Rising rates make homeownership tougher
With interest rates skyrocketing, many brokers are asking: have wages kept pace to ensure clients can comfortably manage their mortgage repayments?
Infometrics chief executive Brad Olsen (pictured above left) recently ran the numbers using Real Estate Institute of New Zealand median house prices for March, helping brokers understand how much a household’s income needs to be to keep mortgage repayments at a manageable third of their income.
For Auckland, where the median house price hit $1,070,000 in March, a household would need to earn $213,000 annually to afford mortgage payments at a third of their income – a huge leap of $80,000 from March 2020, when the median price was $945,000, and clients only needed an income of $134,000 to stay within the same repayment limit, Stuff reported.
Income gaps and realities for buyers
Nationwide, home buyers needed an income of $94,097 in 2020 when the median price was $665,000. Fast forward to 2024, and the median house price has jumped to $801,000, meaning clients now need to be earning $160,000—an increase of $66,000. Yet, median household incomes lag significantly behind.
“Infometrics estimates that in March 2024, the median household income in Auckland was around $133,000, and the national median was about $107,000,” Olsen said. “This means many clients are facing mortgage payments that take up 40-50% of their income.”
Affordability outlook
According to BNZ’s housing affordability index, affordability took a major hit during the pandemic as house prices surged.
Read more: Is housing affordability still an issue in New Zealand?
BNZ chief economist Mike Jones (pictured above right) noted that while affordability has improved by 12% since December 2021 due to falling deposit requirements, higher mortgage rates continued to strain homeowners’ budgets.
“Affordability is still far below pre-COVID levels, and we expect only a slight improvement through the end of the year,” Jones told Stuff.
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