By Roeland Van Den Bergh - The Dominion Post - Saturday,15 September 2007
The Cost of buying a home has blown out to a record high. In August it took 81.6 per cent of a median weekly income to pay the mortgage on a median-priced house.
That is more than twice the amount considered affordable, according to the latest Fairfax Media home loan affordability report That makes the median-priced house the least affordable in the five-year history of the report.
The median individual weekly take-home pay was $674.32, up $15.66 on August last year. But the median house price ballooned $40,000 to $350,000 in that time. A mortgage has become increasingly unaffordable over the past four years. Last year a mortgage sucked up 67.5 per cent of a single median income; five years ago it took 43.9 per cent. A mortgage is considered unaffordable at 40 per cent.
The report estimates that after paying the mortgage, the typical home owner had just $123.79 a week of disposable income in August, about $90 less than a year ago.
“This measure shows why current property prices exclude so many potential buyers,” the report says. On top of that the average two-year fixed interest rate had increased to nearly 9.2 per cent from just over 8 per cent. It took a combined weekly household income of $1376.33 after tax to afford the mortgage on a median¬priced house in August.
In Wellington, a mortgage has become even less affordable, requiring a household income of $1498.43 a week. Wellington house prices rose 5.8 per cent between July and August to a median of $381,050, or 13.4 per cent for the year. But the median income in the region, at $726.59, was also higher than the national median. To keep pace with the increasing cost of buying a median New Zealand house, incomes would have had to grow by nearly 24 per cent.
Nationally, the median house price was now 10 times the median income, much higher than the 6.3 times of five years ago. House prices were considered unaffordable at 4.5 times take-home pay. Regionally, a mortgage was least affordable in Central Otago Lakes where, at nearly 120 per cent, repayments exceed the median take-home pay, beating Auckland where it takes nearly 98 per cent. Southland was the most affordable place to buy, at a little under 45 per cent.
