Bernard Hickey blogs that home affordability got worse in March – to an all time low in the Fairfax Media home loan affordability series.
The median house price increased slightly in March, and interest rates crept up another 10 basis points to produce the worse ever result:
The proportion of median take home pay required to service the mortgage on a median house rose to 83.1% in March from 80.2% in February and surpassed the record 83.0% seen in November last year when house prices hit their peak.
This is also worse than the 77.8% seen in March last year and almost double the 44.2% seen in March 2003 when housing was seen as only just affordable. Most bankers believe anything more than 40% of after tax pay is unaffordable.
In Wellington it is even dimmer. One would need to spend 90.7% of your take home pay to service a mortgage on the median house. In Auckland 96.8%.
Nationally one needs an after tax income of $1,421.76 a week to have only 40% of your take-home pay go on the mortgage. That is $2,100.95 gross a week or $109,549.50 annually.
So if you earn less than $110,000 a year you can’t afford the median house unless you devote more than 40% of your net income to the mortgage.