Low interest rates no help to buyers

Average earners would need to save for an additional five months to get a first-home deposit together compared to just a year ago, Stuff’s new housing affordability dashboard shows.

Housing commentators say that with prices set to escalate further for at least the first half of 2021, would-be buyers shut out of the market will not be able to take advantage of the record low interest rates that are making mortgages more affordable.

Stuff’s dashboard, based on data supplied by CoreLogic and Infometrics, measures two crucial hurdles facing first-home buyers: how long it takes to save a deposit for the average first home, and the affordability of mortgage repayments on that property.

Between November 2020 and December 2020, both affordability measures actually improved. This was almost entirely due to a slight dip in the median price paid by firsthome buyers, from $625,000 in November to $615,000 in December.

The weeks of required saving

(30 per cent of the median household income) fell from 229 weeks to 225 weeks, and the fortnightly repayments on the median first-home price dropped from $904 to $888.

Year-on-year, affordability has significantly worsened, though.

The median price increased by

$70,000 between December 2019 and December 2020, while incomes barely shifted.

This meant that compared to December 2019, a median income household would need to save for an extra 22 weeks to get together the necessary deposit – 225 weeks, compared to 203 weeks.

Independent economist Shamubeel Eaqub said the year-onyear change in required savings was the most important thing to consider.

‘‘Yes, interest rates have fallen, but the time to save a deposit is just getting longer and longer – that’s the biggest barrier for people, particularly for first-home buyers.’’

He was also concerned about the size of the mortgages households were taking on in order to get into housing.

CoreLogic’s senior property economist, Kelvin Davidson, said its analysis of purchased properties showed that first-home buyers were shifting towards smaller dwellings over time.

However, the drop in the median first-home price was a blip in a ‘‘rampant’’ upward trajectory, Davidson said.

There were limited new listings, and the economy was likely to start growing again in the next few months, he said. ‘‘The fundamentals are there for further growth in prices.’’

New regulations and restrictions could slow that down later in the year, though, with LVR restrictions almost certain to be reinstated on March 1, he said.