KEY POINTS:
It might be a recession, but for those who can afford the deposit the housing market is the most affordable it has been in four years.
The latest figures show the average home buyer will pay nearly $118 less per week on their mortgage.
Reduced house prices and tumbling mortgage rates mean buying a house is cheaper but the situation for those looking to sell remains grim.
The Home Loan Affordability series, compiled by economic commentator Bernard Hickey on www.interest.co.nz, shows interest rates, mortgage repayments and house prices have all fallen dramatically in the past year.
At the same time, take-home pay and disposable income have increased significantly for the average buyer.
In 2005 when interest rates were up to 9.3 per cent a couple paying $600 a week for an average $300,000 house was facing 18 years of payments.
Now, the average buyer - a person aged between 30 and 34 years old with a 20 per cent deposit - could pay $118 less per week on the mortgage. Average bank interest rates for a two-year fixed mortgage are down two per cent since December 2007.
It would take just under 14 years to pay off an average mortgage, saving $207,245 in interest.
Since December 2007, weekly take-home pay has increased by 6.8 per cent to $723, and the average weekly disposable income is up $164.
Experts say these buying conditions are being boosted by a drop in property prices for the first time since 1998.
Statistics from the Real Estate Institute of New Zealand show the national median house price for December 2008 was $328,500 compared with $337,500 in November and $345,000 for the corresponding period in 2007.
Real Estate Institute president Mark Elford said:
"There's absolutely no question that affordability has improved hugely over the last 12 months ... interest rates have fallen significantly and things are just really good at the moment.
"There are lots of opportunities out there and now is a good time to be looking at buying."
QV's latest report showed property prices fell 7.4 per cent last year, and mortgage rates have dropped to the same level as five years ago.
A battle of the banks to offer the best mortgage rates will benefit prospective buyers, as the official cash rate cuts introduced last month take effect.
Andrew King of the Auckland Property Investors Association said banks are being tighter with their loan conditions, and first home buyers will still find it difficult to step into the market since many banks now require a 20 per cent deposit.
"It's certainly a much better time to buy at the moment, but you still need to look at your job prospects with the economy the way it is at the moment.
"It may not be the best time for first-time buyers because it's still cheaper to rent than it is to buy. House prices are definitely coming down though and I think they will continue to," said King.
The popular one-year mortgage rate has fallen to around 5.7 per cent down from 8.6 per cent in January last year and the six-month fixed term rate has dropped to seven per cent.
The four-year and five-year rates are being reduced to 6.5 per cent from 6.95 per cent this month.
