BAY OF PLENTY - SEPTEMBER 2019 - interest.co.nz
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
SEPTEMBER 2019 BAY O F P L E N TY
WWW.INTEREST.CO.NZ / E.INFO@INTEREST.CO.NZ / P. 09 3609670
BAY OF PLENTY
HOME LOAN AFFORDABILITY REPORT September 2019
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 Take Home Septem- 33.4% Take Home
Septem- 25.0% Septem- 23.2%
Pay Pay ber 19 Pay
ber 19 ber 19
$1,552.09 Septem- 26.5%
$1,168.05 Septem- 32.9%
$1,528.48
per Week per Week per Week Septem- 23.3%
ber 18 ber 18 ber 18
Septem- 25.4% Septem- 38.7% Septem- 28.0%
ber 17 ber 17 ber 17
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 Bay of Plenty. 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
$1,552.09 a week. in Bay of Plenty, and that they receive the Working for Families of their age in Bay of Plenty, and that they no longer receive the
It is assumed they would have saved $70,626 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 $1,168.05 That would give them total after tax weekly income of $1,528.48
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 ago
To buy a home at Bay of Plenty’s lower quartile price they would ago for $274,000, which was the lower quartile selling price in for $260,000, which was the lower quartile selling price in Bay of
need a mortgage of $374,374. Bay of Plenty at the time. Plenty at the time.
They would need to set aside $387.81 a week to cover the If they sold that home for the current lower quartile price in Bay If they sold that home for the current lower quartile price in Bay
mortgage payments, which would be 25.0% of their take home of Plenty of $445,000, they would have equity of $228,419 to use of Plenty of $445,000, they would have equity of $262,297 to use
pay. as a deposit on a new home. as a deposit on a new home.
Mortgage payments are considered affordable when they take up If they purchased a home at Bay of Plenty’s current median price If they purchased a home at Bay of Plenty’s current median price
no more than 40% of take home pay. of $605,000 they would need a $376,581 mortgage. of $605,000 they would need a $342,703 mortgage.
On that basis it would be affordable for a young couple earning The repayments on this would be would be $390.10 a week which The repayments on this would be would be $355.00 a week
the median pay rate to buy a lower quartile-priced home in Bay would be 33.4% of their weekly income. which would be 23.2% of their weekly income.
of Plenty. 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 Bay of Plenty’s median price. at Bay of Plenty’s median price of $605,000.
2WWW.INTEREST.CO.NZ / E.INFO@INTEREST.CO.NZ / P. 09 3609670
BAY OF PLENTY
KEY DRIVERS OF HOME LOAN AFFORDABILITY September 2019
HOUSE PRICES INTEREST RATES AND MORTGAGE PAYMENTS
The median house price was $605,000 in September, up from The average bank interest rate for two year fixed 2 Year Fixed rate
mortgage rate was 3.502% for September, -79
$599,000 last month. The median house price was $550,000 in
basis points less than the 4.288% twelve months This Month 3.502%
September 2018 which puts annual growth at 10.0%. Five years ago earlier.
the median was $374,000. The RBNZ is back cutting its benchmark interest
A Month Ago 3.699%
Dwelling sales in September were 432, down from August’s 477. rate again. It surprised with a -50 bps cut in A Year Ago 4.288%
August and sharp falls in mortgage interest
They are now higher than the 395 sales twelve months ago and Mortgage
rates have followed. Although they hope this is Payment
higher than the 344 sales five years ago. all they have to do for a while, the weakening (Weekly)
The lower-quartile house price was $445,000 in September, down international situation may see more downward
First Home Buyers $387.81
from $471,750 last month. Annual growth was 5.6%, from the pressures.
Our model assumes borrowers switched to a 2 Young Families $390.10
$421,550 lower-quartile house price in September last year.
year fixed rate in June 2014, following the shift First Rung Buyers $355.00
reflected in RBNZ data.
First Quartile Median House
House Price Price
Bay of Plenty
Septem-
ber 19
$445,000 $605,000
INCOMES (WEEKLY TAKE HOME PAY)
August 19 $471,750 $599,000
Septem- $421,550 $550,000
First Home Buyers Young Families First Rung Buyers
First home buyers are aged 25-29. A Young families are ages 30-34. A First rung buyers are ages 35-39. A
ber 18 household is on male and on female household is one make, a female household is one male, one female,
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
Septem-
ber 17
$379,654 $547,500
is no child in this household. Take
home pay is gross pay less income
works part-time. Take home pay is
gross pay less income tax.
ents work full time. Take home pay is
gross income less income tax.
September $274,000 $374,000 tax.
14 The growth in these are as follows: The growth in these are as follows: The growth in these are as follows:
National
Weekly Change Weekly Change Weekly Change
Septem- $421,000 $597,000
ber 19 Sep 19 $1,552.09 2.18% Sep 19 $1,168.05 1.51% Sep 19 $1,528.48 2.17%
August 19 $415,000 $580,000 Sep 18 $1,519.01 3.45% Sep 18 $1,150.67 1.04% Sep 18 $1,495.96 1.49%
Septem- $380,000 $560,000 Sep 17 $1,468.34 1.61% Sep 17 $1,138.80 0.26% Sep 17 $1,474.07 0.66%
ber 18
Sep 16 $1,445.12 Sep 16 $1,135.90 Sep 16 $1,464.40
Septem- $350,000 $525,000
ber 17
September $279,500 $420,000
14
3WWW.INTEREST.CO.NZ / E.INFO@INTEREST.CO.NZ / 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
4WWW.INTEREST.CO.NZ / E.INFO@INTEREST.CO.NZ / P. 09 3609670
Notes
This work must be referred to as The interest.co.nz Home
Loan Affordability series. There are two related components
rate. The home loan is assumed to be a standard table mort-
gage, where both interest and principal is repaid in a fixed
Disclaimer
IMPORTANT – PLEASE READ
– the Standard Home Loan Affordability series, and the First- weekly payment made in arrears. The repayment is calculated No reader should rely on the contents of this report for
Home-buyer Home Loan Affordability series. They have both using the tools at http://www.interest.co.nz/calculators/mort- making a specific investment or purchase decision. The
been produced by www.interest.co.nz. Please direct queries gage-calculator information in this report is supplied strictly on the basis that
via email to info@interest.co.nz, or see our contact informa- only overall market trends are being reported on, and that all
tion below. Mortgage Rates: data, conclusions and opinions expressed are provisional and
Average mortgage interest rates are sourced from www.in- subject to revision.
Sources / Definitions / Methodology terest.co.nz. These averages are for banks only as banks have If you are making a specific investment or purchase decision,
*a typical buyer: An individual in the 30-34 year old age 90%+ of the mortgage market. Affordability calculations are you are strongly advised to seek independent advice from a
group who buys the median house price with 20% deposit. done for mortgages at the floating rate and one year through qualified professional you trust.
*a first home buyer : An individual in the 25-29 to the five fixed-rate terms. In this report, the two-year fixed The conditions and disclaimers set out at http://www.interest.
mortgage interest rate is used. Until August 2010 this series co.nz/terms-conditions are applicable to this report as well.
Interpreting the Index: used a 2 year fixed rate loan as the basis for interest rates.
The home loan affordability index measures the proportion a In September 2010 it was switched to the floating rate, This report is made available on these terms only, and JDJL
weekly mortgage payment is of weekly take-home pay (for reflecting actual market shifts by borrowers. In June 2014, it Limited or www.interest.co.nz or Roost is not responsible for
a median priced house). An index measure is generated for was switched back to the 2 year fixed rates, again reflecting any actions taken on
each region, and nationally. We calculate, but do not publish, market shifts. the basis of information in this report, or for any error in or
this index using other various mortgage interest rate terms. omission from this report.
House price data:
Interpreting the Household Income Models: Median house prices are as reported by the Real Estate Contact
A mortgage is ‘affordable’ when the mortgage payment is no Institute of New Zealand. Although the REINZ series is more For more information, contact
greater than 40% of household weekly take-home pay. The volatile than the QV equivalent, there is a highly positive Greg Ninness
value of the mortgage is based on the rules below (see Home correlation between the two series. The REINZ series is more Property Editor,
Loan). current and offers an earlier indication of market trends. www.interest.co.nz JDJL Limited
206 Jervois Road, Herne Bay PO Box 47-756, Ponsonby Auck-
Weekly Income: Saving Rates: land, New Zealand
From the July 2007 Report onward, the source on which Average savings interest rates are sourced from www.interest. Phone: (09) 361-6682
we base our estimates of weekly income, is now the LEEDS co.nz. These averages are for banks only, and use the 90 day Mobile: 027 500 5110
(Linked employer- employee data survey) data from Statistics term deposit rate. Saving calculations take into account the Fax: (09) 360-9319
New Zealand. individuals marginal tax rates as defined by IRD. Email: greg.ninness@interest.co.nz
The standard home loan affordability report is based on the Household affordability:
LEEDS data for the 30-34 age group. Household affordability is calculated in the same way as
Income tax rates from IRD are used to calculate a take-home individual affordability except instead of individual income, a
pay (which is the LEEDSbased data net of the specific income household income is used. The household income for a stan-
tax rate). dard-buyer household is made from 1 full time male median
Home Loan: (Median house price less a 20% deposit) income, 50% of a female median income (from LEEDS data)
Mortgage repayments are based on the value of the home both in the 30-34 age range, plus the Working For Families in-
loan, paid weekly for 25 years, using the bank average interest come support they are entitled to receive under that program.You can also read
