Middle income earners locked out of housing

Couples earning $1582.57 per week after tax are struggling to buy an Auckland house.

Time needed to save a 20 per cent deposit:
• Auckland: 7.7 years
• Waikato / Bay of Plenty: 4 years
• Wellington: 3.9 years
• Canterbury: 3.9 years

The low-paid are not the only ones being squeezed out of Auckland's housing market, but middle income earners on about $82,000 annually after tax are being hit, according to the latest Home Affordability Report.

It would now take a couple earning an enviable income of just over $1500/week after tax a daunting 7.7 years to be able save the 20 per cent deposit needed for their first Auckland home, the report found.

That compares to only about four years in other major New Zealand centres, said interest.co.nz, which published the report yesterday.

Things were so much easier just three years ago. In August 2013, it would have taken a typical first home buying couple in Auckland only 5.5 years to save the 20 per cent needed at the Real Estate Institute's lower quartile selling price for the region - at that time, of $453,300.

But by last month, Auckland's lower quartile selling price hit a new all time high of $695,600, up $242,300 or 53.5 per cent in three years, the report said.

Yet the median income for typical first home buyers in Auckland hasn't increased by nearly as much over the same period, rising from $1489.36/week after tax in August 2013 to $1582.57/week last month, up just 6.3 per cent over the same period, the report said.

That means Auckland's lower quartile house price has increased at 8.5 times the rate at which typical first home buyers' after tax incomes have increased over the last three years, which has inevitably pushed out the timeline for them to save a deposit, it said.

"The figures used in the Home Loan Affordability Report are not for people on low incomes. They are based on median incomes, and the bottom quartile of house prices.

"So it is not just the lowly paid who are being kept out of home ownership by Auckland's inflated house prices and low income growth, it is now middle income earners as well," wrote Greg Ninness of interest.co.nz when the report was released.

First home buyers in centres outside Auckland should still be able to save a 20 per cent deposit to buy a lower quartile-priced home within four years, the report said.

Auckland home affordability and housing supply dominated this week's Mood of the Boardroom survey and breakfast in the city on Tuesday where Finance Minister Bill English debated the topic with Labour's finance spokesman Grant Robertson.

Next week, housing data is due out from realestate.co.nz, Quotable Value, Barfoot & Thompson and Harcourts, followed by Trade Me Property and the Real Estate Institute a few days later.

That will all give an indication of how strong the market is in terms of volumes, prices and values in the early spring period when sales usually pick up after winter.