Falling interest rates and flat house prices pushed home affordability to a two-year high in September, a survey shows.
And the situation for house buyers is likely to improve further this year with tax cuts from the start of this month, further falls in house prices forecast, and the likelihood of another cut in the Official Cash Rate on October 23. The average two-year fixed mortgage rate fell 34 basis points to 8.62 per cent last month, and house prices fell in most major centres including Auckland, Wellington and Hamilton, according to the Wizard Home Loans Affordability report.
It took 71.4 per cent of the median wage to service the mortgage on the median house last month, down from 73.6 per cent in August, the report showed.
That was the lowest since 69.2 per cent of the median wage was needed in September 2006, although it was far above the levels of 40 to 50 per cent seen between 2002 and 2004, before the housing market began to boom.
"The economic outlook may be gloomy, but the silver lining is an improvement in housing affordability," said Wizard NZ director John Grant.
The proportion of after-tax income needed by a first home buyer seeking a cheaper house was also at a two-year low, of 57 per cent. A first home buyer is categorised as someone aged 25-29 who has saved 20 per cent of their after-tax income in the previous five years. But affordability remained difficult for many people, Mr Grant said.
Most home buyers needed nearly two median incomes to afford the mortgage on the median house, although that had fallen to 1.79 incomes in September from 2.1 last November.
The only regions to see housing affordability worsen last month were Northland and Central Otago Lakes, where house prices rose.
The most affordable region remained Southland, at 44.4 per cent of the median income. However, the biggest improvements were in Auckland (to 84.9 per cent from 88.2 per cent) and Wellington (to 70.4 per cent from 77.6 per cent) due to a drop in house prices.