QUEENSTOWN-LAKES DISTRICT - JANUARY 2019 - Interest.co.nz
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JANUARY 2019 QUEENSTOWN-LAKES DISTRICT
WWW.INTEREST.CO.NZ / E.INFO@INTEREST.CO.NZ / P. 09 3609670
QUEENSTOWN-LAKES DISTRICT
HOME LOAN AFFORDABILITY REPORT January 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 January 47.2% Take Home
January 47.6%
Pay Pay Pay January 34.1%
19 19
19
$1,534.82 January 55.0%
$1,286.72 January 46.4%
$1,730.78
per Week per Week per Week January 32.1%
18 18
18
January 52.7% January 33.9%
January 26.1%
17 17
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 Queenstown-Lakes District. 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 of
$1,534.82 a week. in Queenstown-Lakes District, and that they receive the Working their age in Queenstown-Lakes District, and that they no longer
It is assumed they would have saved $70,869 to use as a deposit, for Families allowance. receive the 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 $1,286.72 That would give them total after tax weekly income of $1,730.78
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
To buy a home at Queenstown-Lakes District’s lower quartile ago for $373,000, which was the lower quartile selling price in ago for $385,000, which was the lower quartile selling price in
price they would need a mortgage of $644,626. Queenstown-Lakes District at the time. Queenstown-Lakes District at the time.
They would need to set aside $731.12 a week to cover the If they sold that home for the current lower quartile price in If they sold that home for the current lower quartile price in
mortgage payments, which would be 47.6% of their take home Queenstown-Lakes District of $715,495, they would have equity Queenstown-Lakes District of $715,495, they would have equity
pay. of $404,324 to use as a deposit on a new home. of $420,090 to use as a deposit on a new home.
Mortgage payments are considered affordable when they take up If they purchased a home at Queenstown-Lakes District’s current If they purchased a home at Queenstown-Lakes District’s current
no more than 40% of take home pay. median price of $940,000 they would need a $535,676 mortgage. median price of $940,000 they would need a $519,910 mortgage.
On that basis it would not be affordable for a young couple The repayments on this would be would be $607.55 a week which The repayments on this would be would be $589.67 a week which
earning the median pay rate to buy a lower quartile-priced home would be 47.2% of their weekly income. would be 34.1% of their weekly income.
in Queenstown-Lakes District. 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 not be affordable for the couple in this On that basis it would be affordable for the couple in this example
example to move up to next rung of the property ladder and buy to move up to next rung of the property ladder and buy a home
a home at Queenstown-Lakes District’s median price. at Queenstown-Lakes District’s median price of $940,000.
2WWW.INTEREST.CO.NZ / E.INFO@INTEREST.CO.NZ / P. 09 3609670
QUEENSTOWN-LAKES DISTRICT
KEY DRIVERS OF HOME LOAN AFFORDABILITY January 2019
HOUSE PRICES INTEREST RATES AND MORTGAGE PAYMENTS
The median house price was $940,000 in January, up from $1,015,000 last month. The The average bank interest rate for two year 2 Year Fixed rate
median house price was $910,000 in January 2017 which puts annual growth at 3.3%. fixed mortgage rate was 4.248% for January, -37
Five years ago the median was $492,000. basis points less than the 4.618% twelve months This Month 4.248%
Dwelling sales in January were 52, up from December’s 50. They are now lower than earlier.
A Month Ago 4.330%
the 77 sales twelve months ago and lower than the 75 sales five years ago. The RBNZ has had a rate cut program with the
The lower-quartile house price was $715,495 in January, down from $820,000 last first reduction occurring in June 2015 and the A Year Ago 4.618%
month. Annual growth was -6.7%, from the $767,000 lower-quartile house price in latest one in November 2016. However, no more Mortgage
January. cuts are expected although turmoil in markets Payment
recently may change that expectation. Whole- (Weekly)
sale rates have been rising steadily recently and
First Home Buyers $731.12
that is now putting upward pressure on fixed
mortgage rates. Young Families $607.55
Our model assumes borrowers switched to a 2 First Rung Buyers $589.67
year fixed rate in June 2014, following the shift
First Quartile Median House
reflected in RBNZ data.
House Price Price
Queenstown-Lakes District
January 19 $715,495 $940,000
INCOMES (WEEKLY TAKE HOME PAY)
December $820,000 $1,015,000
18
January 18 $767,000 $910,000
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
household is on male and on female household is one make, a female household is one male, one female,
January 17 $724,000 $790,000 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
January 14 $373,000 $492,000
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.
tax.
National The growth in these are as follows: The growth in these are as follows: The growth in these are as follows:
January 19 $386,000 $550,000 Weekly Change Weekly Change Weekly Change
December $390,000 $560,000 Jan 19 $1,534.82 2.17% Jan 19 $1,286.72 2.14% Jan 19 $1,730.78 2.20%
18
Jan 18 $1,502.15 0.37% Jan 18 $1,259.70 0.40% Jan 18 $1,693.48 0.72%
January 18 $350,000 $910,000
Jan 17 $1,496.60 2.90% Jan 17 $1,254.74 3.60% Jan 17 $1,681.43 3.95%
January 17 $373,000 $485,000 Jan 16 $1,454.49 Jan 16 $1,211.13 Jan 16 $1,617.57
January 14 $275,000 $400,000
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
