Homes cost less, food costs more

June 21, 2011

A fall in house prices, record low mortgage interest rates and slow increases in wages and salaries slowly are making homes more affordable.

The Roost Home Loan affordability report for May showed that home loan affordability was at its best since April 2004.

The report calculates how much of a single median take-home income is required to service an 80% mortgage on a median-valued home.

Roost considers a mortgage unaffordable if servicing it requires 40% or more of one person’s median weekly take-home wage.

Queenstown was the least affordable place in the country with an affordability index of  79.3%. However, that’s still a lot better than it’s been:

Servicing a mortgage in Queenstown has become significantly more affordable in recent years, the report showed. A year ago it would have taken 111% of the median wage, with 120.1% required five years ago. The index reached its highest point of 154.3% in December 2005.

The most affordable place to own a home was Southland with an index of 28%.

While house prices and mortgage rates have declined, the price of food has been increasing. That is putting pressure on family budgets but it’s not a bad thing when we export so much of what we produce.

No-one likes paying more for food. But a reduction in interest rates leaves most people with more disposable income and therefore better able to cope with higher grocery prices and higher food prices mean better export returns.

That’s much better for the economy showing unsustainable consumption fuelled by taxing and borrowing is changing to savings, investment and export-led growth.


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