By Bernard Hickey
New Zealand home buyers haven’t had it this good since September 2003 when the Rugby World Cup was last held in this part of the world, a new survey of affordability has found.
A fall in house prices nationwide and renewed expectations of lower interest rates for longer has improved affordability to its best levels since September 2003, just before the Rugby World Cup was contested in Australia and just before house prices surged, the Roost Home Loan Affordability report shows.
Affordability improved in most cities and provincial areas, including Auckland Central, South Auckland, Hutt Valley, Tauranga, Whangarei and Queenstown. Affordability worsened around Christchurch, Otago and Southland as house prices there rose.
Interest rates remained flat at record lows in July and are now expected to remain there until late this year. Before signs of a global economic slowdown emerged in late July, economists had forecast a rise in the Official Cash Rate on September 15. But concerns about slowing growth in America and Europe has seen economists push out their rate hike expectations until December 8.
First home buyer affordability also improved in July to its best levels since July 2004.
Banks eased their lending criteria in the first half of 2011 in an effort to boost lending volume growth from record lows of around 1% a year. Lending was growing at 17% per annum in 2004.
“Banks remain keen to grow their lending and are willing to do deals,” said Rhonda Maxwell, spokeswoman for mortgage broking group Roost Home Loans.
Some banks are offering loan to value ratios of up to 95% and are discounting establishment and legal fees, Maxwell said.
“The prospect of lower interest rates for longer is encouraging many first home buyers to look at their options now affordability is back at pre-boom levels,” Maxwell said.
A young couple earning the median wage could afford to buy a first quartile priced house in July, with 20.5% of their disposable income required to service an 80% mortgage. This is down from 25.6% in July a year ago and down from a June 2007 high of 35.1%.
The national median house price fell to NZ$345,000 from NZ$360,000 in June and a record high of NZ$365,000 in March. The first quartile house price fell to NZ$245,000 from NZ$249,000 in June.
The Roost Home Loan Affordability report measures affordability nationally and regionally for individual income earners and households, taking into account median house prices, interest rates and incomes.
The Roost Home Loan Affordability measure for all of New Zealand showed the proportion of a single median after tax income needed to service an 80% mortgage on a median was 50.2% in July from 52.5% in June. The worst level of affordability was 83.4% seen at the peak of the house price boom in March 2008 when 2 year mortgage rates were close to 10%.
Affordability has been improving since December 2009 as house prices have flattened out and interest rates have fallen, the monthly measure calculated by interest.co.nz in association with Roost found.
More than 50% of home owners are now on floating mortgages and most new borrowers are choosing to float, given advertised floating rates at around 5.75% are cheaper than average longer term fixed rates at around 6.2%. The Home Loan Affordability reports use the floating rate.
Affordability is difficult in Auckland, Wellington, Christchurch, Hamilton and Tauranga for those on a single median income, but homebuyers in smaller provincial cities will find home ownership much more affordable. Households with two incomes are also in a stronger position, particularly those bidding for homes priced in the lower quartile.
Affordability for households with more than one income improved slightly because of the fall in interest rates. This measure of a ‘standard typical household' found the proportion of after tax income needed to service the mortgage on a median house was 33.0% at the end of July from 34.6% in June and a record high of 54% in November 2007.
This measure assumes one median male income, half a median female income aged 30-35 and a 5 year old child that receives Working-for-Families benefits. Any level over 40% is considered unaffordable for a household, whereas any level closer to 30% has coincided with increased buyer demand in the past.
The survey’s measure of a ‘standard first-home-buyer household' found the proportion of after tax income needed to service the mortgage on a first quartile home fell to 20.5% in July from 21% in June and a record high of 34.9% in November 2007.
This measure assumes a first home buyer household includes a median male income and a median female income aged 25-29 with no children. Any level over 30% is considered unaffordable in the longer term for such a household, while any level closer to 20% is seen as attractive and coinciding with strong demand.
Full regional reports are available below:
- New Zealand (159kb .pdf)
- Northland (159kb .pdf)
- Whangarei (159kb .pdf)
- Auckland region (159kb .pdf)
- Auckland Central (159kb .pdf)
- Auckland North Shore (159kb .pdf)
- Auckland South(159kb .pdf)
- Auckland West(159kb .pdf)
- Waikato and Bay of Plenty (159kb .pdf)
- Hamilton (159kb .pdf)
- Tauranga (159kb .pdf)
- Rotorua (159kb .pdf)
- Hawkes Bay and Gisborne (159kb .pdf)
- Napier (159kb .pdf)
- Hastings (159kb .pdf)
- Gisborne (159kb .pdf)
- Taranaki (159kb .pdf)
- New Plymouth (159kb .pdf)
- Manawatu and Wanganui(159kb .pdf)
- Palmerston North(159kb .pdf)
- Wanganui(159kb .pdf)
- Wellington region (159kb .pdf)
- Wellington City (159kb .pdf)
- Wellington Hutt Valley(159kb .pdf)
- Porirua (159kb .pdf)
- Kapiti Coast (159kb .pdf)
- Nelson and Marlborough (159kb .pdf)
- Nelson (159kb .pdf)
- Canterbury (156kb .pdf)
- Christchurch (156kb .pdf)
- Timaru (156kb .pdf)
- Central Otago Lakes (159kb .pdf)
- Queenstown (159kb .pdf)
- Otago (159kb .pdf)
- Dunedin (159kb .pdf)
- Southland (159kb .pdf)
- Invercargill (159kb .pdf)
| Regional home loan affordability comparison: | ||||||
| mortgage payment as a % of weekly take-home pay | ||||||
|
Jul-11
|
Jun-11
|
Jul-10
|
Jul-09
|
Jul-08
|
Jul-07
|
|
| New Zealand |
50.2%
|
52.5%
|
61.2%
|
56.3%
|
76.6%
|
81.6%
|
| Northland |
43.7%
|
51.9%
|
59.8%
|
58.0%
|
77.7%
|
81.0%
|
| - Whangarei |
40.1%
|
43.6%
|
50.7%
|
49.6%
|
68.1%
|
72.3%
|
| Auckland |
64.2%
|
63.8%
|
75.0%
|
68.9%
|
89.0%
|
98.3%
|
| - Central |
67.4%
|
68.0%
|
81.3%
|
71.8%
|
88.2%
|
105.3%
|
| - North Shore |
71.0%
|
68.7%
|
79.5%
|
76.0%
|
93.1%
|
107.0%
|
| - South |
64.6%
|
65.6%
|
76.0%
|
70.3%
|
89.7%
|
93.0%
|
| - West |
56.1%
|
57.6%
|
69.6%
|
60.5%
|
74.9%
|
85.7%
|
| Waikato/BOP |
47.2%
|
49.0%
|
59.0%
|
56.8%
|
77.6%
|
80.0%
|
| - Hamilton |
52.4%
|
49.0%
|
63.0%
|
60.3%
|
78.0%
|
85.8%
|
| - Tauranga |
53.5%
|
56.3%
|
65.9%
|
62.6%
|
84.2%
|
94.4%
|
| - Rotorua |
39.7%
|
40.1%
|
49.4%
|
44.1%
|
63.4%
|
64.3%
|
| Hawkes Bay |
45.1%
|
41.8%
|
52.6%
|
50.8%
|
71.1%
|
76.0%
|
| - Napier |
46.3%
|
45.8%
|
56.7%
|
51.6%
|
76.7%
|
80.7%
|
| - Hastings |
44.0%
|
42.1%
|
56.6%
|
53.8%
|
66.6%
|
72.7%
|
| - Gisborne |
37.8%
|
51.9%
|
56.4%
|
51.6%
|
57.2%
|
85.7%
|
| Manawatu/Wanganui |
33.8%
|
36.2%
|
44.2%
|
40.5%
|
57.4%
|
59.7%
|
| - Palmerston North |
41.5%
|
41.5%
|
45.5%
|
46.9%
|
61.1%
|
68.5%
|
| - Wanganui |
25.8%
|
30.4%
|
39.3%
|
32.2%
|
48.8%
|
47.4%
|
| Taranaki |
40.8%
|
40.2%
|
55.6%
|
50.6%
|
65.0%
|
66.2%
|
| - New Plymouth |
47.1%
|
45.7%
|
62.8%
|
57.0%
|
69.3%
|
80.3%
|
| Wellington region |
49.0%
|
51.2%
|
62.4%
|
56.6%
|
77.4%
|
79.2%
|
| - City |
58.2%
|
53.7%
|
68.1%
|
65.3%
|
82.7%
|
76.6%
|
| - Hutt Valley |
44.5%
|
44.6%
|
54.6%
|
51.4%
|
68.0%
|
74.2%
|
| - Porirua |
45.3%
|
52.4%
|
66.0%
|
59.6%
|
71.5%
|
77.4%
|
| - Kapiti Coast |
50.5%
|
53.2%
|
59.6%
|
54.1%
|
68.6%
|
84.4%
|
| Nelson/Marlborough |
49.5%
|
51.6%
|
63.1%
|
60.2%
|
81.7%
|
83.2%
|
| - Nelson |
50.8%
|
52.9%
|
60.2%
|
64.3%
|
74.9%
|
81.4%
|
| Canterbury/Westland |
47.4%
|
45.2%
|
56.4%
|
50.9%
|
70.0%
|
76.4%
|
| - Christchurch |
55.8%
|
51.0%
|
62.4%
|
55.2%
|
75.0%
|
82.9%
|
| - Timaru |
37.3%
|
38.7%
|
38.2%
|
50.4%
|
57.3%
|
60.5%
|
| Central Otago Lakes |
64.5%
|
68.5%
|
74.4%
|
74.1%
|
137.6%
|
115.5%
|
| - Queenstown |
77.5%
|
84.5%
|
83.2%
|
95.5%
|
139.1%
|
148.1%
|
| Otago |
36.0%
|
35.4%
|
46.8%
|
40.2%
|
58.4%
|
58.2%
|
| - Dunedin |
41.5%
|
39.9%
|
53.1%
|
44.5%
|
63.5%
|
66.3%
|
| Southland |
28.5%
|
28.5%
|
39.2%
|
33.8%
|
42.4%
|
48.0%
|
| - Invercargill |
30.8%
|
30.1%
|
41.4%
|
38.5%
|
46.3%
|
52.8%
|
No chart with that title exists.
84 Comments
The most affordable time to buy since about 1973 was late 2001 early 2002, just after interest rates were slashed because of 9/11 and the fallout from the dotcom crash.
Coincidentally that is when the chart starts!
So to answer your question skudiv, houses were never more affordable than at the end of 2001 for anyone who is younger than about 60 years old today!
Doing a rough calculation (I think I used the appropriate tax rates for the time) for the one income scenario:
2001 was about 36%
1998 was about 57%
1994 was about 36%
1990 was about 62%
1987 was about 80%!
1980 was about 45%
1974 was about 50%
Now remember those calculations completely ignore the move to two income households since the 1970s. Therefore the 50% of 1974 is probably more equivalent to the one and a half income household of 2011 at 33% today.
So all in all, are houses extremely unaffordable? The answer is simply no.
50% on one income in 2011 might not compare to the extreme low of 2001 but it may not trend that low again this cycle unless the country moves into a deep depression with super low interest rates, but that wouldn't necessarily require prices to fall for affordability to increase further.
'Affordability' is really just making it easier for people to go into (more) debt. If (when?) New Zealand goes into deep depression, in companionship with the Rest of The West, and does indeed have super low interest rates, like the others, debt will be the last thing people either want to take on, or be able to source from a lender. Prices of properties will then fall as those who cannot refinance/keep up with even low interest payments into the face of rising staple prices, sell to a diminishing pool of buyers to extract their savings. Is it likely that having had a near death experince these last few years, that when the global economy recovers it will be allowed to be returned to 'normal' with excess debts? I doubt it; hence we have seen the top of this property cycle, and may not see its likes again. The Affordability Index may indeedstabilise, but its componenets may be at lower disposable income/lower nominal prices.
Oh Nick, I hear you... but alas all your hard work and argument is in vain... property is going to keep going up... cos it's not Kiwis buying it... your boomer mates like DavidB (B for BOOMER) and Vera are flicking it off to the highest bidder and they don't care who buys it, as long as they pay loooootttttttssssssssss of money!
Boomers bought that Villa in Devonport for 200k, cos that was what it cost then, expensive, but do-able! Now it's worth 2million... of course they have money... they were born in lucky times! You and most Kiwis now could never make that kind of money, no matter how hard they worked... Boomers yell that "anyone can do it, so long as they work at it!" NONSENSE! They were just in the right place at the right time!
Mandalay, it's amazing how utopian memories of low house prices distort facts.
20 years ago (when a then 35 year old baby boomer was perhaps moving from their first or second home to a proper family home) the average house in Devonport cost $200,000. Today that's $800,000 and the standard of home is much higher.
Across the country prices went from $110k to $350k over the same period up about 220%, which on the face of it looks excessive compared to average wage increases of just 100%, but considering that 20 years ago we just experienced 10 years of 15-20% mortgage rates compared to rates averaging 6-10% over the past 15 years, a price correction would certainly have been expected.
It's not the fact that prices tend to go up that makes property a good long term investment. It is simply that the alternative of paying a lifetime of rent makes renting an expensive alternative.
In the vast majority of cases paying more than you pay in rent to own a property still makes financial sense. It is only when either the rent you would pay is under say 4% of current market value or you intend moving around a lot that you would be better off renting.
Give the sprooking a break CJ...go tell the people who own property/houses in regional towns with no work and falling values that the best thing they did was to buy...and not to feel angry that those who rented have been able to leave town with few worries....Tell your story to those in the chch areas smashed by the quakes...you might get a clap...round the earhole!
What happens when a few retiring BB's decide to " downsize " , to free up some cash from that over-priced house .... and then that trickle of sellers becomes a flood , as prices begin to fall .
.... anyone who thinks that real-estate can't be volatile , down as well as up , need only look towards the USA ......
All asset classes can be volatile . If they weren't , there'd only be miniscule potential gains during the good times .
"o" Wally, I'm definitely not spruiking. I just don't like seeing doomsters saying it's all gloom and you should never buy when in fact it's not too bad a time to be buying in NZ. It mightn't be the best time but it's not the worst either.
BTW tenants in ChCh have the EQC and insurance battles too.
Mandalay: Using Devonport to support your argument is disingenuous and intellectually dishonest. Do you remember Ngataringa Bay? and a bankrupt suburb? and massive rates? that killed off a lot of elderley people financially, that had to sell up and get out at depressed prices. It's called capitulation. And of course robbed their heirs of their inheritances. Children and grandchildren, forever, never to be recovered. And prices there were depressed for a long time.
sigh.... I am saying that a house that cost x amount 15 years ago, spiked in price to x multiply by 300%-400% today ... now those people who could afford the house at x price 15 years ago are now saying people now should be able to afford to purchase that price now... I am saying that argument is disingenuous (see I can use big words in sentances too) as peoples income has not gone up by 300%-400% ...
double sigh... I agree some people got caught in dodgey deals, but most people who bought property 15 years ago have a massive capital gain and peoples salaries haven't come even marginally close by comparison!
200k house in 1996 in Glenfield is now 700k... the people that bought that house were probably earning 60k combined... they aren't earning 200k combined now...
I am sorry for using Devonport, I will never (yeah right) trample on that sacred property ground again!
I left Auckland in 1996 and was earning 80k at the time, a decent place on the North Shore then was around 450K. I thought it too expensive and wasn't worth it and went overseas, that role today pays 100-110K. Similar property today has at least doubled and the income has?? :-)
Mandalay: Says: "it's not Kiwis buying it" ... care to expand on that .. isn't it time someone took their politically correct PC suit off and say it as it really is .. examine the population demographics of Auckland City for 1980 and compare them to the 2010 demographics. Second: If someone comes along and makes you an offer you can't refuse why do you blame the seller and not the buyer. Explain.
In mid 1990's I witnessed a property transaction of a house in an AK suburb where a recent arrival from HK, carrying a briefcase full of cash, offered the homeowner any price they wanted. IN CASH.
exactly what I am saying! This site everyone is arguing about first home buyers and affordability! I am saying it isn't the first-home-buyer buying houses... it's overseas investors!
Nothing PC about it! Overseas investors are allowed to buy property here so they do! I am saying at what cost to the people who make NZ their home (of all races, cause we are a melting pot and I think that's fantastic)? These people who call NZ home (pakeha, maori, pi, chinese, indian, south african etc etc etc) cannot afford to buy a first home of their own... nothing sinister, politically correct or racist in my argument!
I am just asking "AT WHAT COST????????????"
Your comment "If someone comes along and makes you an offer you can't refuse why do you blame the seller and not the buyer..." Sums your type up! Your souls can be bought and who gives a stuff about anyone else, as long as you have your money! How can I blame the buyer if the law always it... but legality does not equate to morality!
Lets see how you feel when the Chinese government owns controlling shares of our power, water and the dairy industries! But then hey, you'd have sold to the highest bidder...
Really .. you obviously haven't followed my position on these matters over the last 15 months .. are you talking about residential property? rural property? commercial property? or businesses? I thought you were talking about residential property .. and FYI the residential demographics of the old Auckland City (before supersizing) in 1980 were pakeha/maori 80% and island and other nationalities 20%. Now, in 2011 the pakeha/maori percentage is 20% with the bulk of the remaining 80% being asian. We're talking suitcases full of the stuff now .. no longer briefcases .. and if your neighbourhood has turned into an ethnic enclave .. tell me .. would you tough it out on moral grounds or accept an offer too good to refuse .. or, an even better question is .. what is your nationality? your origins? .. your roots?
So does this mean, Bernard, that you’re going to stop banging on about New Zealand house prices been unaffordable, especially for first home buyers, and stop demanding that baby boomers be stripped of their hoarded wealth and flogged because it’s all their fault?
By the way, before you poke your tongue out at me for yanking your ponytail, at an affordability index of 50, I think house prices are now only comfortably affordable for first home buyers, but I would like to see the index decline even further to around 40-43. Don't think i'll see it though.
then as an astute property investor Vera you should just say ... "stuff it" and charge them $2000/per week for the privilage to live in your slightly better than average $hitbox! It'll save us all your weekly trumpeting about how well you're doing and you could just slip in to obscurity, rich as... everyone will be happy then...
Usually one of the hordes of houses over one million that haven't moved for the last two years. REINZ reckons only 6% of houses in the million-plis bracket are moving in any one month. A tonne of them are sitting on the Shore, over-priced, over-rated, and over-here!
smoking your socks mate, 'comfortably affordable?" What planet are you living on DavidB (B for BOOMER)? Property is still unaffordable for New Zealanders... but don't worry DavidBoomer, there are still bunches of overseas investors who'll keep buying your and your Boomer mates houses for huge amounts of dollars... who cares about the hard sloggers in NZ, as long as you have your bucks? All is sweet, all is sweet!
What I'd like to see is a really long-run time series (since say 1920?) where average household income (less tax) is used instead of weekly take home pay and actual & predicted interest rates are used rather than the spot rate. Difficult to do but someone must have had a go at it.
Supposedly the US long-run average is around 33% but I've never seen NZ data to back that up.
mate, even if interset rates were half a % property would still be unaffordable here in NZ... Prices are still going up, because it's not Kiwis buying them... Boomers are selling NZ to the highest bidder and don't care who's in control when their Grandchildren come of age!
Mandalay you are correct. What is sad about this site is that we get to see the minds of a microcosim of selfish people who have no idea what they are talking about, what is going on in NZ, let alone the world. They get to poke fun and gloat like they are learned in some section of industry or society, yet they are mostly greedy and not very bright.
Those on this site who are aware, and who try to upgrade the intelligence, are either ignored or hit with stupid comments from the greedy simpletons.
Sadly everyone gets to go down the dunny with them. They dont care about the future of NZ any more than JK does.
I just dont know what these people think will keep them out of the shite, perhaps head in sand does work after all !
LloydM1, owning property and providing accommodation for families and businesses isn't about greed. People wouldn't be buying immovable assets like land if they wanted the country to go down the gurgler.
If you want an effective change that will remove the greedy fly-by-night speculators, then a CGT on those that own property for less than 2 years would acheive this without penalising genuine landlords and their tenants.
I fear thou doth protest too much!
You're not 'providing,' you are renting it at the highest dollar factor you can screw out of the tennant! You aren't a public service, don't kid yourself or anyone else, you are a business and unfortunately the PI people are some of the greediest people in any business... all you have to do as look at the comments of them onthis site!
LloydM1 was pointing out that there are some on the site who are selling their childrens birthright ...
mandalay, landlords are not all greedy. I gave rent breaks to tenants after the earthquake and reduced rents at my expense for others, I have always left rents at below market rates for my long term tenants.
Like any business, landlords try to give the best service and offer the best value.
What are you on about selling their children's birthright? I'm a fifth generation NZer, I do own a number of rental properties but I've also developed a number of new properties increasing supply. Are we all supposed to sit still so that a house can be worth less than the cost of painting it (like Invercargill just a few years ago) all so that someone on the dole can afford to purchase it without a mortgage??
mandalay, landlords are not all greedy. I gave rent breaks to tenants after the earthquake and reduced rents at my expense for others, I have always left rents at below market rates for my long term tenants.
Like any business, landlords try to give the best service and offer the best value.
What are you on about selling their children's birthright? I'm a fifth generation NZer, I do own a number of rental properties but I've also developed a number of new properties increasing supply. Are we all supposed to sit still so that a house can be worth less than the cost of painting it (like Invercargill just a few years ago) all so that someone on the dole can afford to purchase it without a mortgage??
CJ, actually no I think we can be assured that in order to achieve what you think a CGT will, it would need to be accompanied by rules around foreign purchasing of residential property. GCT on its own will make little difference. In any case I think the global economies impending influence on NZ will take care of the housing market soon enough.
Oh, and I am a LL, but I brought it (not in AKL) as a safety net in case things went pear shaped I would still get a roof over my head. I adjust the rent to keep tennants happy and the place occupied as much of the time as possible.
And I could buy another house to live in, but I have said it before that is the LAST thing I would be doing (as they are still a total rip off in AKL) anytime from now on until , well who knows when, if ever!
mandalay, that comment is nonsense.
If interest rates were 0.5% an 80% mortgage on average house would cost $230pw, that is significantly less than the typical rent for that value property which would be of the order of $400pw. Even with a 6.5% fixed rate payments would be only $430pw.
The fact is houses cost a certain amount to build and no matter how much whinging goes on price of existing houses will always reflect new construction costs, unless there is a massive oversupply (which no one would be prepared to create as this would require builders work for a loss).
Price rises are no new conspiracy, it's simply a fact - one that is only exacerbated by a fiat currency and imminent central banker legislated inflation.
where are you living Chris-J, LALA land? Certainly not Auckland, where I might add almost half the country live... the average house price here is $414 000... that's average and you'd appreciate average would be just that, average $hitbox... probably leaky and in a rough part of town.
Most people cannot afford to save an 80K deposit... they probably aren't even making that a year! Besides 0.5% argument is symantic, it will never go that low here! But I'll take your bait... most hard slogging Kiwis will never be able to afford an 80k deposit, right here, right now... so lets say a realisitic 5% deposit... any higher deposit and your argument goes out the window as being absurd!
So the average house now costs 390k... weekly payments at your 6.5% will be $607 a week, just a little under $1000 more a month then your ridiculous figure... That doesn't include over a $100 a week in rates...
You can spruik it how you like, but it's not first home buyers buying property in Auckland, the reality is they are struggling just to pay their $400 week rent, winter electricity bills etc...
And before you get on your high horse, ooops too late, I'm not whinging about house prices, yes they are too high for what one pays for them... but I do understand basic supply and demand... my argument was and is, that it aint first home buyers buying houses in Auckland, they simply cannot afford to buy them.
mandalay, on a median house of $350,000, an 80% mortgage ($280,000) at 6.5% on a 25 year term will cost about $436pw (according to http://www.interest.co.nz/calculators/mortgage-calculator ).
Who pays $100pw in rates on a $350,000 house in a main centre? Rates are likely to be around $25pw on this value property and insurance around $10pw.
Personally I'm in ChCh where prices are much more affordable. Although the market here is in a bit of a hiatus as vendors work out insurance issues, in the pre-quake market you could certainly buy in an average inner suburb an older house on a full section for as little as $200,000. $300,000 can buy a very good house.
Prior to the quake a house purchased for say $230,000 could possibly rent for $320pw. A house worth $350,000 would probably rent at about $420pw.
Obviously Central Auckland and North Shore is in a different price range, but so are rents and the incomes of buyers and renters.
Outer parts of Auckland are actually very affordable and represent good value at around $220,000 for a basic modern 3 bedroom house in Manakau City (with just a 10% deposit that's just $310pw at 6.5%).
A first home buyer on the North Shore may need to spend $400,000 but their household income may well be above $120,000PA.
Relative to the actual cost to build a house, prices of existing homes represent fair value in all but the most desirable parts of cities. Prices are what they are, they may fall slightly in nominal terms (or a lot in real terms) but putting off buying now because you expect prices to fall significantly doesn't make sense.
@Chris_J: I doubt there’ll be more Central bank induced asset price inflation, Chris. Let’s assume some figure bandied about that the ‘bottom’ of the market in March ’09 as an indicator, as $52 trillion wiped of the global value of assets. And let’s take the response of $1 trillion of Q/E by the States, a similar amount by Europe and a covering amount of $2 trillion by China. And let’s round that off to $5 trillion of ‘inflationary’ price support. Let’s then say the stock market has doubled since March ’09, so the loss of global wealth is now only $25 trillion. That’s shows that we still have to issue $20 trillion worth of more currency, brought into existence by borrowing – debt, to just be where we were before all this lot started! If that amount of new currency was ‘printed’ then asset price would run away, back to $52 trillion, and the debt would have chased it up to $25 trillion. So we end up worse off; the same asset base, and $25 trillion more debt to support it! It isn’t going to work, long or short term. The only solution has to be debt retirement/ repayment; lower asset prices supported by lower gross debt and a lower standard of living ( wages) in the West, supported by stabilization in The East. (And that’s why I’m no gold believer! As debt is retired, less cash is left to ‘buy’ a stable/increasing amount of gold.)
"Thousands queue overnight and brave the baking heat for job fair"
This is why wages are going to fall in The West; and it's coming to the UK, Spain, France....and New Zealand, in due course. Becasue I guarantee that anyone in that type of queue isn't asking for a pay rise!
I brought my first house when I was 22. I started saving for a deposit from the day I started working (at 18) so by the time I brought my home, I easily made the 20% deposit. When I first started working my annual salary was 6500pa.
I have no sympathy with Gen X, Y and ME who whine that they can't save 80K for a deposit on a house. Yes you can, and you will, if you stop being a whiny self-absorbed I-deserve-it-all little brat about it, and just do it.
Just another rotten comment from a BB- capitalist, who doesn’t use he’s brain.
I’m 63 of age struggled a long time to build up a production business working hard and long hours, taking risks, but the time was good, we earned good money - and we all had a positive outlook for the future. This was between 1975 and 1998 a prosperous time for all of us.
Since then time changed not for the better. The prospect for the younger generation – ha - keep sleeping David - and don't be so arrogant.
Kunst: Have you thought that through completely? You say it was a "prosperous time for all". So what happened in 1999 that caused things to turn down? If you have been following the recent threads and posts here you will have noticed a number of long time contributors have declared their GenX status and revealed that they and their age group have been the culpable ones who have bought property with their ears pinned back. They unfortunately contradict you. The property "age of affordability" has been moved out of the reach of GenX by their own generation.
You're becoming a very very sad little man on here, Kunst. Why don't you take a break for a while and do something else, and then come back here when you've got something positive and of value to contribute instead of all this rambling contrarian nonsense you keep posting, with its personalised undertones. Insulting, badgering or judging people in this obsessive way is a clear sign that you’ve lost the argument, but can’t accept it.
Go and take a pill and have a lie down. You’re coming off as being increasingly desperate.
... and we could construct a new city on some of the flattened hill land , 10 000 houses or so , for Kaiapoi & Christchurch refugees .
Gummyville ....... that has a nice ring to it . Better than Kunst Town anyway , too many wags would mix up the letters to spell K**ts Town .... OMG is correct on that one .
..... the remainder of the land can go into dairy farms and milk processing facilities .
Well, I don't think it’s any more or less hard now to set up a successful business than it was 30-40 years ago. In some ways it's easier, there are many more markets to tap into as an exporter and /or importer, and in other ways it's harder. There are now many more stringent regulations today that there were 30-40 years ago so the cost of doing business is greater.
I don't know whether you are referring to NZ or Switzerland when you talk about setting up your business, but here in NZ I distinctly remember that the period from 1975-1999 was not one of unbridled milk and honey as you claim it was for you.
In fact far from it.
From 1975 - 1980, NZ’s economic performance was still very negatively affected by the UK's decision to enter the EEC. Unemployment stated to rise for the first time in decades and we were also very bad affected by the oil shocks. By the 1980s, inflation had reared its ugly head, and the economy was so bad, Muldoon introduced a wage and price freeze. We had a very nasty recession in the early 80s and high unemployment. We then had another recession following the 1987 share market crash, and all the economic reforms the country went through following the election of Lange-Douglas and the Richardson. Many people had foolishly borrowed money from the banks to invest in the share market bubble, and when it crashed, people lost everything, including their homes. The banks could wait to sell them up. In fact it got so bad, the BNZ went belly up!
So from around 1987 - 1993 times were bad in NZ. So from that period of 1975-1999 I can only remember the years 1984-1987 and about 1994-1999 as been any good economically speaking. Certainly not prosperous!
So based on what you said, Kunst, I can only conclude that you had experiences that were very different from the average New Zealanders, or you are talking about some other country? What sort of production business was it?
Thanks. I also forgot to mention that during those recessionary times it wasn’t easy doing business in NZ. More were closing than opening, and from memory it was during the 70s to 80s that immigration to Australia started taking off. Another sign that NZ was under stress. So was it easier to start a business back then than now, I don’t believe so. But it would be interesting to get others’ take on it.
Where does the money come from – today David and others ?
To put your earlier comment into prospective. Under high living costs how many Kiwis today, working at 18 (without financial support) can easily make a 20% deposit on a decent house 4 years later ? The risk of taken on mortgages/ debt in today’s unpredictable world is much greater then 30, 40 years ago long-term.
http://www.worldsalaries.org/newzealand.shtml
I don’t deny time was difficult too. We needed 5 years to build up the business before we made good profit and had ups and downs afterwards, because of economic reasons. But as we all know and experiencing almost daily the world is changing fast - for many societies with devastating consequences – so a very different scenario all together then 30, 40 years ago. After all would you under these circumstances start a business now – I wouldn’t - even not in other places in the world.
So, in general the younger generation deserve respect not to be so adventures then we were, but cautious.
I would be interesting what younger Kiwis have to say starting up a business with no other money, but just their savings.
Jeez, Kunst, you make some assumptions at times. I did not have financial help to get my deposit on a house together. I was supported by my parents in that they were happy for me to continue living at home while I saved up for a house. So in that sense, yes I was indeed supported, and they totally supported me in that aspiration. But did they give me any direct money towards the deposit on my house, no they did not. I could have left home the moment I left school and gone flatting as most of my friends did. But I choose not to. No doubt that’s why I owned house when I was 22 and they didn’t.
I’m sure there are many parents today who do similar things for their children. That’s what families are for, right?
But then my parents also instilled in me other values that have been very useful to me in my life. Not least of which were sound healthy capitalist values, a respect for money, industriousness, enterprise, and always looking at ways of doing things better and getting ahead. I applied those values towards saving for my first house. I did not just put money into a home ownership account. I used the imperatives of capitalism and gathered its reward, i.e., I made money. I invested some. Those investments did very well and also contribute towards my having sufficient for a deposit. I wonder what would have happened to me if I was just another whiny kiwi socialist?
The world has not changed, Kunst, in spite of your claims that it has. Any kid today could do exactly as I did and still have the same result. It’s no more or less easy now that it was 30 years ago. It’s up to them. It’s just a pity that there aren’t more families in New Zealand who instill sound and healthy capitalist values in their children, rather than the weak, the government-owes-you, give me a handout, the rich pricks are ripping us off, anti-science socialist claptrap that people like you and the lettuce heads spout. And then when it all turns sour for you, as it will as surely as day follows night, we have to sit and listen to you whine about it and hear how you guys have been ripped off.
David, you write I’m making some “jeez” assumptions, that’s because you either don’t read my comments properly or you don’t understand them. E.g. - I never said you had financial help.
When we started our business we didn’t had any support of our parents – the opposite - they thought we were crazy. Every single $ went into the business – e.g. I had for a time holes in my shoes and put a new plastic bag over my feet when it rained/ snowed.
Anyway, let’s talk about the X Y generation - the original topic. The world has changed and is changing rapidly all the time. Never before in history, unpleasant events on so many fronts are not only accumulation, but also accelerating. This is a challenging time for most people opening a business and need good consideration. I do adore youngsters, who take the risk of opening a business, but I also accept, when they aren’t like me and say no - under the current circumstances, where daily costs are high, prices increasing and times uncertain.
Well, David and before I blame a youngster of being lazy, we have to check, if there is not only a job, but a future. A reasonable future we - the BB's always had in CH and NZ.
You just don't get it, Kunst, do you?
When did you actually immigrate to NZ? Did you do it because you thought that Europe was doomed to a nuclear holocaust when Nato and the Ruskies started flinging nuclear bombs at each other? Thought NZ was a paradise and as far away from Europe as you could get? Thought you could bunker down here safe from the world's problems and Europe that had no future?
Well guess what. Europe is still here. The USSR and the Warsaw pact fell without a shot. Germany is reunified, and under the benefits of capitalism is as rich and prosperous now as its ever been. Poland is free and has a future as does the Czech Republic and the Baltic states. The world didn't end in an atom bomb. But sadly, NZ is stuck with you and your poor judgments.
Yup , that was an excellent summary of our business conditions cfrom 1975 - 1999 .
..... what confuses Gummy's memory , was life in NZ so bad in 1999 that we had to have a new government wade in and start a mega-spendfest , and massively enlarge the welfare state ?
It just seems to me that we were quietly & un-obtrusively muddling through , in the late 90's , nothing to panic about then .
We trained eight apprentices – all succeeded. All did a three 3 years apprenticeship (5 days/ w), which included training/ theory in, joinery, gilding, restoration work, manufacturing of picture/ mirror frames. One day art school combined with history/ accounting etc.
We trained another three young people, who worked for us for 5- 10 years, but didn't do an apprenticeship.
You have strongly advocated job-creation here for quite a while (and I agree with you) .. and .. once upon a time .. one? .. two? .. generations ago most companies offered cadetships where you could start in the mail-room or wherever and get trained in all aspects of the business .. now they don't .. they want ready made skilled workers .. trained at somebody elses expense .. but who trains them now? .. how does one get the skills required? someone has to do it .. and you have made your contribution to society ..
You answered the question most satisfactorily .. thank you.
Kunst: In 1984 or there-abouts, when Lange and Douglas came to power, there was a well publicised case of a young bloke who had share-milked for 15 odd years and had built up a reasonable herd and enough money to step out on his own and buy his own farm. He bought a $600k 100 acre farm, with a $450k mortgage and moved his herd on. Then Douglas removed standard valuations on live stock, eliminated butter subsidies, eliminated fertiliser subsidies, and any other farm sudsidy you can think of, in one fell swoop. Farm prices dropped by 50% almost overnight. That share-milker had only been on his farm for a few months and was wiped out completely, owing $150k in negative equity. 15 years of hard toil evaporated. The standard valuation changes cost me $70k in 1984 dollars, Probably equivalent to $200k in todays dollars. And you think things were easy. You have no idea whatsoever. I have suggested to you in the past to do your homework first.
Right on, I was a very young guy who had just got into a goat farm, it cost me everything then plus my wife's beach house at Whangamata, fortunately I was also in other areas of economic activity/investment so that helped , but then remember the crash of 1987? Those who bleat on about how tough it is for young ones now, have selective memories,or trot out an ideological line, in fact the young ones now come from the most molly-coddled generation of all.
I was a young farmer and started leasing a farm in 1984, it was tough but I still made a margin, my costs were a lot lower and many friends lost everything on Deer goats and borrowing off shore. Many friends and their families are still suffering from those decisions made nearly 30 years ago. I only had a lease farm so couldn't get enough capital and most of my income went in interest, I was paying %18 but if I went over my 30k limit it went up to %24 and then %30,after that I was in no dout that the bank would call me in. I remember buying lambs at fielding sale yards for $8 and that was the good ones, I picked some bottom ones up for $2.50 and sold them to the live shipment for I think $35.
I think today is very different, Im struggling to find oportunities and have ended up sitting on cash, there is alot more money around most of it corporate, in 1984 there was no corporate money around today my agent tells me there is $400 million waiting to be invested in this area , i suspect that alot of that is bullshit money, money someone expects banks to create ofut of thin air or money thats found its way over here from Bernakes little QE experiment, higher interest rates should take care of that.
Im being very cautious , and still looking. I think the cost stucture is what scares me most even at these interest rates Im happy in cash and you will have to shake my tree harder than this to get me down. I suspect commodities will collapse sometime in the short term.
And when we bought our first house in the 80s I saved for 3 years to get $9,000 ( I was 20 when I bought it) and my salary was $6,000= $8,500 over the period. So I saved more than a year's gross salary over 3 years. We had an old washer and fridge, secondhand bed and a sofa from the op shop. Not much else. I think if 20 somethings have saved more than a year's gross salary they would be able to afford to buy a house in a cheap suburb still.Then have some boarders help you pay back more than the minimum. Not fun or easy but do-able. Its what we did.
" have no sympathy with Gen X, Y and ME who whine that they can't save 80K for a deposit on a house. Yes you can, and you will, if you stop being a whiny self-absorbed I-deserve-it-all little brat about it, and just do it."
Spoken like to total selfish w*nker BB DB. In keeping with the rest of your mindless posts on here...
I wont even waste further keystrokes trying to explain why my first sentence sums up your statement!
There is an additional problem. In today’s competitive world people need to be highly trained, they need decent jobs, a professional environment to exercise their training, to develop entrepreneurial skill. They need good wages, for a possible change of investing into their businesses. The combination just doesn’t happen enough. All - is just about taking on too much debt – highly risky.
Good changes to succeed will be limited to sectors such as food production, health and a few others.
and also …David, iconoclast, in the 60’, 70’ up to the 90’ business was driven by capitalistic behaviours, shier endless growth and consumerism, but conservation, sustainability, limits were seldom used words.
What do you think, intelligent, good educated, innovative young people think, confronting capitalism in it’s current form, facing up today’s reality demonstrated in that video ?
http://www.youtube.com/watch?v=EQqDS9wGsxQ
Kunst, you might be giving a little too much credit about what folk know is happening to the man-made constructs masquerading as the financial & economic systems currently collapsing, and the reasons why they are!
The lack of respect for generations is astounding & disappointing, and does not make any attempt (because they are clueless) about the deliberate manipulation of legislation within employment law, family law, education etc to control large swathes of society to be used as political footballs at any given times they were needed. Once you add the attack on young people via media of all kinds over the decades, the skills which might have been more available to be passed down, have been degraded at best, deliberately stolen permanently from those who may have had them at worst. So what chance do many of the generations especially Y & Z have given the those and other hurdles they have to contend with today!
Many Y & Z will not ever watch even MSM news, perhaps just as well given the lies & continued depressing barrage they would see, and with the lack of respect & sympathy from some on this site I can only hope they are not parents, uncles etc it would seem real life experiences are going to be hard enough for them if they cross paths with attitudes seen on this site...
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