Five years ago a mortgage on the average house cost 40 percent of the average wage. Today in Hawke's Bay it costs two-thirds of the average wage. That's better than the national figure, but it's still a big stretch, say experts.
In order to buy a house in Hawke's Bay home buyers need to put nearly two-thirds of the average take-home wage packet on their mortgage, a new study reveals.
Most banks recommend that repayments should be below 40 percent of gross pay (or around 54 percent of take-home pay depending on the applicable tax rate).
But the Hawke's Bay home loan affordability of 64.1 percent is not as bad as the national average of 73.5 percent of average take-home pay, and well below the 92 percent of average take-home pay required to service a mortgage in Auckland.
The figures are based on the median house price, which in February was $272,000 in Hawke's Bay, and a two-year fixed-rate mortgage.
The study, by interest.co.nz, states that at the end of February, the New Zealand average was an "eye-popping" 73.5 percent, up significantly from both January (71.4 percent) and February 2006 (65.5percent).
In January 2002, five years ago, it took just 40.3 percent of take-home pay to make a mortgage payment on a median house.
The study says medium-term affordability is falling in Hawke's Bay and Gisborne and this region was one of just two in the North Island (Manawatu/Wanganui at 52.2 percent was the other) to see a slight improvement in home affordability in February over the prior month.
The main reason for the change was the median house price, which fell 2.7 percent between January and February, combined with the benchmark mortgage interest rate rising from 8.19 percent in January to 8.3 percent last month.
Take home weekly pay in Hawke's Bay/Gisborne rose from $617.85 in January to $620.36 last month. The report says take-home pay is increasing by about 5.3 percent year on year, but the marginal tax rate is clipping -0.4 percent off that. Falling overtime rates are also affecting the take home pay.
To receive a competitive interest rate buyers need a reasonable deposit. The study recommends a benchmark deposit of 20 percent of the median-priced home.
As of last month the Hawke's Bay/Gisborne average time to save for that deposit was 19.1 months. That is, 19.1 months of after-tax income - obviously it will take longer in a real situation.
Six of the 12 regions surveyed have home loan payments at levels above 70 percent of average take-home pay.
Those regions account for 67 percent of the population. That means that for more than two-thirds of the country it will take at least two, and in some cases up to three full-time average incomes to afford the mortgage on a median-priced house.
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