Unaffordable Housing? Or A No Saving Lifestyle?
Much is being made of the latest report saying New Zealand's urban housing is among the most expensive, relative to average New Zealand incomes. When you strip back all the spin there is one reason for this - Demand for housing is exceeding supply.
What won't make housing more affordable is the Government providing low (or no)deposit housing loans or savings schemes with cash bonuses for first home buyers. All that does is increase demand, so any gains will be wiped out after a year or two. The only winners will be those who already own a house.
People who make out that our generation can't afford housing should ask their parents about how they got their first homes.
One solution parents did was to buy their first houses that weren't in fashionable addresses in Brooklyn or Khandallah. They bought in cheaper areas like Wainuiomata and Porirua. They then paid off the mortgages (yes, plural) and used the increased equity to buy in the better suburbs. And you can still buy houses for under $200,000 in those areas!
The next step is to stop putting your hand out, live a more frugal lifestyle and save your pennies - while trips around Europe and to lie on some Asian beach are good fun, that money can be saved for a deposit. Once you are in your own home the holidays can begin. Our parents rarely went out for dinner, grew their own vegetables and ate home made sandwiches for lunch - all money savers that are less commonly done nowadays.
But if you're not willing to put the hard yards into saving then you can't expect to get into your own home.
A final piece of advice is to look at how much the Government takes from your pay-check. And think how you could save every year if they took a bit less.
What won't make housing more affordable is the Government providing low (or no)deposit housing loans or savings schemes with cash bonuses for first home buyers. All that does is increase demand, so any gains will be wiped out after a year or two. The only winners will be those who already own a house.
People who make out that our generation can't afford housing should ask their parents about how they got their first homes.
One solution parents did was to buy their first houses that weren't in fashionable addresses in Brooklyn or Khandallah. They bought in cheaper areas like Wainuiomata and Porirua. They then paid off the mortgages (yes, plural) and used the increased equity to buy in the better suburbs. And you can still buy houses for under $200,000 in those areas!
The next step is to stop putting your hand out, live a more frugal lifestyle and save your pennies - while trips around Europe and to lie on some Asian beach are good fun, that money can be saved for a deposit. Once you are in your own home the holidays can begin. Our parents rarely went out for dinner, grew their own vegetables and ate home made sandwiches for lunch - all money savers that are less commonly done nowadays.
But if you're not willing to put the hard yards into saving then you can't expect to get into your own home.
A final piece of advice is to look at how much the Government takes from your pay-check. And think how you could save every year if they took a bit less.
posted by Michael at
7:45 PM
8 Comments:
While I do agree that personal sacrifice is very important when it comes to owning your own place, I think you're being a bit holier-than-thou when you consider that you entered the real estate market well before the current boom began - and until recently you've had the benefit of having two incomes.
You cannot deny that current prices have made life a lot more difficult - not only are the affordable houses all in dire, crime ridden neighbourhoods, but interest rates are high, and while I'm saving a deposit for the mythical $200,000 shoebox in The Bronx that you refer to, it could very well increase in value in the time it takes me by about 30%. Not to mention that even though I am in the top tax bracket and have low outgoings, I'm still not eligible for a mortgage because the repayments would eat up too much of my income.
By
Rich, at 12:50 PM
I think it's also worthwhile pointing out that I bought my first home in Porirua East in 1997, while I was single, and in the lower tax bracket.
It was well before the boom that started in 2000 but it cost about four times my income at that point.
By
Michael, at 8:56 PM
Totally fair enough, but the article I was reading in yesterday's paper said that the average house is now more than five times the average. Certainly the sort of places I would consider habitable, ie. not shoebox apartments in town or located in warzones, sit around at least five times my income - that's not taking into account the inevitable increase in value while I'm saving for the deposit.
By
Rich, at 10:22 AM
The problem I have with this is that it's just half the story. I agree that subsidising people into housing is not the problem, that we want to restrain rather than build demand, and that increasing the supply of housing will help more with prices.
Simple fact is though, that if housing is now six times the average household income when once it was three, it is less affordable for any given behaviour.
Given that the culture of this country's economy is "spend til you drop" - something unleashed by the reforms of the 80s, and which drives the need for very large budget surpluses - the chances of people saving twice as much as in past ages, when disposable incomes certainly haven't doubled, is non-existent.
So the solution, if we think house ownership is a foundation of a stable society (and I think that it is), is a collective one not just individual. People do need to spend less and save more - yes, our economy shows that every day with gaping current account deficits.
Policy also needs to change, to increase the availability of affordable housing. I challenge you to construct an argument as to why not.
By
Jordan, at 3:28 PM
Policy also needs to change, to increase the availability of affordable housing. I challenge you to construct an argument as to why not.
You will not get any right wing people trying to construct an argument against the benefits of property rights, and private property ownership.
As you say, policies do need to change. After nearly 8 years of Labour Government, they need to move to the right. The further left you go, the less likely you'll see an improvement in meaningful incentives to enable home ownership.
By
ZenTiger, at 5:30 PM
Rich, you may be able to get into the housing market with as little as 10% deposit. I remember some finance houses in Australia were offering no deposit finance.
You could consider a rental property if you were game.
Naturally, you'd need to work out the risk if interest rates climb above 8%, as they may well do later this year.
By
ZenTiger, at 5:37 PM
I've already outlined my solution - If you want a house, save some money and get realistic about your first home purchase. But I'm conservative when it comes to money (all those years in banking).
Our parents had to save a 20% deposit, deal with interest rates over 20%, and becuase they had children at a younger age, generally do it on one income.
(Ask your folks how many Lattes and Paninis they bought each week.)
I agree that the problem is we live with the instant gratification age, where everyone spends on low deposit credit, the Government scratching every itch (which encourages more "itches"), and people not taking responsibility for their own finances.
But that's the opposite of the (incomplete) reforms of the 80s and 90s, which made people less dependent on the state to fix their problems.
By
Michael, at 8:33 PM
In the past we didn't have such a large obnoxious underclass in the poorer suburbs.
Fear of the underclass is one of the main driving forces in the global property boom.
By
nzconservative, at 3:43 PM
Post a Comment
<< Home