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Auckland West / E.Info@Interest.Co.Nz / P JANUARY 2017 AUCKLAND WEST WWW.INTEREST.CO.NZ / [email protected] / P. 09 3609670 AUCKLAND WEST HOME LOAN AFFORDABILITY REPORT January 2017 Home loan affordability is a measure of the proportion of take-home pay that is needed to make the mortgage payment for a typical household. If that is less than 40%, then a mortgage is considered ‘affordable’. The following are typical assessments for households at three stages of home ownership. FIRST HOME BUYERS 25-29 YOUNG FAMILY 30-34 OLDER FAMILY 35-39 First home buyers earn a medi- Young family buyers earn medi- Older family buyers earn medi- an income for their age group, an incomes in their age bracket, an incomes in their age brack- and buy a first quartile house and buy a median house in et, and buy a median house in in their area. Both parties work their area. One partner works their area. Both partners work full-time. half-time. full-time. Mortgage payment as a Mortgage payment as a Mortgage payment as a percentage of the take home pay percentage of the take home pay percentage of the take home pay Take Home January 46.9% Take Home January 32.1% Take Home January 20.0% Pay 17 Pay 17 Pay $1,563.05 17 January 40.0% $1,350.49 January 31.4% $1,881.54 per Week per Week per Week January 19.5% 16 16 16 January 39.0% January 38.7% January 21.0% 15 15 15 This report estimates how affordable it would be for a couple This report estimates how affordable it would be for a couple This report estimates how affordable it would be for a couple where both are aged 25–29 and are working full time, to buy a with a young family to move up the property ladder and buy their who are both aged 35-39 and working full time, to move up the home at the lower quartile price in Auckland West. next home at the current median price. property ladder and buy their next home at the current median It assumes they earn the median rate of pay for people of their It is assumed that one partner works full time and one works half price. age in their region, which would give them a take home pay of time and both are paid at the median rate for people of their age It is assumed that both are paid at the median rate for people of $1,563.05 a week. in Auckland West, and that they receive the Working for Families their age in Auckland West, and that they no longer receive the It is assumed they would have saved $71,348 to use as a deposit, allowance. Working for Families allowance. by putting aside 20% of their net pay each week for up to four That would give them total after tax weekly income of $1,350.49 That would give them total after tax weekly income of $1,881.54 years, earning interest on the savings at the 90 day bank deposit a week. a week. rate. It is also assumed they purchased their current home five years It is also assumed they purchased their current home 10 years To buy a home at Auckland West’s lower quartile price they ago for $333,200, which was the lower quartile selling price in ago for $305,400, which was the lower quartile selling price in would need a mortgage of $605,652. Auckland West at the time. Auckland West at the time. They would need to set aside $733.58 a week to cover the If they sold that home for the current lower quartile price in If they sold that home for the current lower quartile price in mortgage payments, which would be 46.9% of their take home Auckland West of $677,000, they would have equity of $403,931 Auckland West of $677,000, they would have equity of $451,278 pay. to use as a deposit on a new home. to use as a deposit on a new home. Mortgage payments are considered affordable when they take up If they purchased a home at Auckland West’s current median If they purchased a home at Auckland West’s current median no more than 40% of take home pay. price of $761,500 they would need a $357,569 mortgage. price of $761,500 they would need a $310,222 mortgage. On that basis it would not be affordable for a young couple The repayments on this would be would be $433.10 a week which The repayments on this would be would be $375.75 a week which earning the median pay rate to buy a lower quartile-priced home would be 32.1% of their weekly income. would be 20.0% of their weekly income. in Auckland West. Mortgage payments are considered affordable when they take up Mortgage payments are considered affordable when they take up no more than 40% of take home pay. no more than 40% of take home pay. On that basis it would be affordable for the couple in this example On that basis it would be affordable for the couple in this example to move up to next rung of the property ladder and buy a home to move up to next rung of the property ladder and buy a home at Auckland West’s median price. at Auckland West’s median price of $761,500. 2 WWW.INTEREST.CO.NZ / [email protected] / P. 09 3609670 AUCKLAND WEST KEY DRIVERS OF HOME LOAN AFFORDABILITY January 2017 HOUSE PRICES INTEREST RATES AND MORTGAGE PAYMENTS The median house price was $761,500 in January, up from $760,000 The average bank interest rate two year fixed 2 Year Fixed rate last month. The median house price was $685,000 in January 2016 mortgage rate was 4.809% for January, 24 basis points less than the 4.567% twelve months This Month 4.809% which puts annual growth at 11.2%. Five years ago the median was earlier. $387,300. The RBNZ had a rate cut program with the first A Month Ago 4.611% Dwelling sales in January were 170, down from December’s 268. They reduction occurring in June 2015 and the latest A Year Ago 4.567% one in November 2016. However, no more cuts are now lower than the 217 sales twelve months ago and lower than Mortgage are expected although turmoil in markets re- the 184 sales five years ago. Payment cently may change that expectation. Wholesale (Weekly) The lower-quartile house price was 677,000 in January, up from rates have been rising steadily recently and that First Home Buyers $733.58 $661,300 last month. Annual growth was 15.6%, from the $585,700 is now putting upward pressure on both floating lower-quartile house price in January last year. and fixed mortgage rates. Most banks are now Young Families $433.10 in a program of raising their rates by minor First Rung Buyers $375.75 amounts on a regular basis. Our model assumes First Quartile Median House borrowers are on a 2 year fixed rate. House Price Price Auckland West January 17 $677,000 $761,500 INCOMES (WEEKLY TAKE HOME PAY) December $661,300 $760,000 16 First Home Buyers Young Families First Rung Buyers January 16 $585,700 $685,000 First home buyers are aged 25-29. A Young families are ages 30-34. A First rung buyers are ages 35-39. A household is on male and on female household is one make, a female household is one male, one female, January 15 $494,200 $589,000 both earning median incomes. There and a child aged five. One partner and school aged children. Both par- First Quartile House Price Growth Median House Price Growth is no child in this household. Take works part-time. Take home pay is ents work full time. Take home pay is January 12 $333,200 $387,300 home pay is gross pay less income gross pay less income tax. gross income less income tax. tax. National The growth in these are as follows: The growth in these are as follows: The growth in these are as follows: January 17 $330,000 $490,000 Weekly Change Weekly Change Weekly Change December $342,000 $516,000 Janu- $1,563.05 2.94% January $1,350.49 2.77% January $1,881.54 2.79% 16 ary 17 17 17 January 16 $302,500 $685,000 Janu- $1,518.38 1.89% January $1,314.09 1.82% January $1,830.44 1.89% ary 16 16 16 January 15 $287,500 $426,000 Janu- $1,490.24 1.74% January $1,290.55 1.99% January $1,796.53 1.66% ary 15 15 15 January 12 $250,000 $355,000 Janu- $1,464.82 January $1,265.40 January $1,767.25 ary 14 14 14 3 WWW.INTEREST.CO.NZ / [email protected] / P. 09 3609670 National New Zealand Auckland Region Auckland Central North Shore Auckland South Auckland West Wellington Region Wellington City Hutt Valley Porirua Katpiti Coast Wairarapa Northland Whangarei Waikato and Bay of Plenty Hamilton Tauranga Rotorua Hawkes Bay and Gisborne Napier Hastings Gisborne Taranaki, Manawhatu and Whanganui New Plymouth Palmerston North Wanganui Nelson and Marlbourough Nelson Cantebury Christchurch Timaru Otago, Central Otago Lakes and Southland Queenstown Dunedin Invercargill 4 WWW.INTEREST.CO.NZ / [email protected] / P. 09 3609670 Notes This work must be referred to as The interest.co.nz Home rate.
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