Deposit gap squeezes Auckland home buyers

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By Leith van Onselen

Yesterday we reported how escalating home prices against sluggish wages growth has driven the deposit gap facing Sydney first home buyers (FHBs) to record highs.

The situation is equally bad across the pond, with surging home prices in Auckland driving the deposit gap to nearly 8 years for a typical couple saving for a lower priced home. From Interest.co.nz:

The report tracks how long it would take typical first home buyers in each region to save a 20% deposit on the REINZ’s lower quartile selling price in their region.

The income calculations assume both partners work full time and earn the median weekly wage for people of their age group (25-29) in each region and are able to save 20% of their take home pay to put towards a deposit…

In August 2013 it would have taken a typical first home buying couple in Auckland 5.5 years to save the 20% deposit for a home at the REINZ’s lower quartile selling price for the region, at that time, of $453,300.

But by August 2016, Auckland’s lower quartile selling price hit a new all time high of $695,600, a massive increase of $242,300 (53.5%) in three years…

Auckland’s lower quartile house price has increased at 8.5 times the rate at which typical first home buyers’ after tax incomes have increased over the last three years, which has inevitably pushed out the timeline for them to save a deposit…

[The figures] are based on median incomes, and the bottom quartile of house prices.

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The full set of Home Loan Affordability Reports for all major centres throughout New Zealand are available here.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.