Alanah Eriksen

Alanah Eriksen is the New Zealand Herald's property reporter, and assistant chief reporter.

Affordable? Yes, if you can bid near a million

Budget advisers say there is no such thing as affordable in Auckland any more and house-hunters who want to avoid taking on debt may need to adjust their expectations. But others say it's just a shift in property ladder rungs.

This house at 38 Cooper Street, Grey Lynn with an asking price of $895,000.
This house at 38 Cooper Street, Grey Lynn with an asking price of $895,000.

The three-bedroom bungalow with an asking price of nearly $900,000 in Sandringham is "a compelling call to first-home buyers", the agent says. And the "affordable" St Heliers brick and tile with a price tag of $839,000 proves you don't have to "go somewhere west or south to start".

As property prices in Auckland continue to skyrocket, some real estate agents appear to have upped the price range on what they consider a starter home, leaving potential new home owners wondering if the new "affordable" is creeping closer to the $1 million mark.

Property experts say the perception of what is affordable or entry level in certain suburbs - the average house price in Sandringham is now $750,700, and in St Heliers it's $1,148,700 - is changing.

And budget advisers say there is no such thing as affordable in Auckland any more and house-hunters who want to avoid getting into debt may need to adjust their expectations.

Kiwi expat Chris Hayden, who is based in Australia, was recently looking through Auckland properties on Trade Me described as "affordable" for his daughter and her fiance. "I discovered that the price range for a fair sample of these was over $800,000. Given the present state of real estate in New Zealand, I would really appreciate knowing what 'affordable' means," Mr Hayden said.

The Herald typed the words "affordable" and "first home" in the search bars of the Trade Me and realestate.co.nz websites and found real estate agents were listing several homes above $600,000.

They were dotted all over the city - including in Orakei, Meadowbank, Mt Albert, Kingsland, Glen Innes, Grey Lynn, Albany, Milford and Papatoetoe - and listed by all the main real estate agencies.

A Harcourts agent for a three-bedroom townhouse with an asking price of $769,000 in Epsom's double-grammar zone, wrote: "Do you believe Epsom or Remuera is not affordable for first-home buyers any more? I don't. Look what we have found for you. Affordable 3-4 bedrooms ..."

The average house price in Epsom is now $1.3 million - a jump of 40.7 per cent in three years - so that's $531,000 more than the home's asking price.

Harcourts chief executive Hayden Duncan said his agents had training on how to write listings but first-home buyers had different budgets depending on what suburb you were talking about.

"The Epsom example, that is entry-level in Epsom. By Epsom standards, that's affordable. If you aspire to get into Epsom. Affordable is probably not the word you would use to describe [that price] in Swanson, at $750,000."

A challenge for some agents was that some vendors perceived their properties to be more valuable than they were, Mr Duncan said.

"It means that often, you're missing out on the best buyers, because they don't think they can afford them."

Bayleys Real Estate managing director Mike Bayley said it was fairly safe to say that in Auckland, most first-home buyers would be in the sub-$600,000 bracket but there were anomalies such as expats returning home from high-earning careers abroad, or those whose parents were able to fund their seven-figure property.

"The cliche known as 'the property ladder' is just that - most first-home buyers enter at one of the lower, more reachable rungs, somewhere between $300,000 to $600,000 in Auckland. Then after building up equity over the years and seeing their personal financial circumstances improve while they move through the life cycle, they climb up the pricing ladder to higher-value properties. The property-ladder concept has stayed the same for decades; only the pricing rungs have moved upward."

Mangere Budgeting Services Trust chief executive Darryl Evans said he did not think it was fair that agents advertise properties as first homes in the higher price range.

"It is advertised or suggested as being affordable, which most of us know it isn't. Too many will lose their home to mortgagee sale when purchasing high-priced homes.

"I don't believe affordable exists in Auckland any more, which is why we see many looking to buy outside Auckland or on the boundary in areas such as Papakura, Pukekohe, Tuakau and Pokeno. Many are moving further south but then you have travel costs to take into account. Sadly affordable is no longer in the reach of many first-homers."

Mr Evans said most families he worked with could not afford a mortgage of more than $600,000. According to the sorted.co.nz mortgage calculator, that could cost as much as $991 a week on a floating rate of 6 per cent over a 20-year mortgage, or $891 a week over 25 years.

Some first-home buyers were looking at apartments rather than homes on the outskirts of the city, but buyers should be wary of rising lease fees, Mr Evans said.

Federation of Family Budgeting Services chief executive Raewyn Fox said that with the Reserve Bank's new mortgage lending limits - which require most people to have a 20 per cent deposit - first-home buyers would have to save a deposit of $180,000 for a $900,000 home.

"For heaven's sake, that's ridiculous. One of the other big determiners that comes in to my mind is that in Auckland, people are stuck paying ridiculous rents, which makes it hard for them to save anyway. It's a real chicken-and-egg situation."

Ms Fox said her daughter and partner, who have four children, had just moved to Auckland and had no hope of buying their own home.

They were paying more than $600 a week in rent to live in central Auckland.

Her daughter was studying and her partner owned a business but it meant his income was irregular. They wanted to live close to the city for his job and one of their children attended Western Springs College so they needed to be within the zone.

"They were living way out west and had quite a decent place for the kids, with decent grounds, but they were travelling into town for work every day and spending over $200 a week in petrol and having to support two cars," Ms Fox said. "You say, 'Go somewhere west or south'. But in Auckland, with the traffic, and depending where your job is, that's not always an option."

The rate at which house prices are rising has far outstripped the rate at which incomes are rising. Census data showed the median household income in Auckland was $76,500 - around an eighth of the median house price of $637,000.

The latest Quotable Value data shows the most expensive suburbs were Herne Bay ($1.74 million, up 17.8 per cent), St Marys Bay ($1.53 million, up 23 per cent), and Remuera ($1.34 million, up 25.2 per cent).

Mortgage broker Bruce Patten, of Loan Market, who is based in East Auckland, said his average loan size of $460,000 had doubled since 2002 when it was $267,000.

He brokered loans for four sets of first-home buyers last month out of 26 overall. Two of the four bought homes above the $600,000 mark - one a self-employed man and the other a couple who had help from their parents.

"It's because of my area that they're at that level," Mr Patten said.

"If their average house price sale is $1.1 million in that area, the agent might go, 'Well $900,000 is an affordable house'."

Mr Patten recently brokered the mortgage on an $880,000 Mt Eden home for a couple aged in their 20s who saved a $90,000 deposit on their own. The man was a marketing executive on $240,000 and the woman was also in marketing, earning about $160,000.

House hunters wanting to contest wording of real estate listings can lay a complaint with the Advertising Standards Authority (ASA), the Real Estate Agents Authority and the Commerce Commission, which will respectively investigate whether the advertisement is misleading.

But the agencies say the agents may have a good defence in that a price for a certain suburb may be seen as affordable because the average price was going up.

ASA executive director Hilary Souter said she could not recall any complaints about expensive properties being labelled as first homes, but other cases of contested wording included a radio advertisement stating that Pokeno was "just 20 minutes south of Manukau", attic space above a detached garage at a North Shore home being advertised as a fourth bedroom and an ad implying golf membership came free with the sale of a section.

Ms Souter said the authority would look at any complaint under "truthful presentation" in its code of ethics.

"If that is now the entry-level price there are people who may be in that market ... whose family contribute and they take on that enormous debt."

A Real Estate Agents Authority spokesman said if an advertisement clearly showed the purchase price, house hunters could judge a claim of affordability for themselves.

Holiday sales down

The number of houses sold in Auckland, and the average price, dropped last month for the city's biggest agency.

Barfoot & Thompson said sales were down from 1392 in March to 811, while the average price dropped from $725,708 to $708,603.

Easter and Anzac Day holidays were partly responsible, the agency said, as many people took an extended break.

Harcourts data out yesterday showed its average Auckland and Northland sale prices rose slightly from $697,448 in March to $700,793 last month. Harcourts said the figure was driven up by sales at the upper end of the market.

Barfoot managing director Peter Thompson cited the holiday period but said the loan-to-value regime and rising interest rates were keeping prices in check.

"This average is higher than those achieved last year but more aligned to 2012 numbers. It shows ongoing support in the Auckland property market, but more listings create more choice, and that ultimately softens prices. Sellers need to stay pragmatic about their property prices and not overprice them if they want them sold."

The April median price was $619,550.

Harcourts' provisional figures revealed a new Auckland/Northland record, up 11 per cent annually.

Dominick Stephens, Westpac chief economist, said house sales data had been hard to interpret lately.

"The composition of house sales has been affected by the Reserve Bank's restrictions on high-LVR mortgage lending. The B&T data is no exception," he said.

But it continued the weak trend of the past six months.

"House sales fell 10 per cent after an 8 per cent rise [in March]. 'Looking through month-to-month volatility, the trend in sales is clearly downwards - sales are now 20 per cent lower than their August 2013 peak, in seasonally adjusted terms."

The number of listings available on the market had risen - now up to 3.7 months' supply, from a low of 2.8.

Averages

Barfoot & Thompson
• $708,603 average Auckland sale price in April
• $725,708 in March

Harcourts
• $700,793 average Auckland + Northland sale price in April
• $697,448 in March.

- NZ Herald

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