Reserve Bank data shows that in September, the average gross income for first-home buyers was $144,473. Photo: 123RF
Most first-home buyers are earning more than the average New Zealand household, data shows - and people who are buying solo face a particularly significant struggle.
Reserve Bank data shows that in September, the average gross income for first-home buyers was $144,473.
The average income for all households across the country was $135,079.
About 40 percent of all first-home buyer lending was done to borrowers with a debt-to-income ratio of between four and five.
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The average income of these borrowers was $139,000 in August, down from $147,000 a year earlier but up from about $100,000 in 2017.
Cotality chief property economist Kelvin Davidson said the data did not show the "absolute threshold" for income for buying a house.
But he said it showed that while affordability had improved a bit, most first-home buyers still had fairly high income.
"It's going to be difficult if you're in the lower half of income to satisfy those [bank] tests."
Loan Market adviser Karen Tatterson agreed most of the first-home buyers she saw earned more than average.
"The key is external debt and most lenders are wanting them to have no more than $20,000 in outside financial commitments. This is excluding student loans. Most of the first-home buyers I see have little or no debt as there is a general understanding that this will improve the likelihood of purchasing their first home."
Another Loan Market adviser, Bruce Patten, said incomes were "always a problem" for purchasers.
"Especially in places like Auckland because the house prices are so high, however, with falling interest rates, the affordability is so much better now especially given the house prices have dropped or been static for a few years now.
"Debt-to-income (DTIs) will further hinder buyers as well now, however as seen during Covid I'm not sure the Reserve Bank had a choice, because we don't want to see the crazy price increases we had in 2020-2021 again."
Glen McLeod, head of Link Advisory, said KiwiSaver was an important tool to help build up a deposit and the income level of borrowers could vary a lot.
"Government support through Kāinga Ora's First Home Loan continues to play a significant role. Couples with a combined income of up to $150,000 can qualify for this scheme, enabling them to purchase homes, provided they have no short-term debt.
"Parental assistance is another common factor, allowing some buyers to purchase at a higher level thanks to larger deposits that reduce borrowing requirements."
He said apartments could be more affordable, as could homes on the outskirts of Auckland.
"Interestingly, income doesn't appear to be a major barrier for couples buying in main centres. The challenge is greater for individuals, who often need to rely on boarder income to meet repayments."
Gareth Kiernan, chief forecaster at Infometrics, said first-home buyers would often have a decade of work experience and associated pay increases behind them.
"There will also be a selection bias, with first-home buyers likely to have higher incomes than people at a similar age who are not purchasing their first home, because better incomes mean those people will have had more opportunity to save a deposit, and they will also have better debt-servicing and borrowing capability."
He said he would not be surprised if first-home buyer incomes were lower compared to the average in the past, when house price-to-income ratios were lower.
"Put another way, the amount of money for a 20 percent deposit would have been significantly lower, relative to average incomes, back in the 1990s, meaning that homeownership was a more realistic option for a broader range of household incomes. However, the effect might not be as large as you might initially anticipate, because mortgage rates were quite a bit higher 30 years ago - meaning that debt-servicing costs would have been somewhat more of a constraint than they are now."
Earlier, RNZ calculated a two-adult, two-car household with two children would need to earn at $78,500 to be able to afford a $375,000 house.
To service a $1 million loan with two borrowers, two kids and two cars, a family would need income of $165,500, assuming no other debts.
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