Surging house prices in Auckland and Queenstown have pushed home ownership even further from the reach of first home buyers in the two districts.
The AMP360 Home Loan Affordability Report for March says the high house prices in both places were not just affecting first home buyers. They could also be preventing some owners from moving up the property ladder.
But housing remained affordable for first home buyers everywhere else in the country. Affordability improved slightly in Wellington, Otago and Hawkes Bay in March, compared with February.
In Queenstown, it now takes 49.6% of the median after tax income of a couple in the 25 29 age group to pay the mortgage on the lower quartile priced house in March. This is up from 39.3% in the previous month. A year ago, it was 43.6%.
''Essentially, the median income for a couple is not enough to buy a lower quartile priced house,'' the report said.
Saving the necessary initial deposit would be a ''significant barrier'' for many in Queenstown. Based on current income and house prices, it would take the household 3.5 years to save a 10% deposit and seven years to save a 20% deposit, as required by most banks.
The Queenstown lower quartile house price was $532,750 in March, up from $429,750 last month. Annual growth was 18% from the $451,500 lower quartile price in March last year.
The report said a single median income for a first home buyer was not enough to buy a lower quartile priced house, even with a deposit of about 10% of the house's value. A couple or family with more than one income might find the lower quartile price affordable.
In Queenstown, the median weekly take home pay for an individual first home buyer was $711.72 in March, up from $710.57 in February and $699.46 in March last year.
Weekly disposable income in the resort town was $5.13 in March, $78.26 lower than the $73.13 in March last year.
The picture is much different in Dunedin, where it takes 19% of the median after tax income of a couple in the 25 29 age group to pay the mortgage on the lower quartile priced house in March.
This is down from the 21% in February and the 19.2% in March last year. Based on current income and house prices, it would take the household 1.5 years to save a 10% deposit and 3.1 years to save a 20% deposit, the report said.
The Dunedin lower quartile house price was $217,000 in March, down from $235,000 in February. Annual growth was 3.3% from the $210,000 a year ago.
It seems possible a single person can afford to pay the mortgage on a lower quartile house in Dunedin, at 40.1% of one median income in the 25 29 age group. The index was 41.1% a year ago and 38.1% four years ago. The index reached its highest point of 67.3% in May 2008.
In Dunedin, the after tax median weekly take home pay for an individual first home buyer was $662.32 in March, up from $661.25 last month and $650.93 in March last year.
The report said a single median income was not enough for a single person to buy a first home but a couple and family with more than one income would find it affordable.
The report also highlighted the difficulties that might be faced by couples with young families who might want to move up the housing ladder, perhaps from an apartment or home unit to a house on its own section.
The model for the couple with a young family was based on the median income for a couple aged 30 34, with one child, where the male worked full time and the female worked part time earning 50% of the full time wage.
It was assumed they would have a 20% deposit for a median priced house either because they had saved the money or accumulated sufficient equity in their first home.
''House prices in Auckland and Queenstown would be too high for them to be able to afford to step up into a median priced home.''
In both Auckland and Queenstown, the mortgage payments on a median priced home would eat up 62.1% of their take home pay, making such a move severely unaffordable, the report said.
Such a move should be affordable for a young family in all other parts of the country where the mortgage payments would be less than 40% of their net income.
Couples in Auckland and Queenstown had to face difficult choices, which could include delaying having children until later in life, having children but remaining in their first home for longer or making arrangements to enable both partners to continue working full time during the early lives of their children.
