A Rotorua teen is thinking of moving to Australia for a better chance at buying her own house as deposit rates continue to climb further out of her reach.
First-home buyers in Rotorua are having to save $24,000 more for a deposit than they did a year ago, new data shows.
The latest figures from OneRoof/Valocity show the deposit for a house in Rotorua is $24,000 more than it was 12 months ago. In Tauranga, it is $33,000 more.
It's an issue 19-year-old Lily Anderson is trying to combat as she saves to buy her own home by the time she turns 25.
But with rents continuing to rise at the same time, the building apprentice is losing hope.
"I went to a number of different banks and they all kind of told me the same thing.
"I can't afford it by myself because I cannot make the weekly payments but I just don't know how they expect a single person to buy a house by themselves."
Anderson questioned if she would be able to afford to buy a home in three years' time.
Being an only child, Anderson doesn't have siblings she could buy a house with, so now she is looking at moving to Australia, where she believes it would be more affordable.
OneRoof editor Owen Vaughan said first-home buyers were having to scramble together an extra $24,000 to buy in Rotorua compared to this time last year.
"That shows just how much the market has moved and just how punishing it is," he said.
Vaughan said a $600,000 median house price in the city meant first-home buyers were looking at saving a 20 per cent deposit of $120,000, compared to the $96,000 deposit needed for a median-priced house a year ago and $55,000 five years ago.
The change over five years was $65,000.
The Real Estate Institute of New Zealand (REINZ) figures released this week show the median price in Rotorua is $617,000.
Deposits were not as high as they were in Tauranga, but regardless it was getting harder.
"Twelve months ago you would have typically been able to get by with a deposit of $96,000. Now it's $120,000, that's an extra $24,000. That's still a lot of money for the region," Vaughan said.
"It's going to get steeper for first-home buyers and that's a real worry because they are a huge part of the market."
Rotorua Professionals McDowell Real Estate co-owner Steve Lovegrove said as long as property prices went up, so too would deposits.
"The interesting thing is over the last 30 years, interest rates, incomes and property prices have meant that as property prices have gone up, interest rates have gone down.
"The cost of servicing the mortgage has flattened out a little bit, because we're not paying the big interest rates."
However, the real trick was getting the deposit, he said.
"It's quite frightening what people have to get because that has gone up in terms of its relativity to people's earnings, that's gone up significantly.
"Young people are having to look at other sources to do it, and this is where it's hard because some might have the resources within other family members and some don't."
Managing director of Realty Group Limited, which owns Bayleys and Eves, Simon Anderson, said the deposit was reflective of the regions increase in capital values over the last 12 months.
"The increase in deposit rate obviously puts more pressure on first-home buyers.
"To have saved $24,000 over the past 12 months is very difficult to do."
Anderson believed longer-term renting would be the reality in the future, as it was overseas.
"People will be in rentals like they are around the rest of the world. More of a global trend [emerging] in New Zealand even though one of our passions is buying property."
However, higher deposit rates weren't making it easy for investors either, said Rotorua Property Investors Association president Debbie van den Broek.
"It affects everyone, and also the fact that an investor now has to have a larger percentage of the deposit [due to the loan-to-value ratio restrictions].
"Investors just can't pull money, they've got to work for it, save for it, borrow it and service the debt."
She said it would impact the rental market, as investors wouldn't be able to provide a large supply.
"It's just going to make rental housing more expensive because there's less of it because there will be fewer rentals in the market going forward."
Last week CoreLogic released its House Price Index for February 2021, which showed Rotorua had the lowest growth rate out of all the provincial centres with 0.6 per cent.
However, across 12 months the growth rate was 16.8 per cent.
CoreLogic head of research Nick Goodall said in other words, the flipside of rapidly rising house prices was a sharp decline in affordability, which was likely to progressively weigh on property growth rates.
"Rotorua has performed quite well, in the last nine or 12 months since we got out of lockdown, but potentially there are signs of fatigue there because of the strong growth and that average value starting to tip up a little bit higher.
"It'll start to impact the ability for people to continue to buy property there as well. The average value is now at $600,000 and that will be affecting affordability for those people that are trying to get into the market."
The Rotorua slowdown could be a signal of things to come with the loan-to-value ratio (LVR) restrictions officially back in place last week and further tightening for investors from May 1, Goodall said.
OneRoof editor Owen Vaughan said the Rotorua's low growth rate through February didn't mean house prices were dropping, it was more indicative of the type of houses on the market that sold over the period.
"Over the summer period places like Rotorua have taken a pause in their market activity but there is still a shortage of listings in Rotorua."
The LVR restrictions requiring investors to have a 40 per cent deposit would slow the market, Vaughn believed.
"But I don't think it would drop prices to any meaningful degree that first-home buyers are suddenly going to have to save less.
"The surge that lifted prices coming from the post-lockdown [period] last year, those price increases are here to stay. They're not going to fall back to where they were last year."
Trade Me Property’s latest Rental Price Index is out.