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First-time home buyers are expected to rush into the market at the end of the year as falling interest rates and property prices combine to kick-start the sluggish market.
A report on economic commentator Bernard Hickey's interest.co.nz website says home affordability hit a four-year high last month. At the current rate of improvement, housing is likely to be broadly affordable again for most buyers towards the end of the year, the report says.
Young Australians are already returning to the market, helped by $14,000 Government grants.
Here, the Government's shared equity scheme is expected to help up to 700 applicants during a two-year $35 million trial that started last July.
The scheme allows people with a household income of $55,000-$85,000 to borrow between 5 and 30 per cent of the value of their home.
But Auckland mortgage broker Jeff Royle said New Zealand affordability was lagging behind Australia because of our banks' tighter lending criteria and higher incomes across the ditch.
Without Government intervention, he predicted, first-time buyers wouldn't be able to join the market for at least nine months. But other brokers said it could take longer.
Mark Jurgeleit, of Meta Group, said conditions could improve by the middle of next summer but some young buyers were already organising requests for pre-approved loans.
All 12 regions surveyed for the interest.co.nz's report showed improvements in affordability.
The biggest were in Nelson/Marlborough and the Central Otago/Queenstown Lakes regions, where median house prices fell 11 per cent and 10 per cent respectively.
Southland continued to be the cheapest region, with typical buyers having to spend a third of their take-home pay for the mortgage on a median-priced house.
In Auckland, the mortgage on a median-priced house requires 75 per cent of a single salary, down from a record 101 per cent a year ago.
The figure for Wellington is 62 per cent, Northland 61 per cent, Waikato/Bay of Plenty 58 per cent, Hawke's Bay/Gisborne 54 per cent, Taranaki 52 per cent and Manawatu/Wanganui 44 per cent.
Westpac economist Doug Steel hoped the Reserve Bank would trim the official cash rate by 1.5 per cent on Thursday.
