The rising cost of buying first home

By Cassandra Mason

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IN DEMAND: Low levels of construction since the global financial crisis, combined with population growth, had caused housing shortages PHOTO/THINKSTOCK
IN DEMAND: Low levels of construction since the global financial crisis, combined with population growth, had caused housing shortages PHOTO/THINKSTOCK

THE average Hawke's Bay first home buyer is forking out $270,000 for their first property - a 42 per cent jump from 2004.

Figures provided by CoreLogic show the median price for a first home in Hawke's Bay was $270,000 last year, compared with $190,000 nine years earlier.

However, local prices for first homes increased at a lower rate than the national median, which jumped 59 per cent from $220,000 in 2004 to $350,000 in 2013.

According to the most recent Roost Home Loan Affordability report, home-loan affordability in Napier improved from 53.8 per cent in February this year to 51.6 per cent in March, but worsened from 48.1 per cent a year ago.

Read more: First home buyers get millions

The report measured the percentage of after-tax pay needed to service an 80 per cent mortgage on a median-priced house.

In Hastings, home-loan affordability worsened from 45.3 per cent in February to 46.8 per cent in March, compared with 48.9 per cent a year ago

While first house prices in the Bay rose at a slower rate than nationally, the rate of wage growth in the wider region was higher.

Statistics NZ figures show the median weekly income for Hawke's Bay and Gisborne residents in paid employment rose from $493 in June 2004, to $756 in June last year - a 53 per cent increase.

Leaders Hastings director Elanor MacDonald said first home buyers in Hawke's Bay were looking at a price bracket of $250,000-$300,000.

But while schemes like Welcome Home Loan and KiwiSaver were helping house hunters get around the Reserve Bank's low deposit mortgage lending restrictions, a housing shortage in the region meant the homes weren't coming on the market.

"The problem at the moment is there isn't enough houses for them to choose from," she said.

"It's the lowest number of those [first home] properties available in many years. It would be good if some of the investors sold some of their properties that they've been hoarding up for years so we can sell them to first home buyers."

Hawke's Bay property prices peaked between 2002 and 2005, and there had been "very little" price increase from 2007, she said.

Real Estate Institute of New Zealand figures show the region's median house price was $269,000 last month [APRIL], compared with $277,000 in April 2013.

ASB economist Christina Leung said housing affordability for first home buyers had deteriorated over the last decade.

"House price growth has outstripped wage growth by so much."

Low levels of construction since the global financial crisis, combined with population growth had caused housing shortages - further compounded by the Christchurch earthquakes.

While most acute in Auckland and Christchurch, housing demand had spread to other regions, pushing property prices upwards, she said.

Wages had not kept up with skyrocketing property values. "Subdued" wage growth was partly caused by increased migration of available workers, Ms Leung said.

An Organisation for Economic Co-operation and Development (OECD) report published this month [MAY] rated New Zealand house prices the most overpriced in the developed world on a price to rent ratio, and second worst on a price to income ratio.

In a bid to cool the nation's heated property market, the Reserve Bank introduces mortgage lending restrictions last October which effectively shut out anyone with less than a 20 per cent deposit.

The measures were designed to control rapid price rises and reduce risk in the financial sector. But the 'speed limits' have shut more first home buyers out of the market than anticipated - making it even tougher for young families to get a foot on the property ladder.

- HAWKES BAY TODAY

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