­por­tion of a sin­gle me­dian af­ter tax in­come needed to ser­vice an 80 per­cent mort­gage on a me­dian house im­proved to 59.5 per­cent in July from 61.3 per­cent in June and is closer to its 57.4 per­cent level from July 2009.

Af­ford­abil­ity hit its worst level of 83.4 per­cent in March 2008 just af­ter house prices peaked and 2 year mort­gage rates were close to 10 per­cent.

Af­ford­abil­ity for the typ­i­cal first-home­buyer also im­proved to 52 per­cent in July from 53.8 per­cent in June.

Af­ford­abil­ity im­proved sig­nif­i­cantly in Queen­stown, Waikato/Bay of Plenty, Hawke’s Bay, Nel­son, Welling­ton and Can­ter­bury be­cause house prices fell.

But af­ford­abil­ity wors­ened slightly in North­land, Manawatu, Otago and South­land as house prices there rose.

Auck­land is now the least af­ford­able area in New Zealand, tak­ing the man­tle from Queen­stown for the first time since Jan­uary 2002.

Photo: FAIR­FAX

TIME TO BUY: A new re­port says fall­ing house prices and mort­gage rates mean in some parts of New Zealand now is the best time to buy a house in nearly a year.

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