Tauranga housing cost: Why it takes so long to save a home deposit

It has been promoted as a “vibrant city” where the GDP has eclipsed the national average since 2013 to make it New Zealand’s fastest-growing economy. Home to about 161,800 people, it is a tourist destination, hosts the biggest port in the country and has a CBD being transformed by $2 billion in investments. So why does it take longer to save a house deposit in Tauranga than any other main centre? Carmen Hall reports.

An average wage-earning household in Tauranga would take 11.3 years to save a 20 per cent deposit on an average house, CoreLogic NZ has found.

That is longer than for any other New Zealand main centre, with Auckland on 10.3 years followed by Hamilton (8.9), Christchurch (8.7), Wellington (8.3) and Dunedin (8).

CoreLogic chief property economist Kelvin Davidson suspects “wealth” in Tauranga’s property market may be one reason for its ranking.

He said the ratio was calculated using an average house price of $1.03 million and a 20 per cent deposit of about $206,000. Infometrics put Tauranga households’ average yearly income at the end of last year at $121,512 ($132,981 nationally).

“Assuming you save 15 per cent of your income, that’s 11.3 years.

CoreLogic NZ chief property economist Kelvin Davidson.

“The housing is pretty expensive... it’s not the only place where it’s difficult to buy a house if you’re on the local income but I think wealth plays more of a role in Tauranga than average.

“People are bringing in wealth from other parts of the country and that’s pushing up house prices.”

Tauranga’s average residential property value was up 1.5 per cent in the latest OneRoof Valocity House Value Index. At the end of January, the average was $1.093m.

The Bay of Plenty also overtook Auckland to become the country’s priciest renting region in December, according to Trade Me data.

Priority One chief executive Nigel Tutt. Photo / Salina Galvan Photography

Priority One chief executive Nigel Tutt said Tauranga’s housing market was a major concern for the economy.

“It is a factor of short supply of land for housing, high population growth, and lower-than-average incomes.

“If we’re unable to address this, the outcome will be we are less attractive to talent.”

This would be a problem with an ageing population requiring more services such as healthcare.

Tutt said the good news was incomes were growing faster than the national average as the proportion of high-skilled jobs increased.

“But we need more housing.”

Mortgage market picks up

Majesty Mortgage and Insurance Advisors mortgage adviser Margaret Richardson.

Majesty Mortgage and Insurance Advisors mortgage adviser Margaret Richardson said inquiries are down from the same time last year but were rising.

She said first-home buyers were back and represented most of her approvals.

Most used KiwiSaver and the First Home Grant for a deposit, “closely followed by gifting from the bank of Mum and Dad”.

She said banks had lightened up on people’s spending habits in their bank statements but were wary of gambling and bad account conduct.

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Tauranga Mortgage Brokers director and financial adviser Tracey Robinson said it could not get pre-approvals for people lacking a 20 per cent deposit unless it was a Kāinga Ora-backed First Home Loan.

Banks had to limit their low-deposit mortgage lending and usually reserved it for existing customers.

The company’s clients were coming from across the whole market, including first-home buyers..

Tauranga Mortgage Brokers director and financial adviser Tracey Robinson.

Robinson said some clients were increasing their KiwiSaver contribution, living frugally, returning to parents’ homes and taking in flatmates or boarders to save for a deposit.

Rapson Loans and Finance financial adviser and co-owner Tristan Hewett said a 20 per cent deposit opened up pre-approvals, options that allowed clients to bid easily at auction, special rates and full cash contributions.

He said banks were, however, still lending to people who needed to borrow more than 80 per cent of their home price.

“With Kāinga Ora and BNZ we can go to 95 per cent lending.”

He said the Tauranga market had picked up, with plenty of first-home and upsizing opportunities.

“There are numerous examples where clients have been able to get really good prices on lovely homes.”

Rapson Loans and Finance co-owners Tristan Hewett and Brooke Reynolds. Photo / Alex Cairns

Fellow co-owner Brooke Reynolds said its first-home buyers learned tips and tricks to increase their deposit.

They could include cutting discretionary spending by eating out less, making grocery lists and shopping only weekly.

“We have been recommending clients close their after-pay and lay-buy type payments and reduce or close credit cards.”

When the property market turned

A young, working Tauranga couple’s attempt to buy a home in 2021 was “the worst introduction to buying a house ever”.

That was the view of one partner who shared their story on the condition they were not named.

“The viewings were packed and every house was a multi-offer and if you had any conditions you were already out of the race.”

Fast-forward to March 2022, and “agents became our best friends, viewings were quiet and my phone wouldn’t stop”, he said.

“It was an interesting experience to compare two slightly different market environments. All in all, it was a very stressful journey.”

They bought an $800,000, four-bedroom home in Brookfield, which gave them the option of flatmates to assist with the mortgage.

“It ticked all of our needs and most of our wants.”

He said they went in with a 10 per cent deposit, mostly from KiwiSaver.

“The rest was just cash savings and sharemarket investments over a few years. We had zero family assistance. We just lived normally and saved a portion of our incomes regularly.”

However, he noted that prices of many things were higher now.

It was important to understand each step in the buying process from pre-approval to settlement, he said.

“Write them down and tick them off if needed. This helps to not get overwhelmed.”

What the banks say

An ANZ spokeswoman said getting a home loan deposit together could be “challenging”.

It applied a servicing-sensitivity rate when assessing affordability given interest rates could move over a loan’s term. That rate was currently 8.95 per cent.

ANZ Investments managing director Fiona Mackenzie said young people who started investing in KiwiSaver from their first job would likely have a decent-sized deposit when they hit the typical first-home buying age.

A 21-year-old invested in a high-growth fund, earning the living wage of $26 per hour ($54,080 annually) and contributing 3 per cent, matched by their employer, could have about $75,000 by age 34.

Kiwibank head of home lending and investments Pete Brooking said it had a partnership with Kāinga Ora enabling home loans with a 5 per cent deposit for eligible customers.

The bank assessed all potential new borrowers to ensure they could meet their day-to-day expenses, other financial commitments and repay their mortgage over time.

Kiwibank head of home lending and investments Pete Brooking.

It was stress-testing at 8.75 per cent and generally required that mortgage applicants provide three months of bank statements.

Reserve Bank of New Zealand figures show total monthly new mortgage commitments were $5.3 billion in December 2023, down 18.9 per cent from $6.5b in November.

The share of new mortgage commitments to first-home buyers rose to 25.2 per cent in December, up from 23.8 per cent in November. This was the highest share for first-home buyers recorded since the series began in August 2014.

Carmen Hall is a news director for the Bay of Plenty Times and Rotorua Daily Post, covering business and general news. She has been a Voyager Media Awards winner and a journalist for 25 years.