Home dream out of reach for poor

By SCOTT KARA

New research shows the Kiwi dream of owning your own home is increasingly impossible for low-income earners - especially in Auckland.

Despite low interest rates and small deposit requirements, house prices in the 1990s have risen beyond the grasp of most Aucklanders on modest incomes.

While many banks require only a 5 per cent deposit for a housing loan, the gap between incomes and house prices has widened significantly.

Chris Kingham, business manager at Apex Financial Services, said a 5 per cent deposit on a $180,000 house was $9000 and servicing a 25-year loan would cost $1283 a month.

The minimum income needed to service a loan of that size would be $44,000.

"If you're earning $21,000 [or less], I would categorically say you're not going to be buying a house in Auckland," he said.

The Affordable Housing in the Auckland Region report, done as part of the Regional Growth Strategy, highlights the difficulties low-income earners face in buying a home.

Figures show house prices, and consequently deposits, have soared well ahead of incomes.

In the Auckland region in 1991, raising a deposit for a house required 1.5 times the annual household income of a poorer family. By last year this had increased to more than 2.1 times the annual income.

In contrast, the rest of New Zealand was more affordable, with only 1.3 times the annual income needed for a deposit last year.

Auckland City was by far the most difficult place to raise a deposit. Between 1991 and last year, house prices at the lower end of the range rose more than 80 per cent, from $115,000 to $212,000.

In Auckland City, the cost of a 20 per cent deposit on a home was more than 21/2 times the annual household income in the low-earner bracket.

The deposit requirements in more affordable areas of Auckland, such as Manukau, Waitakere and Papakura, are also well above the rest of New Zealand.

Larry Murphy, senior lecturer in geography at the University of Auckland, said owning a home was not going to be an option for low-income people in the future.

"It's almost impossible for them to generate that kind of savings in the short term. It would take a number of years to generate a deposit."

He said that even if low-income earners saved hard for years, the deposit could meanwhile rise out of reach.

Some would say people in the low-income bracket should not aspire to owning a home, said Mr Murphy. But that went against the great Kiwi dream.

"In New Zealand we've created a housing policy over 40 or 50 years based around the norm of people living in home ownership."

Buying a house was not totally impossible because there were other ways of getting a deposit, such as borrowing or inheriting money from family.

Mr Kingham said many low-income people did not meet banks' strict criteria allowing them to take advantage of the 5 per cent deal.

These conditions included the need for a deposit to be "genuine savings" from the past six months, and for a clean credit record.

"It is directed at young professional people who may not have a huge deposit but they've got pretty good cashflow."