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Housing affordability hits record lows

Media release by

Embargoed for general release until 1 pm Wednesday, 16 April 2008

Fairfax Media home loan affordability reports

For March 2008

Housing affordability hits record lows on higher interest rates

A slight blip up in the median house price in March and the relentless rise in interest rates have combined to shunt New Zealand housing affordability to a record low.

The Fairfax Media Home Loan affordability report shows the average 2 year fixed mortgage rate rose almost 10 basis points to 9.64% in March, which compounded the damage done by a slight rise in the median house price to take the national affordability level to its worst ever.

The proportion of median take home pay required to service the mortgage on a median house rose to 83.1% in March from 80.2% in February and surpassed the record 83.0% seen in November last year when house prices hit their peak.

This is also worse than the 77.8% seen in March last year and almost double the 44.2% seen in March 2003 when housing was seen as only just affordable. Most bankers believe anything more than 40% of after tax pay is unaffordable.

Affordability worsened sharply in Northland and Wellington because of a bounce back in house prices. Wellington’s figure of 90.7% of take home pay to service the median mortgage rose from 82.9% in February and was up from 46.3% in March 2003.

Home loan affordability improved slightly in Waikato/Bay of Plenty, where the portion of take home pay needed to service the mortgage fell to 80.7% in March from 83.9% in February because house prices nudged lower. Affordability improved substantially in Nelson Marlborough because of a drop in prices, with the mortgage payments dropping to 82.5% from 91.9%.

The least unaffordable region in New Zealand remains Southland, which saw the portion of after tax median income needed to service the mortgage on a median house falling to 50.1% from 52.7%. It is up from 19.3% in March 2003.

The most unaffordable region continues to be the Central Otago Lakes district where 124.1% of take home pay is required to service the mortgage on the median house. That’s down from 132.8% in February because of lower house prices, but is up from 70.3% in March 2003.

Affordability for first home buyers also worsened to 72.6% of median take home pay to buy the first quartile house from 70.8% in February and 36.1% in March 2004.

Home loan affordability for typical buyers

General/New Zealand Report:

regional reports are available from this link

Home loan affordability for first-home buyers

General/New Zealand Report:

regional reports are available from this link


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