Housing getting further out of reach for first home buyers

The latest Home Loan Affordability Reports not surprisingly show that it’s getting tougher for first home buyers to get into the housing market. House prices either remain very high (Auckland), or have climbed to record levels. Low interest rates are good for those who already own a home, but high prices and a shortage of properties for sale make it hard to buy, especially for those with no equity already in property.

Housing getting further out of reach for first home buyers as strong price rises cancel out the benefits of falling interest rates,  interest.co.nz’s latest Home Loan Affordability Reports show

The benefits of lower interest rates for first home buyers are being more than wiped out by rising prices at the lower end of the housing market, according to the latest figures from interest.co.nz’s Home Loan Affordability Reports.

The reports show that mortgage interest rates have tumbled since the Reserve Bank slashed the Official Cash Rate (OCR) from 1.5% to 1.0% in August, with the average of the two year fixed mortgage rates offered by the major banks falling from 3.81% in July to 3.46% in October.

That should have helped aspiring first home buyers get into their own homes by reducing mortgage payments, but it appears that the fall in interest rates has simply helped to pump up house prices at the bottom end of the market, meaning first home buyers are likely worse off now than they were before mortgage rates were cut.

According to the Real Estate Institute of New Zealand (REINZ), the national lower quartile selling price (the price at which 25% of sales are below and 75% are .above, representing the bottom quarter of the market), has risen steadily from $401,900 in July to $437,500 in October.

That’s a lot for the bottom end of the market.

Prices have risen a lot in Dunedin over the past couple of years (18.9% in the last 12 months). Some of that was a catch up with other regions, but the big bump up continues. A real estate report from last week:

As we approach the end of 2019, the continuation of a strong Dunedin market has resulted in a median sale price of $515,000 as at 31st October. This is the first time Dunedin has exceeded a $500,000 median price and for the same corresponding period in 2018, the median house price was $433,000.

There wouldn’t have been too many people that anticipated such a sharp increase – 18.9% year on year – and there’s no doubt that the record low stock levels have been a major contributing factor, in conjunction with the positive net migration and historically low interest rates.

here remains a large disparity between the huge number of people wanting to make a move and the limited supply of new listings.  These people have found it incredibly difficult to locate and secure a suitable home, so it would be great if more choice was available, but without any further land coming to market we will continue to see pressure being put on the existing houses.

The Dunedin population is growing, and the housing pressure is likely to get worse, with major projects planned, including the hospital rebuild, major university projects and a large ACC office.

A shortage of land for new housing is badly impacted by an appeal against rezoning in the new district plan currently before the Environment Court – a recent affidavit showed that over a thousand properties were affected (couldn’t be developed) because one person (possibly with some supporters) doesn’t want land built on.

And as is well known the Government’s Kiwibuild plans have failed badly. Too much emphasis on ‘affordable’ new homes (most first home buyers start with older homes that are generally cheaper), plus incompotence.

Some interesting comments on the Affordability Report and difficultiues in buying first homes here at Reddit.

 

Leave a comment

37 Comments

  1. Blazer

     /  27th November 2019

    All that Q.E as the big banking cartels have inflated ‘money’ supply is the root cause.

    The foundations were laid from 2008 onwards as the Govt sat idly by and watched NZ’ers become tenants in their own country.

    For the sake of GDP to make politicians look competent, the dreams of first home buyers were sacrificed as foreign and local investors flipped and pumped property prices aided and abetted by the rapacious,one trick pony banks.

    The latest revelations about Westpac is just another example of the craven disregard banks have to any moral virtue.

    They are parasites who need to be brought to…heel.

    The only way for the banks to maintain any pretence of solvency is to have the present low interest rate regime.

    Yesterdays 400k mortgage at 8% becomes an 800k mortgage at 4%.

    Meanwhile savers get their heads kicked in,and the people are meant to believe that inflation is practically non existent.

    Reply
    • Kitty Catkin

       /  27th November 2019

      The foreign buyers thing has been pretty well debunked, I think. Apart from anything else, why would anyone push up the price of something that THEY’RE buying ?

      Reply
      • Kitty Catkin

         /  27th November 2019

        People save to have the money there, interest is a nice bonus but not, probably, the main reason for saving; at least, not in savings accounts and term deposits.

        Reply
      • Blazer

         /  27th November 2019

        In a world awash with money and millions of new millionaires ,land is looked at as a secure storage of value.
        What else is there?

        There are many countries around the world that are too stupid to realise that letting foreigners buy up their country is a …capital idea!

        As for laundering money….well ..’we don’t have the…data’.

        Reply
      • Duker

         /  27th November 2019

        “The foreign buyers thing has been pretty well debunked”

        No it hasnt. Ask Queenstown . They want an exemption now from the foreign buyers
        The numbers quoted always include non cash transactions like estates, family trusts, divorce settlements and so on where the change of ownership occurs but its not a ‘sale’
        When you then look at the real sales and in certain cities the foreign buyers became a significant factor especially as even a small demand imbalance ( under 10%) can and does raise prices , often steadily year on year.
        Real estate agents then use tricks of multiple sales on properties in their patch to egg buyers on about rising prices, as they are in league with property flippers

        Reply
        • Kitty Catkin

           /  27th November 2019

          Isn’t flipping illegal now ? Why would someone risk it ? The consequences for an agent wouldn’t be worth it. It didn’t occur to me that a higher price doesn’t make that much difference to the agent’s fees, they’re better off persuading the seller to take a lower asking price and sell the house faster…

          I am not convinced that foreign buyers want to generously give a seller more than the house is worth. No one’s that generous. Most people want to pay less, not more. When I buy something on Trade Me, I don’t pay more than the asking price or bid more than I have to.

          Reply
          • Blazer

             /  27th November 2019

            No its not illegal.
            Whether or not you are convinced is irrelevant to the topic.

            Reply
            • Kitty Catkin

               /  27th November 2019

              My mistake; see, I am happy to admit that I was wrong and don’t bluster or pigheadedly insist that I’m right. I was thinking of the financial penalty (tax) Someone I knew bought a house when her marriage broke up, then sold it when they were reconciled. She was warned that if she did it again, she risked some sort of financial penalty. NB, I don’t agree with this.

              But why would anyone be kind enough to pay over and above the asking or market price ? What motive would an investor have for paying more than they have to ?

    • Pink David

       /  27th November 2019

      “All that Q.E as the big banking cartels have inflated ‘money’ supply is the root cause.”

      The root cause is the demand for houses is greater than the supply. The supply of bank loans is just one part of that demand.

      “The foundations were laid from 2008 onwards as the Govt sat idly by and watched NZ’ers become tenants in their own country.”

      Tenants are much more likely to be recent immigrants than New Zealand born.

      Reply
      • Blazer

         /  27th November 2019

        If you read what I wrote ,the reason for the demand is apparent.

        Your last sentence states the…obvious.

        Reply
        • Pink David

           /  27th November 2019

          “If you read what I wrote ,the reason for the demand is apparent.”

          What you wrote is wrong. Money supply is a secondary factor. It is not the cause.

          Reply
          • Blazer

             /  27th November 2019

            It most certainly is….

            The fact is, there are no safe returns for investors that can match those from RE.

            With high immigration gains,the problem with supply is accelerated,and that is reflected in higher rents.

            Reply
            • Pink David

               /  27th November 2019

              “The fact is, there are no safe returns for investors that can match those from RE.”

              Untrue. Share market returns have been significantly greater over the same period and have the same level of ‘safe’.

              “With high immigration gains,the problem with supply is accelerated,and that is reflected in higher rents.”

              Why does this immigration carry on at high levels given the impact it has on housing demand when supply clearly cannot keep pace?

            • Blazer

               /  27th November 2019

              re immigration…=makes GDP look good,keeps wages down/profits up.

              You are WRONG about the sharemarket,plain and simple.Risk is way higher.

  2. Kitty Catkin

     /  27th November 2019

    Everyone knows that having a mortgage means that one’s paying more than the actual price of the house.

    Let us be thankful that the days when mortgages were in double figures are long gone. I remember my stepfather having a phonecall from either his lawyer or accountant….it was very brief. He was asked if he was willing to lend money for 2nd and 3rd mortgages; the interest was 25% and 33%. The answer was no, the risk was too great.

    I was talking to a young woman who’s just bought a house in a small Waikato town; I’d say that she was in her 20s and her partner’s probably the same age. It was a modest house from the sound of it, but it was their own.

    The prefab houses firms seem to be doing a brisk trade. I go past one quite often, and the houses are good enough for anyone to live in as well as being very affordable.

    Reply
  3. Blazer

     /  27th November 2019

    Actual houses are affordable,although expensive per sq m compared to Australia and many other countries.

    The big cost factor is accessible LAND.

    And of course RMA and other expenses are substantial.

    Reply
    • Duker

       /  27th November 2019

      land supply is constrained by land bankers, who literally buy up 1-20 yrs ahead. Auckland Council found there was plenty of land zoned for residential purposes in the growth areas. But landbakers are asset rich and cash poor so dont have acess to the money to turn the land into sections and banks hate that sort development by small players
      Nick Smith in the previous government spoke of compulsory purchase of smaller pockets by the government who would on sell to big developers . This would mainly affect the enclaves near the developers land holdings

      Reply
      • Pink David

         /  27th November 2019

        Land banking only exists because of the consenting process, incl the RMA. The more work there is involved getting permission to build, the more profit there is to be made from land-banking at a much lower risk than developing the actual property.

        Reply
        • Blazer

           /  27th November 2019

          and….?

          Reply
          • Kitty Catkin

             /  27th November 2019

            For some reason, Australians having houses built tend to choose a plan and have it built as is, but Kiwis tend to change the plan and customise it, thus making the building more expensive.

            I have read this quite a few times.

            Reply
            • Duker

               /  27th November 2019

              It’s a different market, the customisable home is for middle income and up market. We hardly have much built at the stnardised lower income and first home buyers level. Aussies have more big companies building at that level , only big non franchise builder is Fletcher’s and they start at the $800-900k level. The standard NZ home is franchise builders doing pepper potted customiseable homes.
              I remember when I was involved in the industry , a crazy case of a small builder who build a middle level house for a woman , who then had a second section she wanted the same house design built on, once the framing went up she suddenly wanted the plans flipped to face a different way… Needless to say the builder said how much it would cost before she changed back again. It was a spec house like the earlier one.

  4. Alan Wilkinson

     /  28th November 2019

    Idiots elect stupid politicians who have never done anything in their lives except talk big and who go on power trips to destroy property rights with the consequences we now live with.

    Poor stupid people have wrecked their own lives and still don’t realise it. Fat cats are laughing at them raking in huge salaries for paper pushing and leaching off the industry while property owners’ only option is to ride the capital gains tide on existing houses preferably with borrowed money and builders go bankrupt. There is now a whole new raft of unproductive minimum wage jobs that move road cones and scaffolding around holding up as many people for as long as possible in the process and making doing anything useful prohibitively expensive.

    We have built a system full of wealthy gatekeepers fleecing the producers at every step and impoverishing the country but Blazer is fixated on blaming the regulated rather than the regulators.

    Reply
    • Blazer

       /  28th November 2019

      Your main ‘crime’ Al is not realising that exactly the opposite of your claim…i.e de regulation is the core of banking chicanery.
      Repeal of Glass Steagal,allowed the banks to embark on their relentless drive for profits by engaging in what has basically become a casino of ponzi schemes that rely on derivatives,futures, and other ‘products’ ramped by Q.E.
      The big banks get the first use of money expansion and use it .
      They oppose any sign of regulation and are such a powerful lobby that they usually get their own way.
      Look at the screams here when they are asked to improve capital ratio’s.

      Reply
      • Alan Wilkinson

         /  28th November 2019

        Don’t be ridiculous, B. Banking is the most heavily regulated business in the country. Unaccountable Orr is threatening to enforce huge costs with no evidence they are necessary or are based on credible and analysis and banks are rightly pointing out the probable consequences for the country.

        Reply
        • Blazer

           /  28th November 2019

          It is not heavily regulated at all.
          APRA has more teeth,and the big 4 Banks dominate in OZ and NZ.
          Drill down into who the main shareholders are and you will find the big international banks are the majority shareholders,through various proxy entities.

          When Blinglish borrowed all those billions,where do you think he got it from,and how did they get their funding.?

          After decades of very tame RB Governors ,Orr is actually holding them to account.
          The ANZ knowingly ignored cap ratios for 5 years and blamed it on a junior staffer.

          The fines the banks will and have paid for their discovered misdemeanours is a good indication of their ‘too big to fail’…mindset.

          The profits the big 4 make are obscene.

          Shane Elliot’s transparent bluff re ANZ operations here being ‘downsized’ are laughable.
          He should join Westpacs C.E.O…out the door.

          Reply
          • Alan Wilkinson

             /  28th November 2019

            B.s. Orr is not holding them to account, he is simply penalising borrowers on the basis of a fantasy claim plucked out of thin air that he is saving us from a 1 in 200 year disaster. All parts of that claim are false.

            Reply
          • Duker

             /  28th November 2019

            Shreholders list based on the share registry doesn’t show what you think. The proxy’s are exctly that. Why would a bank invest in another bank with it’s own money.. it’s usually more profitable to use it’s own capital for building it’s business normally with a complete buyout.

            Reply
            • Blazer

               /  28th November 2019

              Why?Because the ‘money’ is free money.

              ‘its own capital’?…The OECD ,the IMF ,the B.IS ..western banking cartels reach into all compliant countries.
              What do you think the ‘axis of evil’ is?Hint=non compliant countries.

              For a’ know all’ your knowledge on this is astoundingly deficient.

  5. Duker

     /  28th November 2019

    1 in 200 yr fantasy? Have you never heard of BNZ. Without the labour party in Oz taking the correct financial steps ,so that Australia was one of the few Western countries to stay out of recession during the GFC , we might have had another ‘upset’ here if the Aussie owners cut it loose and dumped it on the taxpayers

    Reply
    • Alan Wilkinson

       /  28th November 2019

      Michael Reddell has thoroughly debunked Orr’s nonsense. Go read it if you wish.

      Reply
  6. Blazer

     /  28th November 2019

    I have ..it is not debunked at all….Redell just presents a counter argument.

    Banks ,funnily enough have a lot of influence…they pull money out of their ..arse…always handy when you need some …acolytes.

    Reply
    • Alan Wilkinson

       /  28th November 2019

      I don’t know how far you’ve read back but Reddell has showed the risks are minimal, the costs are huge, the benefits negligible, the international precedents lacking, the justification empty rhetoric and the self critiquing non existent.

      Apart from that I guess it might be a well thought through initiative.

      Reply
      • Blazer

         /  29th November 2019

        the risks are minimal-‘no one saw it coming’

        the costs are huge-they are a prudent provision,costs’ are exaggerated.

        the benefits negligible-increasing ratios gives more security=a good thing.

        the international precedents lacking-selective nonsense,and hardly a justification

        ’empty rhetoric/’justification…a cursory look at eyewatering debt levels, reliant on perpetual ‘growth’ ….is a very sound case to objective critique.

        Looking at the big 4’s yearly profit figures ,suggest that maintain those takes precedence for them….not fiscal prudence.

        Reply

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