Buying in Auckland?

What you need to earn

Three-bedroom “affordable” homes on the market for $650,000 under Housing Minister Phil Twyford’s KiwiBuild programme would be out of reach for more than half of Auckland households, an Auckland Council study suggests.

The study found middle-income earners had been the hardest hit by falling housing affordability. It also suggested a three-bedroom home at the top end of the KiwiBuild price range is likely to be out of reach for half of Auckland’s households.

KiwiBuild aims to build 50,000 Auckland homes in the next 10 years.

The council said its study discovered a household would need to earn $105,200 a year — in the top half of income earners — and already have a 20 per cent deposit in the bank to afford a $650,000 KiwiBuild home.

If a household has only a 10 per cent deposit, the council says a family would need to earn $118,300 a year to afford a $650,000 KiwiBuild home. “To deliver houses that even households in the top half of earners could afford, KiwiBuild would need to deliver a lot of houses below the $650,000 cap,” council senior economist Harshal Chitale says.

The caps on the costs of KiwiBuild homes in Auckland are $650,000 for three bedrooms, $600,000 for two bedrooms and $500,000 for one bedroom. Twyford said the Government hoped it would be able to build houses for less in some areas.

A spokeswoman for the minister yesterday stressed the $650,000 was the maximum price and said the first homes under the programme in Papakura will be sold for $579,000.

“This report shows the desperate need for the KiwiBuild programme,” Twyford said in a statement.

“The national housing crisis is locking a generation out of the dream of home ownership,” he said.

“Many New Zealanders would be surprised that this now includes professional families.”

The council’s chief economist unit, which produced the study, also says Auckland’s squeezed middle-income earners have been hit the hardest by worsening housing affordability.

It said median housing prices in Auckland increased 71 per cent from $494,000 in 2012 to $847,000 in 2017.

Median household income was up by 25 per cent over that time, $78,100 to $97,300.

Chitale said because mortgage interest rates were almost identical in 2012 and 2017 differences in affordability were “driven purely by changes in house prices and household incomes”.

According to the council’s analysis in 2017, the poorest third of Auckland households “had practically no likelihood of being able to purchase a freehold home (whether a standalone house, townhouse or apartment) — even with a 20 per cent deposit”.

A household squarely in the middle of the pack could only afford a home in the bottom 11 per cent of the market ($537,000 and below), provided they had a 10 per cent deposit.

If they had a 20 per cent deposit, they could afford a property in the bottom 18 per cent of the market.

“We also examined how affordability by income percentile has changed over the five years since 2012. Practically every household income group saw the range of houses they could afford fall sharply,” Chitale said.

“But the biggest declines were for households in the 50th to 75th percentiles. These middle-class income groups have been increasingly locked out of home ownership.”

This report shows the desperate need for . . . KiwiBuild. Phil Twyford (pictured)