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Housing affordability was largely unchanged in February as a small rise in the median house price offset a fall in mortgage rates, interest.co.nz says.
The pause in the improving trend for housing affordability was not expected to last for long given predictions that house prices and interest rates would fall further later this year.
Fresh tax cuts later in 2009 will also increase take-home pay and improve affordability, interest.co.nz said.
The Real Estate Institute median house price rose to $330,000 last month from $325,000 in January, eating up the benefits from a drop in the average two-year mortgage rate for new borrowers to 5.92% from 6.1% the previous month.
The proportion of an after-tax median income needed to service the mortgage for the median house fell to 54% in February from 54.1% in January.
This is down from a peak of 82.9% in November 2007 when the median house price was $352,000 and the two-year fixed mortgage rate was at 8.75%.
Interest.co.nz said it was predicting that housing was likely to be largely affordable for most first home buyers by the end of 2009 if house prices kept falling, interest rates fell further and tax cuts were implemented.
"Affordability for most home buyers has improved dramatically and will continue to get better through the rest of 2009 as house prices ease and take-home pay improves, thanks to expected tax cuts," interest.co.nz editor Bernard Hickey said.
"The only complication for first home buyers is the increasing requirement by banks for a deposit of 20% or more, which is making housing effectively less affordable."
The threshold proportion of after tax income considered prudent
to sustainably own a house is around 40%. Anything above that is
starting to become unaffordable.
