The cheapest houses in the country are on the West Coast, where the median price is $375,000. File photo. Photo: 123RF
If you're a two-adult, two-car household with two children, you need to be earning at least $78,500 to be able to afford the cheapest median-priced house in New Zealand.
Data from the Real Estate Institute shows the cheapest houses in the country in January were in the West Coast of the South Island, where the median price for the month was $375,000.
Assuming a 20 percent deposit, that means borrowers there need to be able to service a $300,000 mortgage.
That is likely to require a family income of at least $78,500 a year.
Karen Tatterson, a mortgage adviser with Loan Market, said that would not allow for any external debt such as credit cards, car loans or Afterpay. Households servicing any of those would need to be earning more.
She said the situation was "scary" for first-home buyers anywhere in the country.
"I was chatting to some real estate agents today and we were talking about the purchase price in Auckland - most first-home buyers are now looking at in excess of $1 million for their first purchase and many are now actually servicing a mortgage of over $1m."
To service a $1m loan with two borrowers, two kids and two cars, a family would need income of $165,500, assuming no other debts.
Squirrel chief executive David Cunningham said banks applied different rules, but the approach used to determine what people could afford was to look at their income after tax, the cost of their debt, insurance and rates. The bank would also need to see a set amount of "surplus" each month that the borrower would live on.
"Affordability has been the biggest issue for first home buyers in the high-interest-rate environment with bank test rates peaking around 9 percent. They are drifting down towards 7 percent which will make a big difference. Bigger deposits and/or higher household income is the key to borrowing more - especially in the main centres."
Kelvin Davidson, chief property economist at Corelogic, said people sometimes found a way to buy houses with lower incomes. If they did not have as many children, or only ran one car it could help.
"And attitude and commitment still seems to play a big role too - if people want it badly enough, they can make it happen."
Banks will generally allow borrowers to have a flatmate or boarder and use that income in their application.
"If you earn a relatively low income and/or don't have a large deposit, it's obviously not going to be easy, with affordability measures still more stretched than they typically are," Davidson said.
Debt-to-income rules mean banks can only lend 20 percent of new lending to owner-occupiers with debt six times their household income, including home loans, student loans and other debt.
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