It’s no secret that Auckland has a problem with high-cost housing. House prices have risen significantly faster than average incomes in recent years. As a recent Treasury working paper (Skidmore, 2014) documented, Auckland’s house prices have quadrupled in the last generation, and rents have more than doubled.
This is widely acknowledged as a problem, but it’s important to understand that it’s not necessarily a problem for all Aucklanders. Another Treasury working paper (Law and Meehan, 2013) shows that young New Zealanders – singles and couples between 25 and 34 – are significantly less likely to own their own homes.
Most middle-aged and retired people are on the property ladder and thus able to benefit from capital gains from Auckland’s housing market. Rising prices are often positive for older people. But they’re not very good for the young, who don’t own property and, increasingly, find themselves shut out by rising prices.
To make matters worse for young Aucklanders, rising house prices are coupled with falling real incomes. We aren’t merely standing still – we’re rapidly falling behind.
The chart below shows real income growth for employed people by age group from Statistics NZ’s LEED data on median earnings of full quarter jobs, deflated by the consumer price index. Since the global financial crisis, real median wages for people under 35 have fallen. But people over 35 have done pretty well over the same time period:
In short, Auckland seems to be developing a dangerous “two-speed” economy. Most middle-aged people can expect their wages to rise and the value of their houses to boom. Most young people are experiencing wages that are stagnating or falling while being shut out of the housing market by high prices.
This is the point at which older Aucklanders sometimes seem to shrug their shoulders and say, “so what – I’ve got it good.” But they shouldn’t be so complacent, because we don’t have to be here. If it becomes too hard to live in Auckland, young Aucklanders will leave. If we can get a better deal elsewhere – higher wages or cheaper housing – we can go there instead. And for many of us, this will mean leaving New Zealand.
Young New Zealanders are mobile. We’ve seen our friends and family abscond to Melbourne or Sydney, or go to London on OE and choose not to come back. We may have moved here from other places. While we want to be able to live in Auckland and participate in the city’s revitalisation, we’re keenly aware that we have options.
I’ve written before about how New Zealand has the opportunity to raise its living standards by investing in better cities. Well, the reverse is also true. Expensive housing and lower wages for the young is a recipe for long-term economic failure. If you’re middle-aged, this should worry you: We might not be around to pay your pensions and buy your expensive houses when you want to downsize. We’d like to stay and pay for your retirement – we really would! – but we need a pay rise and affordable housing options.
So what’s your plan to make Auckland affordable for young people?
Processing...
that’s exactly what I have been silently conjuring in my head for while. Babyboomers bosses don’t want to increase our wages but at the same time they expect us to keep paying more and more for their rents or property. Of course it’s not going to work.
Yup, sounds about right. I’m a recent graduate originally from Wellington who has just moved to Auckland for work. Despite really loving Auckland I know that I won’t be able to stay here long-term because there is simply no way that I will ever be able to afford a house. Long term I will have to either move back to Wellington or go overseas – probably to Melbourne. Lots of my friends feel the same way – renting is doable for now, but eventually people want their own space.
I wouldn’t mind renting long-term if New Zealand was willing to (a) implement better tenancy laws that give more certainty to renters and (b) invest in upgrading the quality of rental housing through programmes like Warm Up New Zealand or a rental WOF.
It seems like the rental market is trapped in a vicious cycle – we don’t expect people to rent long-term therefore we don’t make policy to enable long-term renting therefore people don’t rent long-term…
I’m always suspicious of those who think that more regulation is the answer. Both the Building WOF and capital gains taxes will have an adverse effect on the rental market as the expected returns will remain and the costs will be passed on, the only question is just how quickly.
My guess is that there are already regulations and powers available to deal with the issues of 5% of landlords who are used as examples for the need for regulation, but that the agencies tasked with enforcing the law are under funded and/or overworked.
If you are a landlord why would you not invest in your asset to maximise your return. Do we really need more regulation in this area ?
I’m not sure that individual landlords can provide long-term certainty for their tenants. For example, my landlady wants long-term tenants and is happy to let us improve the place as a result (heat pump, new fixtures, etc). However, if she were forced to sell by financial difficulties, the new landlord could put us on the street in a month’s time.
Other countries do regulate to solve this collective action problem, and while there are ways to do it wrong (e.g. rent control), it’s often been extremely successful.
NZIER recently put out an good paper on the topic, showing that NZ’s rental protections were among the lowest in the world and calling for reform. It’s available online at http://nzier.org.nz/static/media/filer_public/98/7c/987c99b1-d879-48ca-ac2c-58e05307ac5c/nzier_public_discussion_document_2014-04_-_home_affordability_challenge.pdf
In terms of housing quality, there is often a real asymmetry of information between landlords and tenants. When you’re flat-hunting, it’s often hard to tell whether a flat will be warm enough in the winter, or whether there are concealed problems with mould or damp. And once you’ve signed a lease, you don’t have a lot of recourse to get such problems fixed.
This is, in other words, a classic situation in which either regulation (in the form of a rental WOF) or public investment (in the form of subsidies for insulation and weatherproofing) can raise welfare. Remember, information asymmetries often imply market failure!
Only legislation can correct the power imbalance of a landlord being able to kick a tenant out for no reason. Landlords plead “But tenants only have to give 21-days’ notice”, which is true, but only one of us has the power to put the other on the street.
1/ Build more houses- anywhere people will buy them. 2/ Keep prices lower by pushing back at AT every time they ask for wide footpaths & cycle lanes on residential streets. (They are now up to 1.8m for the footpath and 1.8m for the cycle lane plus a metre clearance at parking on either side of the street). The buyer pays for the cost of all that concrete and the extra stormwater has to be treated. 3/ Support the special housing zones particularly those that have a dog’s show of actually being built. 4/ Post mean comments when on anti-sprawl blogs.
Glad that you support building lots of housing in the inner suburbs where people will buy them :p.
Also, if we are going to limit the width of raods we would be best to reduce traffic lanes to 3m everywhere and remove onstreet parking everywhere too.
I absolutely support more houses in the inner city. The problem is that it is all in multiple ownership with all the owners wanting different things. One or tow might develop piecemeal. The same thing occurs on the edges where 10acre blocks were permitted. The bits that actually get developed successfully are where land is held by one or two owners who have the same goal. That means we can either expect most on the edges until the extreme left wing get control and nationalise everything (which of course will be never.) As for 3m lanes I have been pushing that for years on everything except motorways. Any wider than 3m just results in speed. The biggest push for 3.5m comes from AT particularly their bus ops people. My prediction is more of the same. Expensive wide roads, lots of housing on the edges of the region, lots of flats in the CBD and lots of unrealistic claims that it could all be different.
I know this is kinda a strange link, but I wish our three biggest cities have these kinds of small Condos that they have in Japan. Great for if you are a student. And apparently these are $500 a month.
Not a strange link at all! As Alain Bertaud observed, one of the way that you can make cities more affordable for people on low incomes is to not compel them to buy more space than they need or can afford.
This is why we need to not listen to people criticizing small apartments. The people doing the criticizing will never live in them anyway. Who needs a big balcony if they spend their lives at inner city bars, cafe’s, libraries anyway.
Dammit. A relink for those that are confused. https://www.youtube.com/watch?v=1PR8reKtP8s
LOL@mfwic
It’s something I point out to many older people but they don’t seem to understand how the aging issue will impact them. It is worse for Auckland because of Asian chain migration: one child, two parents, 4 grandparents. It is a demographic time bomb and I don’t have to stick around and pay a large chunk of my income to pay someone’s pension.
I totally understand and sympathise. I’m 33, my wife is 32 and in the past two years our Auckland house has climbed in value by over $60K. Great for us, but we cannot help but feel for the rest of our friends and family that aren’t in the same boat- Let alone those younger than us. Having said all of that I do think back to our renting days and feel that although our capital wealth has no doubt increased, we’re far poorer and are close to the poverty line (due to my wife starting up a business that’s only now paying for itself after 12months of very hard graft) compared to our renting days we’ve had to really dig deep and have absolutely no life (apart from taking our 3 kids to places like the botanical gardens, parks and beaches such as Maraetai. In the past 2 years our owning our home has certainly meant an extreme sacrifice getting ourselves into better financial shape for our future rather than going on family cruises, nights out on the town/casino, etc…
I do think that it’s possible to buy a house in Auckland, but having zero debt (which I know is hard because of student loans- something the baby boomers don’t have any experience of) and having a nest egg (in the form of Kiwisaver & any other savings/grant/s) is an absolute must. We’ve done it on just my wage $55K per year + working for families (we have 3 children), with no debt and thankfully we took advantage of all the Kiwisaver grants and from 2 years worth of hard savings. Also, places such as Remuera just aren’t a first home destination, unless you’re seriously well heeled..
However, with Immigration at such a high level, I just don’t see anything changing. Yes many friends and family of ours have moved on, but with Immigration well outstripping Emigration there’s no shortage of demand in the near future. I feel for everyone that’s not on the ladder (aka: gravy train), however all is not lost, it just takes really hard graft, saving, determination and increasingly two wages to get onto the housing ladder…
One thing that many friends of ours are now doing is getting into owning their own business before owning a home. If you’re in a relationship that’s healthy and both parties are able to bring something to the table then perhaps owning and running a successful business maybe a way into the property market at a later date? (I wish my wife’s business was established before we had a mortgage to pay as the capital that’s needed by a business is a serious drain/ juggling act… :-), however owning a successful business is almost more satisfying that owning a family home )
I hope this hasn’t been too much of a lecture…
RMA reform is going to be a priority for the National government in it’s third term.
The reforms of previous governments have gone too far and the result has been fewer properties being built compared with population growth. The Auckland City Council has also been a factor in this with their out of control charges for anyone who wants to subdivide or go into property development.
I can only hope the RMA reform is dramatic so we can enable property developers to build again, increase the supply of housing and bring down the cost of housing.
My understanding of the issue as it relates to Auckland is that the constraint will move from the RMA to the Unitary plan, so you still won’t be able to build the type and style of building due to more localised limits.
How the affordable housing issue is resolved as population increases and the cost of travel time starts to be included in the affordability debate will be an interesting study on how the growing pains that the city is experiencing will play out.
In effect it is not a rule or a set of rules, more a mindset that is limiting our potential.
You mean by ignoring all the other fundamental problems throwing more petrol on the fire is going to work? Whatever!. All more stock means is more chips on the table to gamble.for the punters.
The problem is all the nimbys opposing any up zoning in the places people actually want to live.
What destinations are competing for New Zealand professionals in their 20’s ? It’s cities such as Melbourne, Sydney, Brisbane, Perth and London where
– apartments are a strong and growing sector of the residential market, and
– conservative governments are investing in large rail projects.
Both Sydney and Melbourne are both experiencing a boom in apartment construction
http://www.hutchinsonbuilders.com.au/2014/08/sydney-apartment-construction-boom-is-underway/
Melbourne is now approving more units and apartments than stand-alone houses.
http://www.macrobusiness.com.au/2014/06/melbourne-apartment-boom-gets-second-wind/
Excellent post Peter! Really encapsulates a lot of important issues that need to be driven “home”.
Current policies, especially regulatory settings preventing more intensive development, are really exacerbating housing affordability issues especially for the segment of the market that can least afford it. By supporting these regulatory settings, such as minimum parking requirements, minimum apartment sizes, building height limits, floor area ratios, and building set-backs, older generations of happily suburbanised Aucklanders are unintentionally, 1) increasing the level of impoverishment of young people and 2) creating the economic conditions under which they will be more likely to migrate.
In terms of #2, I note that the wider world’s economic issues have helped insulate us from outwards migration for the last wee while, but if the global economy recovers then you can expect to see such migration resume – and in the long run that is not necessarily in the interests of the people who remain.
What this also highlights is that NZ’s economy does a very efficient job at delivering high income *growth* to people who have accumulated wealth. Somewhat logically this leads to these people accumulating more wealth, from which they generate more income etc etc. I don’t mind too much if people disagree with Labour’s proposed capital gains tax, what I do disagree with is if they pretend there is not an issue with the very strong connection that exists between accumulated wealth and income growth in NZ.
History doesn’t repeat, but it does rhyme. And I think it’s notable that the wave of mass emigration from NZ in the 1970s and 80s was motivated by the failures of an excessively-regulated, uncompetitive economy. (Which, I would add, Muldoon’s government tried to stimulate with uneconomic infrastructure projects.)
It’s not just housing, it’s all property. How long until these insane prices affect businesses because investors want to recoup the money via tenants? How long until running a business in Auckland becomes unaffordable?. Remember we are a low wage beer economy with a 1st world property appetite for champagne..
This market is not supported by income, its being held together by speculation and cheap debt. It is dangerous and high risk.
Greed by the generation who have property is killing this city but given the election result that’s the way some kiwis want it and we now need a big free market correction to shock the country out of this stupor!.
I’m one of those people trying to find a place to buy at a price point that even vaguely makes sense. I work in the CBD, and I want something central-ish (so housing out in surburbs on the edge of town doesn’t interest me). There is a *lot* of activity going on in terms of apartment developments at the moment (I’ve been debated whether to pen a guest post updating the site’s “Development Tracker”), but if you take the government’s threshold of $550,00 as “affordable”, there aren’t many apartments that fall under that line. You could get a a 2 bedroom apartment in one of Conrad’s downtown towers like the Park Residences, or a 1-bedroom unit in the Fiore Mt Eden. I had a look at Fortythree, a 4 story apartment block that’s just started marketing in Ponsonby – 1 bedrooms from $600,000, 2 bedrooms from $800,000 and 3 bedrooms from $1 million. You aren’t getting much of a discount for going the apartment route. I had a look at an open home for a north facing unit in the Isaac (mentioned by Sudvhir Singh at his lecture the other day as an example of “density done well”) – $1.2 million for a 2 bedroom + internal study apartment. If you want something affordable you have to pick your poison: small, distant, history of leaky building issues…
The cost of building apartment in NZ is quite expensive. We are not as efficient at building, nor the raw material are cheap here.
All of those affordable second hand apartment on the market are either small, leaky, poorly built, distant, poorly managed, leasehold or all of above.
Not all, they are just hard to find 🙂
Yes I keep meaning to update the development tracker but keep putting it off due to how much work is involved due to the shear number of projects. If you want to do so then I would be very pleased.
What’s expensive is the 20 – 25% profit margin that developers expect. Nothing more than unbridled greed!
Thanks for the comment Chris – I’ll send you an email re: the Development Tracker (which we hope to have back on its feet soon regardless). There is quite a large premium being paid for new apartments so there are certainly a large number of existing ones available at lower prices, not all of which have issues…
It would appear from the graphs that the percentage of over 65s owning their own home is also declining. Although you say that “most” over 65 own a home, it is also true that over 40% don’t. To style it as a generational issue misses the real point and that is the number of speculators owning houses.
Of course ‘divide and rule’ is a well used method of the establishment to maintain their wealth. I’m over 65 and never had the opportunity to buy a property (along with over 40% of my cohort).
I think that by framing it as an inter generational battle you are falling into a trap.
I think you might have misinterpreted my point slightly. I don’t see this as an intergenerational battle. I _want_ to be able to pay for your pension! In fact, I already am. But that’s not a fair deal for young people if they’re being asked to put up with lower wages and higher housing costs. If it becomes too unfair young and mobile people will opt out.
Our cost of building material is so expensive here because there is a lack of competition and some kind of monopoly for raw material distributor. The same material here is much cheaper in Australia and US.
Also the cost of subdividing a property cost around 100k for each new house. Which is pretty much administration fee. This should be lowered.
Therefore to build a new house, it actually cost 700k for a low end one and 1mil + for a decent one.
Also building more apartment may not lower the cost, because the cost of apartment construction is about 4k per Square Metre vs 2k for house. So the construction cost for large apartment is expensive. That’s why new family apartment in a good location can sell for 1 million. Which is not really much cheaper.
Since the cost of building new house/apartment is expensive, second hand market value will increase to match.
Therefore if we want the house price to goes down, we have to fix the above by:
1. Lower subdivide administration cost <- RMA reform?
2. Increase competition for raw materials <- Commence commission? Rules for distributors?
3. Increase construction scale: Use factory built house and apartment <- Investment on large scale building factory?
1. I suspect admin costs like subdivision fees are also partly to do with anti-rates populism. Think California’s Proposition 13.
2. There was a story on NatRad not too long ago where someone saved a truckload on building his house after importing the materials from Europe. And you’re right that the Commerce Commission has been weak-kneed towards the dominant building materials companies.
3. Prefabs come to mind. It’s also been pointed out that NZers have a lot of customisation compared with Australia. On the other hand, who wants cut-and-paste suburbs like the ones seen in America?
And it’s safe to say that snobbery makes up a sizeable chunk of an Auckland house price. You only have to listen to the hoity-toity NIMBYism of Bill Ralston and David Seymour. On that note, reform of the Resource Management Act starts in Epsom and Ponsonby.
Kelvin, I think you’re a bit off with some of those costs… I’m assuming you’re including consultants, site works and what not in your construction costs, in which case fair enough, but let’s not forget there’s a range of typologies between detached houses and high-rise apartments. And, for that matter, you’re probably looking at a smaller differential than the one you’ve used if the detached house is two storeys, which they often are these days.
As for a $100K per section “administration fee”, not sure what you’re getting at there. The vast majority of the costs that get paid to council entities are for infrastructure – development contributions and Watercare charges. Those are expensive, but nothing like $100K per section. $40K, maybe, if GST is included. Consent costs are much smaller. I’m sure in isolated cases – drawn out plan changes, hearings etc – costs can reach $100K per section, but that’s certainly not the norm. I’m sure there are ways to reduce these costs somewhat – through improved consent processes, more council efficiency, etc – but I don’t think they can be cut significantly unless the infrastructure costs are tackled. I’m skeptical that major differences can be made there either, unless the costs of that new infrastructure get shunted onto existing ratepayers instead, which seems to happen to some extent anyway and seems more likely with the recent law change.
The Commerce Commission allows almost any takeover bid, and their definition of a monopoly seems to be more than 80% of the market. What we have is heaps of comfortably duopolies. Cement is a good example
This is in some respects the other side of the agglomeration issue which makes cities such great places. I have called on a couple of light engineering businesses which have relocated to Whangarei because of these issues. Long term leases available for business premises and reasonable housing costs for employees. One firm does truck bodies, and their market is almost entirely in Auckland. They brought almost their whole staff with them and it seems to have worked out well. There is no Grammar Zone to worry about and if you really wanted to, cycling would be an option, although motorists here can be almost as antisocial as in Auckland. My son moved back here and built a freehold house with the cash that he got from a heavily mortgaged house in Auckland. None of us could ever hope to get back on the Auckland property ladder.
So that’s how I see the Auckland property boom hurting in reducing agglomeration benefits.
The solution is really to close the loophole which allows landlords/speculators/land bankers to convert taxable income into capital gain. That requires either a capital gains tax, or limitations on the tax-deductibility of interest. Either way, if you prick the bubble there will be all hell to pay.
“If it becomes too hard to live in Auckland, young Aucklanders will leave. If we can get a better deal elsewhere – higher wages or cheaper housing – we can go there instead. And for many of us, this will mean leaving New Zealand.”
– If people put their own personal gains ahead of contributing to the growth of New Zealand, they can kindly piss off. We have no space for the selfish who would sell out their country for 40 pieces of silver. That sort of “economically rational” behaviour is anti-patriotic and selfish.
By that logic, all of our ancestors should have stayed in Polynesia, Great Britain, or Asia. I’m personally very glad that mine left the sheep-farms and factory towns of Northern England for a better life.
Only if, Peter, they reassigned their loyalty to the new country thus merely transferring their patriotism. If their decision was for purely economic reasons they are a dual traitor (failing to support their motherland, and then engaging in economic parasitism in the second)
I recommend that you emigrate to North Korea. Your style of rhetoric would be a good fit for their propaganda agencies.
Oh spare us the mindless patriotic bollocks! Patriotism has often been used by countries as an excuse for selfish acts. Speaking personally, patriotic nonsense is actually a very good reason to leave a country. And besides, no-one in NZ can blame anyone for migrating to a better life; as Peter notes it’s the very reason most of us are here in the first place.
Actually I can. A better life for you, but not for the country.
It is by definition a *selfish* act. Loyalty to the country means that you do what you can to build a better future for NZ even if you yourself bear some of the costs
What I’m hearing is “NZ works just fine as it is right now – for me – so please stick around and prop up my lifestyle regardless, even if it means working poverty for the rest of your days.”
Ta but I’ll pass if it ever comes to that, God forbid. Don’t remember signing myself away to the dictatorship of the boomertariat just because I had the nerve to be born here.
Or should that be Boomergeoisie?
“If people put their own personal gains ahead of contributing to the growth of New Zealand, they can kindly piss off.” By which you presumably mean the ‘investment property’ buyers, who are making themselves rich by contributing no growth to NZ.
This whole issue is caused by the propertied wealthy class selfishly putting their desires above those of New Zealand as a whole. I don’t think that asking for urbanisation and affordable housing so that it is worth me staying is anywhere near as selfish as asking for development to be stopped so that one can acquire massive capital gains and then retire off of the gains.
Or to put it another way, the landed gentry with cellphones.
I don’t totally accept that first home buyers can’t afford to get into the market. Buy in a modest neighbourhood further out, and sell up and move nearer where you want to be in the future when you have more equity, or buy an apartment. I bought my first house in an less desirable suburb with a 10% deposit and moved up later. Young people have unrealistic expectations that their first home will be their dream home.
Bit rich Bob that the landed gentry complaining about young peoples expectations and telling them to bugger off to the outskirts of town, are the very same people resisting any ability for apartments to be built in inner suburbs that WOULD provide a realistic and affordable option for young people, in a place they actually want to live.
Bob, I suggest you have a look on trademe property to find out how much a “modest neighbourhood further out” costs. Start by plugging in “under $300,000” and “house” anywhere in Auckland and seeing what pops up. You find perhaps half a dozen houses like these:
http://www.trademe.co.nz/property/residential-property-for-sale/auction-785691465.htm
http://www.trademe.co.nz/property/residential-property-for-sale/auction-762845118.htm
Note the warnings like: “Do Up” and “It offers a challenge to scope out the repairs that are needed.”
for around $250,000 (plus holiday homes in the country and random junk) which might fit your criteria.
The problem is that plenty of people make less than $40k per year. Even if you have 1.5 people working it can take years to save the $50k deposit and then take on a relatively high $200k mortgage. This is for a couple of on the *average* household income buying the *cheapest* house in Auckland.
Here is the official Salary scales for teachers in New Zealand to give you a realistic idea what people even in “middle class professions” might be making.
http://www.minedu.govt.nz/NZEducation/EducationPolicies/SchoolEmployment/TopicsOfInterest/BaseSalaryandAllowances.aspx
PS; To the mods. There seems to be a bug with the site. If I type in a long comment the “post” button scrolls below the bottom of the screen and I can’t reach it. I did a trick to post this
“I don’t totally accept that first home buyers can’t afford to get into the market. Buy in a modest neighbourhood further out, and sell up and move nearer where you want to be in the future when you have more equity, or buy an apartment. I bought my first house in an less desirable suburb with a 10% deposit and moved up later. Young people have unrealistic expectations that their first home will be their dream home.”
Based on a sample size of…one? These days that modest suburb is a long way away. How poorly does one value their time to spend half their life commuting?
The problem in Auckland and New Zealand is the unreasonable costs for building. Our building supplies are very very pricey. Material costs to much and dare I say it the major construction companies are so bloated they can charge whatever they want from the government. Fletcher and the likes are one of the biggest obstacles to prosperity for this country. The council is tuck having to deal with inefficient companies that haven’t had to make structural adaptions to their work. This shines through in legislation and how old suppliers/contractors work. There is so much that could be done alot cheaper with the same or higher standards.
I still haven’t gotten over that they needed Norwegian tunnel drillers when they built a rather large tunnel north of Auckland the other year. Norway the most expensive country in the world where construction workers earn about NZ$ 8.000 a month. They were flown down here to do the work, lived like kings and earned a fair bit more than in Norway. Their manager stated that their company could have built the project for at least 30% less just using their people. if he trained kiwis and gave them the knowledge he estimated about 50% less.
Norway the worlds most expensive manufacturing country. Thats what were up against when it comes to larger constructions such as apartment building.
How can the price for a house in Northern Sweden, extreme climate, be cheaper or the same price as here? their houses have everything we want * 3 ? Their houses come with triple glazing, smart wiring, insulation everywhere and a much better one than what NZ has ever seen, proper walls ie not GIB board walls etc etc. Northern Sweden is pretty remote, wages are close to double in NZ, taxes are 20% higher, climate is tough etc etc. The cost for them should be higher not lower.
we need to change the construction industry if we are to get better and cheaper apartments. That goes for all our infrastructure projects.
Not to take it off track but having an extended family who specializes in subdividing I think the figures here are very over blown.
These days the price for most sub-dividable properties are 800.000-900.000 or similar. The do the paperwork, build a house (5 bedroom around 250.000) renovate the previous house 50.000 and sell. They usually end up making about 200-300.000 per subdivision. They do at least 4 a year.
Also almost everyone I play badminton with have a few investment property’s. Ok this is mainly locals who emigrated from malaysia, HK etc but even those with normal work have them. I have one, if we wanted to we could visit another bank and take out a new mortgage on a third, a forth etc just like most of my badminton mates have done. Works for them, they never pay off the mortgage just wait and take the capital gain. Banks compete for business and rents are high. Perfect scenario to crowd out first time buyers who doesnt reply on their parents.
It would be good if the young or renters could form a lobby group (is anyone on transportblog keen?) to counter act the nimby’s, the building material duopoly, the excessive Council charges and so on. So that house prices are low and stable in relation to income.
They could also advocate for better rental conditions, long term rental leases, rental WOFs plus low and stable rental prices.
Bernard Hickey, himself a Gen-X’er, has made a few noises about the issue.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11244355
I would argue that if fringe development was cheaper then the property price curve back to the centre would also drop. That doesn’t necessarily mean a mono-modal road and standalone housing sprawl.
Auckland could get its transit operators to do something like this http://www.gazettenet.com/blogs/readuponit/12980237-95/commuter-rail-operators-are-becoming-land-developers-to-pay-for-the-service.
Yea kiwirail pretty much missed the opportunity.
I would like to think I had a useful contribution on Bernard Hickey’s old webite.
http://www.interest.co.nz/opinion/70493/fridays-top-10-brendon-harr%C3%A9-national-vs-labour-housing-affordability-uk-councils-spy-
I am also a Gen-X’er so have seen the changes in NZ society that housing unaffordability is generating.
Trust me, Sydney and Melbourne are not all they’re cracked up to be and I for one am looking forward to the day of returning to Auckland. Sydney especially, is extremely expensive for accommodation and prices have sky rocketed there probably even more so than in Auckland. It now costs $700k just for a very sub par home that’s not 2hrs from the city. Then there’s the expensive transportation, fees, taxes and many other things you don’t think of. Even with the higher wages, I think it’s still more expensive and harder overall than Auckland (to buy new into the market). The one thing it does have though is more opportunities, which I think is where Auckland lacks.
Agreed, I always laugh a sad laugh when people say “housing is too expensive in Auckland so I’m movng to Melbourne/Sydney”… they are in for a nasty surprise
Melbourne and Sydney are overrated. Battlers just follow the trend and move there for $10 bucks an hour more to be confronted by just as expensive real estate and living. Auckland is on the rise and will soon hang on to those young kiwi assets we keep leaving overseas. Bulk Asian migration is worry and must be effecting soaring house prices!
Nasty surprise in Sydney or Melbourne? I can tell you having grown up in Auckland until 23 then after living in Melbourne, London and then Sydney for the last 5 years, Sydney is far easier to afford property than Auckland. Your earnings are far far greater than Auckland. The average household income in Auckland will not get you anywhere near the average cost of an Auckland house. And btw Auckland is not a patch on Sydney for lifestyle not even close.
I have just moved to Auckland from Wellington, we rented our house out in Wellington {with a view over the airport} and rented a lovely four bedroom house in caster bay {with a view over the sea} for the same cost. I must thank my Chinese landlord for renting a property at less than a 2% yield.
In time we will want to buy but we will never be able to afford to buy anything close to comparable to what we have in Wellington. After driving to work for a week i am close to suicidal. I never thought i would say this but i would take the wind any day of the week.
Wellington ; higher wages, easier to get around, more affordable housing, shit weather.
Can I ask where you commute to? Castor Bay, like anywhere on the Shore, is terrible to drive out of at peak times. Would the bus work for you? The northern busway is pretty amazing if you are headed to the central city, and express buses run through Castor Bay.
Agree! My case, 26 year old, earn a 80Ks salary, one newborn, wife on parental leave. Down to one income, and couldn’t afford to buy a house. Waiting to bugger off to middle east (Dubai), so at least can earn tax free money. All the babyboomers can then live happily ever after, when we, the young people are gone.
I found this site that shows the latest New Zealand house prices for free – http://soldst.co.nz
It is a great resource if you want to have a nosy around your neighborhood.
More importantly as our population ages there will be nobody around who can afford to live and support them. Anybody in the service industry will either be seeing themselves as a community charity or moving on to where they can afford some kind of lifestyle. It will wipe the smug smiles away pretty quickly. Sydney is already in panic mode about this. The economy of the city cannot sustain itself without its workers…
Regardless if this is a bubble or not, we won’t buy a house here in AKL at least for now.
If it’s a bubble and the price of a house will change in 4yrs time, the we will buy and we’ll have bigger savings at that time. If nothing will happen – we’ll move to Melbourne. Look, in Melbourne you can buy a brand new house for 400k, 28kms from CBD. How about in Papakura? Can you buy a brand new house there for 400K? Heck no, not even in Pukekohe.
Exactly!! I believe the whole system has problem.