Happy Homes NZ

6 Worst Types of Real Estate Investments

admin — Wed, 15 May 2013 03:19:02 +0000

6 Worst Types of Real Estate Investments

Published May 07, 2013

Zillow

REUTERS

As any experienced real estate investor will tell you, not all investment properties are created equal. Homes that might be perfect for a primary residence, for example, might not yield positive cash flows — and without positive cash flows, you’re losing money, not making it.

Here are a few things to think about and properties to avoid when you are ready to invest your hard-earned cash equity capital.

1. Anything that doesn’t generate rental income

These include second homes and land investments. Too many people invest in properties hoping that they will go up in value. But there is an opportunity cost to having money sit in real estate that doesn’t pay any income. Even if the property goes up in value, you’ve got to reconcile and account for all the money you would have earned if your money had instead been in the bank or in stocks and/or bonds.

2. Anything with negative cash flows

If you buy a “prize property” — such as a fancy downtown apartment, beach property or holiday rental — it’s probably going to be 20+ years before you get your first dime of positive cash flow. And that’s just no way to invest your hard-earned money. Pencil out any potential deal ahead of time, and buy properties that pay cash flow from day one — the moderately priced properties in non-prize areas.

3. Tenant-in-common (TIC) investments

These were popular from 2005 to 2007 as a way to diversify a portfolio without having to deal with the hassle of owning and managing real estate. But few people ever earned a dime because of all the costs and fees associated with the agreements.

4. Development deals

Development of land is extremely high risk. There are entitlement, construction and market pricing risks, plus countless others. These investments are best left to the extremely wealthy and experienced investors who can take the chance that they’ll never see their money again.

5. Condo-hotels, intervals & time-shares

These aren’t even investments. There’s no ability to predict cash flows, rental income or future value/sales prices. And they are very hard to resell and typically only at a fraction of the original cost.

6. Foreign real estate

You might be OK buying real estate in Canada or Britain – however don’t forget about the foreign currency risk — but foreign countries generally have different real estate laws, protections and fluctuating currencies, making these properties extremely high risk.

Note: While this list is obviously an American version it is not so different here. When looking at investment property it is all about the returns on investment. Do not get hung up on what the property looks like. It all comes down to numbers, you may actually dislike the property, but as long as the numbers stack up then it will make a good investment. Anything over a 7% return is a good investment in Cambridge.

Open homes – questionable value for sellers so why are they so common?

admin — Sat, 11 May 2013 00:26:50 +0000

Open homes – questionable value for sellers so why are

they so common?

Alistair Helm | WEEKEND REVIEW | 8 comments

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Should we implement restrictions on overseas buying of NZ property?

admin — Wed, 01 May 2013 23:12:56 +0000

Should we implement restrictions on overseas buying of NZ property?

Alistair Helm | WEEKEND REVIEW | 12 comments

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Alistair Helm

How to be the Most Attractive Homebuyer | How to be the Most Attractive home buyer

admin — Tue, 23 Apr 2013 22:40:26 +0000

How to be the Most Attractive

Homebuyer

by Andrea Murad

Published March 21, 2013

FOXBusiness

REUTERS

The spring season tends to flood the housing market with buyers, and in markets with low inventory levels, the competition is stiff.

As home prices continue to recover and interest rates remain at near-record lows, some houses are receiving multiple offers and to win the bid, buyers need to stand out from the crowd. According to the National Association of Realtors, houses sold in 71 days in January, down from 99 days a year ago.

Since markets are moving fast, experts recommend buyers have their loan pre-approved and down payment ready before starting their search. “The market is changing,” says Cara Ameer, broker associate and Realtor at Coldwell Banker Vanguard Realty based in Ponte Vedra Beach, Fla. “Inventory is low and demand is high—a buyer needs to know exactly what their parameters are.”

Multiple bids are becoming the norm, so be ready to compete and do your homework to seal the deal. The longer the negotiations, the more chance you could lose out to someone else who made a better offer, says Ameer. Be reasonable without being difficult because until an offer is signed, sealed and delivered, other buyers can bid on the property.

While you have to compete in the current market, maintain your budget. “You don’t want to end up paying more for the house than it’s worth,” says Daren Blomquist, vice president at RealtyTrac.

Experts warn against cutting corners like skipping the inspection or engaging in a bidding war. You don’t want to unduly stretch yourself just to get into a property,” says Blomquist.

To help you become a homeowner in this competitive market, experts recommend the following tips for being the most attractive:

Plan Ahead

“You have to plan four months before you’re going to buy,” says Michael Corbett, Trulia’s real estate expert. Check your credit for accuracy and avoiding making any big purchases or taking on any big debt during this time.

“[Debt] brings down your credit score and increases your debt-to-income [ratio] which are two critical things banks look at when qualifying and preapproving you for a loan,” says Corbett.

If your debt-to-income ratio is too high, experts recommend paying down as much debt as you can to lower this ratio.

Set Your Home Price

“Don’t look at a $300,000 home if all you can afford is $250,000,” says Ameer. Less supply on the market increases the likelihood for multiple offers, and you won’t be able to compete. “If properties are selling at 95% of asking price, don’t think you’ll get a deal at 85% of asking price,” she says.

If you do spot a great deal on a house, don’t wait days to make an offer, warns Corbett. Since time isn’t on your side, learn how to spot a great deal by researching an area’s home prices.

“Do a little due diligence and go to open houses—do your homework,” says Corbett. Being educated will help you negotiate and could prevent you from paying more for a house than it’s actually worth because you’re emotionally involved.

Know that Cash is King

The more cash you have, the more appealing you are as a buyer. Putting 20% or more down makes you look more financially stable and gives sellers comfort that you’ll qualify for a mortgage, says Corbett.

Getting a valuation on the property

Cash can cover a multitude of problems when you make an offer, whether it’s difficulty with the mortgage process or a lower-than-expected appraisal. “A buyer can contribute more cash to cover the difference between the appraisal and offer price,” says Blomquist.

If your appraisal is low, don’t expect the appraiser to come up in value, says Ameer. “Appraisers are under scrutiny with the banks and they have to justify everything they do.” They’re required to follow Uniform Standards of Professional Appraisal Practice (USPAP) guidelines, as well as lender guidelines.

Get Preapproved before Your Search

Getting prequalified for a mortgage gives a ballpark for what you can afford to buy and will streamline your search process.

If you’re financing your house with a mortgage, have a pre-approval letter with you and if you’re paying cash, have proof of funds that shows you’re good for it.

Getting preapproved will also help you to compete with an all cash buyer, says Walter Molony, spokesperson for the National Association of Realtors.

When you know what you can afford and are preapproved, you won’t be shopping outside of your price range, says Corbett. “It makes you a much stronger buyer when you can turn in that preapproval letter with your offer.”

Limit Your Contingencies

Experts suggest having as few contingencies as possible to be an alluring buyer. “Don’t overcomplicate your offer to the seller,” says Ameer. Certain contingencies based on your ability to get a mortgage, the appraisal and home inspection are standard, but piling on more could make the seller less inclined to work with your offer.

Experts advise making an offer based on a satisfactory home inspection by a qualified building inspector before you make any form of offer. “It gives you the opportunity to walk away if you find in an inspection that there are too many problems with the house,” says Corbett.

Making an offer conditional on you selling your house first will make you a less appealing buyer. If you need to sell your house before buying a new one, then sell your home first and rent or move in with family or friends while you look for your new home, says Blomquist. “As a seller, you’ll sell that home quickly. Then as a buyer, you’re much more appealing than a buyer conditional on a sale.”

Add a Personal Touch

Corbett suggests sending a letter to explain why you want to buy that house. “You become a person who really loves and appreciates the home instead of just a number,” says Corbett. Sending a letter is just one extra little thing that will help level the playing field.

Be Flexible with Closing Dates

“Let the seller know that you would be flexible on the closing timeline,” says Corbett. Find out when the seller would ideally like to close on the house and see if you can match it.

While the bases of this article is for the American market the advice here in is also good advice for our market here in NZ. Cambridge NZ is fortunately not as robust as Auckland and buyers have a little more scope, but if you find what you are looking for and want that house make sure you are in the best position possible. Most of all GOOD LUCK!!

Nutrition

admin — Sat, 23 Mar 2013 21:20:34 +0000

Nutrition

Just want to share with you this site. If you are like me and love the sweets………read more

Craving this:

http://www.stumbleupon.com/su/8RuvMC

House prices up 7.6% in February

admin — Sat, 23 Mar 2013 21:06:19 +0000

House prices up 7.6% in February,

edging towards December record

Tuesday March 12, 2013 | 2 comments

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New Zealand house prices rose in February, edging towards the record high set in December and highlighting the heating property market that is likely to be concerning the central bank.

The national median house price rose 7.6 percent in February to $382,000, still below the record $389,000 set in December, according to the Real Estate Institute. The median price for Canterbury/Westland rose 3.2 percent to a record $355,000.

The Reserve Bank is seeking feedback on proposals to introduce macro-prudential tools such as limits on loan-to-value ratios that would allow it to target pockets of heat without stifling the whole economy.

Economists say governor Graeme Wheeler may give more detail of his thoughts and single out the housing market in his monetary policy statement on Thursday.

The stratified housing price index, which was developed with the central bank and smoothes out the skew effects when more high or low-value houses are sold, rose to a record high 3544.9 last month, REINZ says in its report.

There were 6632 houses sold in February, up 34 percent from January and an increase of 7.5 percent from the same month last year. The median number of days to sell fell two days to 39 in February from a month earlier and was down by seven from a year ago.

The median sale price in the Auckland region rose 14 percent to $535,000 from February 2012 and the number of sales climbed 16 percent to 2399. The median sale price across Wellington rose 4.4 percent to $405,000 from a year ago, with a 12 percent lift in volumes to 763.

Sales in Canterbury/Westland fell 4.1 percent to 859 from a year earlier, while Otago median sale prices increased 1.4 percent to $243,000 on an 11 percent pick-up in sales numbers to 258.

Note: In our little neck of the woods, Cambridge just an hour and a half from Auckland we noticed in February sales really took off an unusual swell that has continued in March. Also we have many more enquiries these days from Aucklanders just wanting out of that market and choosing Cambridge as the place they want to settle down.

First NZ Capital analysis shows that after inflation, house prices are still

admin — Wed, 20 Mar 2013 03:09:32 +0000

First NZ Capital analysis shows that

after inflation, house prices are still

down on 2007, but price rises are

expected to run at an annual rate of

8.5% in the near term

Posted in Property March 19, 2013 – 09:42am, David Hargreaves

Despite New Zealand house prices recently reaching all-time highs, values are actually still some 8% down, after inflation, on those seen during the last housing boom in 2007, according to research from First NZ Capital.

Analyst Chris Green says that in recent times, underpinning the rise in national house prices has been strong gains made in both the Auckland and Canterbury regions. In particular, the latest REINZ figures for the month of February showed annual increases in the Auckland and Canterbury regions of 11.6% year on year and 12.3% year on year, respectively.

“In real terms (deflating nominal prices by the Consumer Price Index), we estimate that annual house prices have been recording positive increases since the December 2011 quarter, and for the December 2012 quarter recorded a real increase of 5.7%.

“However, despite this recent run of annual increases, national house prices in real terms are estimated to be around 8% below their September 2007 peak levels,” Green says.

First NZ believes, however, that looking forward, it expects the recent acceleration in national house prices to peak around the 8.5% level, “dominated by robust price rises in the Auckland and Canterbury regions”.

“Looking further ahead over the 2014 year, we expect nominal house price growth to ease back by the end of next year to around the 5.5-6.0% year-on-year level,” Green says.

“In broad terms this would represent real annual house price inflation slightly above its long-term average of 2.5% year-on-year, together with a forecast annual inflation rate of 2.0-2.5% year-on-year.”

Green says that underpinning the expectation of further gains in house prices is a backdrop of a moderate NZ economic recovery, a rise in real incomes, the boost to residential investment from the Canterbury earthquake rebuild, a modest recovery in net migration flows, together with the maintenance of “supportive” interest rate settings.

“However, somewhat offsetting these supportive factors will be the prospect of relatively subdued domestic credit growth, together with continued balance sheet consolidation by households,” Green says.

“Moreover, the key policy uncertainty when attempting to forecast domestic house prices remains the potential introduction by the RBNZ of macro-prudential policy tools. While these tools are currently in the consultation phase, they could begin to be deployed as early as the second half of this year.”

First NZ believes the most likely macro-prudential tool to be used by the RBNZ to dampen any additional “overheating” in the housing market would be restrictions on high loan-to-value residential mortgage lending, followed by the central bank looking to adjust sectoral capital requirements to housing lending.

“In terms of likely triggers for RBNZ to implement these new tools, the bank has noted that it is closely watching the relationship between the growth in credit and GDP. If aggregate credit growth continues to remain around its current growth rate of 4-5% then we believe the RBNZ will remain vigilant, but be unlikely to act.

“However, if credit growth accelerates to around the 8-10% region and/or national house price growth move in excess of 10% year-on-year, the likelihood of macro-prudential policy tools being deployed would significantly increase. Relative to our house price forecasts, such a scenario will likely entail a higher peak in house prices, followed a more pronounced decline, as the macro-prudential tools were employed.”

Green says on the basis of the long-term trend, real house prices, which were around 35% overvalued at their peak in September quarter 2007, were now estimated to have moved back to being around 10% overvalued.

“Despite house prices remaining overvalued, our housing affordability index, which takes into account interest rates as well as incomes, has shown a significant improvement since its peak in September 2007 on the back of the sharp decline in mortgage interest rates.”

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment in the box on the right or click on the “‘Register” link at the bottom of the comments. Remember we welcome robust, respectful and insightful debate. We don’t welcome abusive or defamatory comments and will de-register those repeatedly making these comments.

Note: One of the most significant things for every home owner paying a mortgage in the country is the recent drought over most of the north island of New Zealand. The huge impact on farmers who are in recovery mode. It is highly unlikely we will see any increase in mortgage rates for some time yet possibly the next 12 months at least.

Bernard Hickey looks at whether to fix or float, what's happening with house prices, and what economists are saying

admin — Thu, 07 Mar 2013 23:09:23 +0000

Bernard Hickey looks at whether to

fix or float, what’s happening with

house prices, and what economists

are saying

By Bernard Hickey

After years of being flat as a pancake, the outlook for interest rates appears to be turning. There’s great hope by some that this could the year of the ‘great recovery’ after the Global Financial Crisis (GFC), which would see economic growth surge and interest rates rise. Yet, as in previous years, others point out many of the problems exposed in the GFC have not been solved and growth is unlikely to surge.

The year appeared to begin well with signs of a strong recovery in business confidence in New Zealand and relatively calm financial markets in America and Europe. If this followed through into a burst of investment, employment and economic activity that would put upward pressure on interest rates, making fixing more attractive. However, the New Zealand dollar remains persistently high, which is dragging down on inflationary pressures and there’s still plenty of potential for hiccups overseas to stall our rebound. Europe is in recession with few signs of life and America is sputtering along with periodic political and fiscal crises that have handicapped investment plans.

The net result of all this is the Official Cash Rate (OCR) is not expected to rise until late in 2013 or early 2014 and has been at a record low 2.5% for most of the last 5 years.

In previous years I was firmly in the floating camp because I saw interest rates staying low or even falling further because of the stubbornly weak global economy and very low inflation. However, in recent months my views have started to shift towards fixing. This largely followed the appointment of new Reserve Bank Governor Graeme Wheeler in September last year and the surge in the Auckland housing market through 2012 and into 2013.

The new Reserve Bank Governor seems to be taking an orthodox approach to policy and interest rates, which means he is less likely to cut. He is also starting to look at the surge in the housing market and appears reluctant to use alternative tools to control house price inflation (such as a limit on loan to value ratios) other than the blunt instrument of the OCR. This hawkishness on inflation and orthodoxy on monetary policy makes a rate hike late in 2013 more and more likely.

The Reserve Bank has a big dilemma at the moment. The economy is subdued and inflation is below the Reserve Bank’s 1-3% target range. All other things being equal, there’d be a good case for the Reserve Bank to cut the OCR, which should in turn drag floating rates lower and make floating more attractive than fixing. But house prices are taking off again and any OCR cut risks pouring yet more petrol on the fire of record low interest rates under house prices, particularly in Auckland and Christchurch.

One way for the Reserve Bank to get around this dilemma would be to use other tools to try to control the housing market, incluing limits on Loan to Value Ratios (LVRs). Other central banks and bank regulators in Israel, Canada, Hong Kong and Singapore have used such LVR limits, but Wheeler said early in November and again in December he would not use a LVR limit yet, even if he had it. See the full article and video here.

What the economy is doing and what the RBNZ is saying

Firstly, let’s look at what the ‘ref’ at the Reserve Bank has said recently and what the latest economic and financial signals are saying.

The Reserve Bank’s chart below is from its December 2012 Monetary Policy Statement of its forecast track for the 90 day bill rate, which is typically around 30 basis points above the Official Cash Rate (OCR), tells the story.

The blue line shown is its December forecast with the OCR peaking at around 3%. The red line shown is its September forecast. These forecasts have been dropping for at least a year.

Wheeler said in the Reserve Bank’s December 6 New Zealand’s economic growth outlook had slowed, but was still expected to recover to around 2.5-3%. He said he was watching inflation closely, particularly the housing market in Auckland, but saw no need to change the OCR from 2.5%. On January 31 he repeated that it was appropriate to keep the OCR at 2.5%.

o the Reserve Bank is forecasting a rise (the blue line), but it’s very slow and not much at all. If the Reserve Bank’s forecast now actually turns out to be fact, then floating mortgage customers would see their advertised floating rates of around 5.7% rise very slowly to a peak of around 6.2% by the end of 2014. Although it’s worth remembering that those customers with plenty of equity and good repayment records can push their banks for better deals at the moment of around 5% to 5.2%.

Those in competitive situations would see their floating rates rise to around 5.7% by the end of 2014 in this scenario. Currently advertised 18 month-2 year rates are around 5% to 5.5%, which would mean you’d pay more for the first 6-12 months or so and then less in the second 12 months.

Fixed rates tend to be more closely linked to wholesale ‘swap’ rates than the OCR. Swaps rates fell broadly through 2012 on increasing fears about a global slowdown and a slow rebuild in Christchurch, but they have risen around half a percentage point in early 2013 on hopes for recovery and relative stability on global markets. Luckily for borrowers though, banks’ funding costs on international markets have dropped so the net effect is fixed mortgage rates haven’t risen.

There is a way to test the various scenarios and work out which option is cheaper (although cheapness is not the only factor worth thinking about for many people).

There is a calculator

We have a calculator here that allows you to test which rate is cheaper, depending on three different interest rate scenarios. Click here to go to the calculator.

There are three different rate scenarios. A is the high one with an OCR peak of almost 3.5%, B is the medium one, which is in line with market expectations for flat rates and then a rise to 3% by mid 2014, and C is the low one, which implies flat rates through to mid 2014.

Try it out to see which option is cheaper for you, depending on your rates view.

A simple money calculation isn’t everything though. Some people put a high value on knowing exactly what their mortgage payments are going to be for the next two years because, perhaps, they have a fixed income or are very nervous about a sharp rise in rates. They may see paying slightly more for a fixed mortgage as a bit like an insurance payment that helps them sleep at night.

Others may want to stay floating because they really believe interest rates will be cut again or not rise, and because they don’t want to be stuck fixing and have to pay an exit fee if rates do fall. The most recent memories for some people are having to break their mortgages and pay big break fees (or finding it unaffordable to do so) during 2009 and 2010. Others have longer memories of being stung with big increases in floating mortgage rates as the OCR was hiked from 5% to 8.25% between early 2004 and mid 2007. Really old people remember the 20% plus rates of the mid 1980s. I’m not that old.

Everyone has different appetites for those sorts of risks about paying more or missing out on paying less, and different views about where interest rates will go. Those are the main things to consider when fixing or floating.

More than 50% of New Zealand’s mortgage lending is now on floating rates, which is just below a record high and a complete turn-around from before 2008. Although there has been a slight move back to fixing in recent months. See Gareth Vaughan’s article here. The decision for many now is when to fix.

What house prices are doing

House prices are rising quite quickly, particularly in Auckland and Christchurch, where chronic shortages of non-leaky and non-damaged buildings are being squeezed by demand from immigrants (both internal and from overseas) and those with insurance payouts. Record low interest rates with little prospect of fast rises is also fueling activity.

REINZ figures showed the national median house price was 4.3% higher in January from a year ago, while Auckland prices were up over 8%.

The Reserve Bank has said it is watching it closely, but has said so far it does not think the Auckland inflation is spreading in a way that would boost Consumer Price inflation beyond its current target band of 1-3%. It has also signalled its reluctance to use unorthodox alternative tools such as Loan to Value Ratio limits to slow the market. Although Governor Wheeler did mention in passing in a speech in late February that the housing market was ‘over-heated’, particularly in Auckland.

New house building is increasing, but remains less than needed in Auckland to keep up with demand. All those factors together suggest continued house price inflation in Auckland and Christchurch at least, however a weakening economic outlook and any rise in interest rates would take away some of that upward pressure.

What economists are saying

Westpac’s Dominick Stephens expects the Reserve Bank to start hiking interest rates from September 2013 and eventually rise to 5.25% by 2016 as the Reserve Bank is forced to react to rising inflation pressures, particularly from the construction sector and the Christchurch rebuild. He thinks fixing is better than floating. Westpac forecasts house price inflation of 9% and 4% respectively over 2013 and 2014.

Note: I have fixed 80% of my mortgage and I must say the lower interest rates have encouraged me to put every penny I can into the mortgage while we have enjoyed these lower interest rates. But as Bernard says we must do what is right for our situation.

Two state bungalows sell for nearly $2m

admin — Thu, 07 Mar 2013 03:45:57 +0000

Two bungalow-style state houses in Auckland have sold at a Bayleys auction for $1,910,000.

The houses are at 94 and 96 Haverstock Rd. No 94 sold for $1,050,000 and No 96 sold for $860,000.

Both were on 968sqm sections – large for the area. No 94 had a CV of $700,000, No 96 $660,000.

It was “an exceptional price that exceeded expectations”, Housing New Zealand general manager asset development Sean Bignell says.

“The sale price of two state houses today in Sandringham, Auckland (a tradionally working class suburb on the up, but still a firm Labour seat), means money can be spent building and improving other state homes for families in need.

“The value of those properties was in the land, as the houses were older-style state houses with original features. Both had large sections perfect for subdivision,” he says.

View Larger Map

The 17 remaining properties in Haverstock Rd, on seven separate titles, are being removed from their sections to be sold through a tender process next month.

“As a public sector organisation, we made the decision to sell the land to a private purchaser as it is too costly for us redevelop within this Auckland residential area.”

The tenants of the 19 properties have been moved to other state houses.

Housing NZ covered “reasonable relocation and reconnection costs”.

c.hutch@clear.net.nz

More by Chris Hutching

Note: This is amasing but does show us that house prices in Auckland are just crazy the rest of New Zealand is falling well behind this trend averaging a more sustainable gain in values.

Roost Home Loan Affordability Report shows worsening in Oct as median house price jumps to record high and fixed mortgage rates drop just slightly | home affordability,

admin — Sun, 25 Nov 2012 23:02:45 +0000

Roost Home Loan Affordability

Report shows worsening in Oct as

median house price jumps to record

high and fixed mortgage rates drop

just slightly

Note: Please use this link below to see the video:

http://www.interest.co.nz/property/62182/roost-home-loan-affordability-report-shows-worsening-oct-median-house-price-jumps-rec

By Bernard Hickey

Home loan affordability worsened sharply in October as house prices surged to record highs and interest rates fell only marginally, lifting the proportion of after tax pay needed to service an average home loan, the Roost Home Loan Affordability reports show.

Housing market activity and buyer interest perked up through the Spring open home buying season, pushing the national median house price to a record high NZ$380,000, up 5.8% from a year ago. Auckland’s median house price jumped to a record high NZ$530,000, up 14% from a year ago.

Advertised floating mortgage rates have been unchanged since March last year, but average 6 month and 1 year mortgage rates have dropped around 30 basis points and 20 basis points respectively since mid September as wholesale interest rates have nudged lower and bank competition has heated up.

This helped reduce interest costs for fixed rate borrowers, but not enough to improve overall affordability once the impact of higher house prices and marginal income growth is accounted for. Competition between banks to poach market share and boost lending heated up in September and October.

ANZ’s decision to drop the National Bank brand has sparked a new round of fixed mortgage rate cuts and market activity.

The Roost Home Loan Affordability monthly reports show affordability for young working couples has deteriorated in the last month, but remains near its best levels in almost eight years. Affordability for home buyers in central Auckland, central Wellington and Christchurch remains difficult.

“The housing market is stronger and the banks are increasingly competitive, which makes finding the best mortgage deal even more important for home buyers wanting to make the best offer they can,” said Colleen Dennehy, a spokeswoman for Roost Mortgage Brokers, which sponsors the Roost Home Loan Affordability report from Interest.co.nz.

Some banks have cut fixed mortgage rates to under 5% and are offering discounted legal fees, lower interest rates for borrowers with high equity and, in some cases, the discounting of break fees. Pricing is often differentiated, depending on the safety of the borrower and the size of the loan.

The Official Cash Rate (OCR) is expected by economists to be steady at 2.5% through until late 2013, before rising to a peak of around 4% over the next couple of years. However, financial markets are pricing in expectations the OCR will be cut in the next year. Affordability worsened in October as the median house price for all of New Zealand rose to NZ$380,000 from NZ$371,000 in September.

This increased the proportion of single after tax income needed to service an 80% mortgage on a median house to 54.8% from 53.6% the previous month, the Roost Home Loan Affordability report shows. This is the worst level since March 2011.

Household affordability for first home buyers deteriorated to 22.0% of income from 21.8% the previous month because the median lower quartile house price rose to a record high NZ$262,000 from NZ$260,000. First home buyer household affordability is measured by calculating the proportion of after tax pay needed by two young median income earners to service an 80% home loan on a first quartile priced house. Affordability deteriorated for Auckland to its worst level since August 201o. See the main report for links to regional reports.

The Roost Home Loan Affordability reports measure affordability nationally and regionally for individual income earners and households, taking into account median house prices, interest rates and incomes in their regions and cities. Affordability has generally been improving since December 2009 as interest rates have fallen, although there has been some deterioration in recent months as house prices have firmed again.

Just under 60% of home owners are now on floating mortgages, although there has been a surge in fixed rate borrowing in recent months as banks pared their rates. Advertised floating rates at around 5.75% are higher than 1 year fixed rates at around 5%, but many banks are offering ‘unofficial’ floating rates of around 5.3% to solid customers with high levels of equity that threaten to leave their bank.

The Home Loan Affordability reports use the advertised floating rate. Affordability for households with more than one income worsened in October because of the higher median house price. This measure of a ‘standard typical household’ found the proportion of after tax income needed to service the mortgage on a median house rose to 36.1% from 35.3% in September.

This measure assumes one median male income; half a median female income aged 30-35 and a 5-year-old child that receives Working-for-Families benefits. Any level over 40% is considered unaffordable for a household, whereas any level closer to 30% has coincided with increased buyer demand in the past.

The first home buyer household measure assumes a first home buyer household includes a median male income and a median female income aged 25-29 with no children. Any level over 30% is considered unaffordable in the longer term for such a household, while any level closer to 20% is seen as attractive and coinciding with strong demand.

Regional home loan affordability comparison:
mortgage payment as a % of weekly take-home pay
	Oct-12	Sep-12	Oct-11	Oct-10	Oct-09	Oct-08
New Zealand	54.8%	53.6%	53.1%	55.7%	63.3%	68.1%
Northland	41.7%	45.0%	47.4%	55.5%	61.4%	74.7%
- Whangarei	38.4%	38.0%	42.3%	51.1%	56.5%	69.5%
Auckland	72.7%	70.8%	65.4%	69.3%	76.9%	82.8%
- Central	80.2%	77.7%	68.2%	67.1%	87.1%	88.4%
- North Shore	77.4%	77.2%	72.7%	73.2%	83.5%	89.4%
- South	68.2%	68.0%	66.7%	70.8%	76.8%	81.2%
- West	62.3%	60.3%	59.2%	59.5%	67.6%	76.5%
Waikato/BOP	47.8%	47.6%	49.7%	52.0%	62.6%	67.9%
- Hamilton	51.9%	51.2%	52.2%	56.5%	64.1%	73.7%
- Tauranga	52.9%	57.0%	57.5%	55.5%	78.3%	75.5%
- Rotorua	37.0%	36.9%	34.1%	38.3%	49.1%	53.9%
Hawkes Bay	41.5%	42.3%	42.9%	52.1%	54.9%	59.8%
- Napier	49.6%	47.3%	48.6%	57.1%	56.3%	64.2%
- Hastings	35.4%	41.7%	38.8%	51.6%	57.1%	60.1%
- Gisborne	41.9%	42.1%	40.1%	50.0%	60.0%	56.0%
Manawatu/Wanganui	34.7%	34.8%	34.9%	40.0%	43.7%	50.7%
- Palmerston North	41.1%	39.4%	40.0%	46.4%	46.3%	57.4%
- Wanganui	30.8%	27.1%	25.7%	31.4%	41.6%	41.8%
Taranaki	39.7%	41.0%	45.8%	48.9%	53.5%	62.8%
- New Plymouth	50.4%	46.6%	49.3%	55.0%	63.7%	67.4%
Wellington region	53.6%	53.3%	53.5%	57.5%	68.3%	69.5%
- City	59.5%	55.5%	53.7%	59.8%	73.4%	71.5%
- Hutt Valley	49.7%	51.5%	48.2%	53.0%	59.9%	61.6%
- Porirua	50.5%	54.3%	61.7%	54.2%	63.2%	71.3%
- Kapiti Coast	48.9%	50.4%	56.4%	54.4%	65.6%	72.1%
Nelson/Marlborough	53.4%	55.5%	55.5%	56.2%	63.1%	72.5%
- Nelson	55.7%	53.4%	53.3%	60.6%	62.1%	70.2%
Canterbury/Westland	51.1%	49.2%	50.2%	52.3%	57.3%	61.2%
- Christchurch	55.6%	53.7%	54.6%	57.6%	64.8%	68.6%
- Timaru	37.1%	42.7%	38.4%	43.1%	48.9%	55.6%
Central Otago Lakes	64.3%	69.7%	68.3%	67.0%	94.1%	104.1%
- Queenstown	81.7%	91.2%	77.3%	83.1%	108.1%	109.1%
Otago	37.9%	37.2%	37.7%	42.6%	45.8%	50.4%
- Dunedin	42.7%	44.2%	43.7%	48.5%	53.3%	56.3%
Southland	31.3%	30.8%	32.3%	28.9%	34.5%	43.8%
- Invercargill	32.5%	32.4%	34.5%	30.5%	37.3%	43.7%