Housing affordability remains almost impossibly high in the Central Otago Lakes district despite falling house prices and lower interest rates driving a record improvement in home loan affordability in other parts of New Zealand.
The Wizard Home Loans affordability report for June showed the largest improvement in the report's six and a-half year history.
This monthly report measures the proportion of a median after-tax income needed in each part of New Zealand to service an 80% mortgage on the median house price in that region.
Central Otago Lakes is by far the least affordable place to own a home, according to figures provided by Wizard.
It takes 128.2% of a median after-tax income to afford a home in the region compared with 93.7% in Auckland, 56.1% in Otago and 46.1% in Southland.
For first-home buyers, it now takes 121.2% of one median income to pay the mortgage on the lower quartile-priced house in Central Otago Lakes, up from 111.7% in May.
That index was 95.4% a year ago and 79.2% three years ago.
It takes 113.5% of one median income for the 30- to 34-year age group to pay the mortgage on the lower quartile house price, up from 104.2% in May.
A household that bought Central Otago Lake's median-priced house in June needed at least $1791.65 of weekly after-tax income for the mortgage to be "affordable".
A mortgage is affordable if the weekly payments are 40% of weekly take-home pay.
A year ago, a first-home buyer household required $1355.22 to make the mortgage affordable.
However, the median weekly take-home pay for a first-home buyer in the region was $591.46 in June, up only a few cents on May.
Disposable income (wages minus mortgage payment) was (minus) -$125.20 in June, $151.52 lower than the $26.32 in June last year.
Wizard director John Grant said the measure showed why current property prices excluded so many potential buyers.
The June median house price in Central Otago Lakes was $514,000.
The lower quartile price was $389,000, up 9.6% on a month previously and 29.7% on the previous corresponding period.
"The lower quartile house price is now worth 12.6 times the median income. This is significantly higher than 9.8 from four years ago."
Home loan affordability was much better in the rest of Otago with it now taking 51.6% of one median income to pay the mortgage on a lower quartile-priced house and 56.1% on a median-priced house.
Things are even better for buyers in the 30-34 age group although buying a lower quartile house is still tough going.
It takes 48.4% of a median income for someone in that age bracket to buy a lower quartile home.
The median house price in Otago was $225,000 and the lower quartile price was $180,000.
A household that bought Otago's median-priced house in June needed at least $763.32 of weekly after-tax income for the mortgage to be affordable.
The median weekly take-home pay for a first-home buyer in the region was $591.46, up from $591.05 last month.
Weekly disposable income was only $286.13 in June, $32.03 lower than the $254.11 in June last year.
Mr Grant said affordability throughout New Zealand looked set to improve through the rest of the year, as interest rates either fell or were stable while house prices kept falling.
Tax cuts due from October 1 were also expected to improve affordability ratios as take-home pay rose slightly for most home buyers.
"Buyers are in control in the housing market and the prospect of lower interest rates and even lower prices will make it easier for New Zealanders to get into this market," he said.
