KEY POINTS:
Homes are the most affordable they have been in four years but they are still unaffordable for many and credit rationing by banks isn't helping.
This is the conclusion of the December Home Loan Affordability report from financial information website www.interest.co.nz, released as banks slash mortgage rates further.
The proportion of an after-tax median income needed to service the mortgage for the median house price fell to 59.6 per cent in December from 63.8 per cent in November.
This was the first improvement to below 60 per cent for a typical home buyer since January 2005 and well below the record worst level of 82.9 per cent in November 2007.
The proportion of after-tax income considered prudent to sustainably own a house is around 40 per cent.
At current rates of improvement, housing is likely to be broadly affordable again for most home buyers towards the end of 2009.
The improvement in December was driven largely by lower interest rates in the wake of the Reserve Bank's 150 basis point cut in the Official Cash Rate (OCR) to 5 per cent on December 4. It is widely expected to cut the OCR to 4 per cent on January 29.
Rationing of credit by banks and demands for higher deposits may constrain a rebound in housing market volumes and prices, keeping affordable housing out of the reach of buyers with only small deposits, the report said.
All 12 regions surveyed in the report showed improvements in affordability. The biggest improvements in affordability were in Nelson/Marlborough and the Central Otago/Queenstown Lakes regions, where median house prices fell 11 per cent and 10 per cent respectively.
- NZPA
