What will happen to National now?

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#2888212 18-Mar-2022 13:27

GV27:

Feeling pretty put off by Luxon wanting to scrap mandates already. Auckland may have peaked but other places are behind us in terms of the curve.

I personally think he's trying to appeal to the business sector so they can open/operate as freely as possible. I agree with you though - thank Christ he's not in charge of things (at the moment).

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#2888236 18-Mar-2022 13:46

GV27:

Feeling pretty put off by Luxon wanting to scrap mandates already. Auckland may have peaked but other places are behind us in terms of the curve.

Agreed.

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#2888242 18-Mar-2022 14:01

GV27:

Feeling pretty put off by Luxon wanting to scrap mandates already. Auckland may have peaked but other places are behind us in terms of the curve.

I dont think AKL peaking is a huge deal. There will be huge number of people who havent caught it in AKL. The bigger issue is unleash the beast, and

A) Many more catch it, and sick days galore, affecting all employers including supplier businesses

B) Hospital beds increase at a faster rate than they get emptied.

However, re B), it seems that only 1/3 of Covid beds are used FOR Covid, so B) may not be that relevant now.

Jas777

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#2888252 18-Mar-2022 14:20

GV27:

The whole reason WFFTC was needed is because state services got wound back so far and living costs escalated to the point where it wasn't possible to afford to actually raise kids, and plenty of people who struggle to meet modern living costs don't qualify for it either.

Really? And here was me thinking that WFF was done to win the 2005 Election

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#2888722 19-Mar-2022 14:16

Jas777:

GV27:

The whole reason WFFTC was needed is because state services got wound back so far and living costs escalated to the point where it wasn't possible to afford to actually raise kids, and plenty of people who struggle to meet modern living costs don't qualify for it either.

Really? And here was me thinking that WFF was done to win the 2005 Election

I mean you could say the same about interest-free student loans; there was a need to do something and Labour took advantage of the fact National wanted to argue about Maori instead.

But the reality is that we aren't a country where people have masses of disposable income and people can only pay their bills with what is left over. IMO that means governments have a moral obligation to Kiwis to make sure the money they're spending is getting us a decent return.

I really don't buy into the "we'll have to slash services!" argument because taxpayers aren't actually bottomless pits and and some point there has to be some gains on the state ledgers, or else you end up taking so much in tax that people don't have enough to get by. Current tax levels might have been justifiable when living costs were 2/3rds of what they are now, but if we have to pay even more (and apparently get even less in the way of services) then the social contract that underpins general taxation is broken and needs to be reset.

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#2890518 23-Mar-2022 11:04

https://www.newshub.co.nz/home/politics/2022/03/christopher-luxon-defends-national-s-policies-aimed-at-reducing-rents-despite-not-being-able-to-say-what-impact-they-would-have.html

He sounds like he has an idea in his head for what he'd like to do, but hasn't really thought it through at all.

GV27

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#2890531 23-Mar-2022 11:36

quickymart:

https://www.newshub.co.nz/home/politics/2022/03/christopher-luxon-defends-national-s-policies-aimed-at-reducing-rents-despite-not-being-able-to-say-what-impact-they-would-have.html

He sounds like he has an idea in his head for what he'd like to do, but hasn't really thought it through at all.

30% to 40% of income as rent is not reasonable. It might be doable if all our other costs where where they were two decades ago. But they are not.

But firstly, that's NOT net income, it's gross. So take off tax, student loans and Kiwisaver. What follows is purely illustrative.

So perhaps say 25% including those things as a marginal rate of someone's income is gone before it hits their bank account. Then, say 40% of rent again and you're down to 35% left over to eat, run a car, save (possibly even for a house if you're renting), get to work and have something left over for 'discretionary' spend.

So let's divvy up that 35%. That's $21K. $75 a week for food (probably pretty ambitious for a single person) and groceries is $4k. Down to $17K. Are you running a car? Great, that's probably $2k in fuel and then another $1k in running costs and insurances, assuming nothing goes wrong with it. Down to $14K. Internet, power, phone etc? Let's be generous and say that's $250 a month. Another $3K.

So we're down to $11K of money outside of fueling a car, keeping the lights on and keeping a roof over your head. That's $211 a week.

Saving 10% of a house deposit for a $550K Kiwibuild home (and let's say half of that 10% is going to come from Kiwisaver and grants) at a rate of $211 a week, assuming you don't go anywhere other than work or home, never travel, never eat out, etc; that's 2.5 years of solid saving, just to hit a 10% deposit to get yourself out of the renting cycle.

This is not aspirational. This is a poverty cycle. I am so extremely disappointed that National's idea of 'affordable' is just entrenching all the reasons why NZ is no longer a place where the bottom 40% can afford to live.

Does someone go through these numbers with them? Has someone explained why 'historical' rates of accommodation costs at 30% are a crappy barometer given we're about to see a period of prolonged interest rate rises? If it's 30% - 40% now at a time of record low rates then it's going to be past 50% if interest rates normalise.

I expected better from Luxon, but I can see I was wrong to. Unless you own investment property or are a big corporate, National does not care how ambitious you are. Nothing has changed.

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#2890566 23-Mar-2022 12:07

I agree with most of what you're saying. I remember reading somewhere many years ago (maybe the early 2000s) that your rent/mortgage costs shouldn't take up more than 30% of your income, which sounded fairly reasonable. But - as you point out - petrol wasn't almost $3 a litre back then, nor were groceries around $300 a week. Yes, I made less, but wages simply haven't kept pace with the increases in cost of living.

I do wonder where he got these figures from, makes me wonder if the people giving him this information are using his personal income as a guideline, as opposed to, say, yours or mine.

GV27

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#2890583 23-Mar-2022 12:38

quickymart:

I do wonder where he got these figures from, makes me wonder if the people giving him this information are using his personal income as a guideline, as opposed to, say, yours or mine.

The hands-down best advice I ever got when learning financial planning was someone telling me to always, always focus on your net income and not your gross, because gross income isn't real. It never exists in your hands.

Imagine if we measured housing affordability or inflationary pressure relative to net income. Can you imagine what that would do for our understanding of how hard it is to get by in this country? Imagine if people understood that the minimum wage is really about $18? That's $720 a week.

That's basically nothing in 2022.

antonknee

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#2891058 23-Mar-2022 23:04

GV27:

The hands-down best advice I ever got when learning financial planning was someone telling me to always, always focus on your net income and not your gross, because gross income isn't real. It never exists in your hands.

Imagine if we measured housing affordability or inflationary pressure relative to net income. Can you imagine what that would do for our understanding of how hard it is to get by in this country? Imagine if people understood that the minimum wage is really about $18? That's $720 a week.

That's basically nothing in 2022.

Amen to thinking about net income and not gross. It's what you see in the bank and on your payslip, and importantly, it's what you can actually use (unless you've found the government's debit card down the back of your couch).

As for measuring housing affordability or inflationary pressure or anything relative to net income - it's definitely a better metric for all the reasons above. It would nicely illustrate how much our tax brackets whack the working poor and even the middle class. Would it change anything though? Well no - because:

GV27: I expected better from Luxon, but I can see I was wrong to. Unless you own investment property or are a big corporate, National does not care how ambitious you are. Nothing has changed.

and I'm not convinced the red team are actually better (although they'll at least pretend to care).

sen8or

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#2891094 24-Mar-2022 08:18

The red team don't want the average kiwi to be aspirational, they want them to pay for those that are less fortunate, even though the average kiwi wouldn't exactly class themselves as "well off", hence their social policies are out of reach for average kiwis, and without tax brackets shifting in a long time, the tax take from that group has increased markedly in recent years.

There are things that can be done to help keep rental costs under control like not renting more bedrooms than you need, but if you do have a spare bedroom, get a flatmate / border. Sure, it may be less than ideal, but when you can get $150+ for a room in most major cities (plus expenses), it can help share the load.

Also, don't forget, the 30-40% of income on rent may sound high, but that is the total outgoings for the property, as owner, theres mortgage, rates, insurance and upkeep. Whilst some of this may be factored into weekly rent figures, I'd hazard a guess that there are a lot of rental properties that are cashflow negative because of these extra costs (and hence why tax incentives used to help recover some of the losses).

Where did the notion that home ownership has to be affordable for everyone, thats simply unachievable, if you aspire to homeownership, there has to be sacrifices along the way, be that to lifestyle (smashed avo on toast / daily coffee, takeaways), work/life balance (2nd job, overtime etc), location, prestigeness of property etc.

I have no doubt that its tougher now, both my uni aged children wonder just how on earth they are going to buy a house, but at least here in Christchurch, there are still areas that are "affordable", sure they aren't the best spots in town and the houses aren't likely to be featured on grand designs either, but our first house was a do-er upper in Mangere and we were definitely in the ethnic minority in that neighborhood, but it was a start and thats all thats needed.

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#2891097 24-Mar-2022 08:33

sen8or:

Where did the notion that home ownership has to be affordable for everyone, thats simply unachievable, if you aspire to homeownership, there has to be sacrifices along the way, be that to lifestyle (smashed avo on toast / daily coffee, takeaways), work/life balance (2nd job, overtime etc), location, prestigeness of property etc.

The difficult part is people who already do all those things you mention yet still can't afford a deposit. I don't eat out (unless you count McDonald's maybe once every 3-4 months), I can't stand avocado so would never eat it (never mind on toast), don't drink coffee, and walk almost everywhere or take the bus, but given my cost of living expenses at the moment, I have 0 chance of getting a deposit together given the current environment.

GV27

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#2891098 24-Mar-2022 08:36

sen8or:

Where did the notion that home ownership has to be affordable for everyone, thats simply unachievable, if you aspire to homeownership, there has to be sacrifices along the way, be that to lifestyle (smashed avo on toast / daily coffee, takeaways), work/life balance (2nd job, overtime etc), location, prestigeness of property etc.

All of these are papering over the fact you used to be able to pay a mortgage on an entry level home on a single mid-level salary, whereas now that's not really doable unless you have two.

A lot of these are hashed out tropes about millennial spending that data doesn't bear out. We save more than previous generations, and still ended up going backwards relative to affordability. There's no getting around that, no matter how much people want to bang on about avocado on toast or somehow managing to get overtime if you're on a salary; most contracts nowadays just say you'll work until it's done and you accept that's going to be the case from time to time.

And that's before you get to things like stripped back redundancy entitlements - in the end, getting made redundant was the only reason I was ever able to buy a home in the first place. My current role has a grand total of one week of redundancy. My next contract, given the changes in government income insurance in the pipeline, will likely have none at all.

And I'm not sure there's two many first home buyers realistically smashing back takeaways, cafe avocado on toast (is this a bingo yet) on the reg and daily coffees and wondering why they can't afford a $3m Grey Lynn villa.

Christchurch is still relatively affordable, but if a FHB wants to buy my modest three-bedroom West Auckland starter home (25km from the CBD that takes over an hour to commute from in non-Covid traffic) with a 20% deposit, they'll need $170K. If they save that over five years, that's $34K a year. So they just need to cut out $653 worth of coffee and takeaway meals a week, every week for that to make an actual difference. If there's a $20 Avo on Toast there from the local garden centre cafe, then they just need to drink 126 fewer long blacks a week.

If they are drinking more than 126 long blacks in a week, then they've got bigger problems than house prices.

sen8or

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#2891205 24-Mar-2022 10:44

Entry level on a single salary, not in many years I suspect.

When we bought our first house (about 1996), all we could afford at the time was a 3brm in Mangere, $125k - 95% mtge. We were earning about $50k (gross) between us at that point (so about $ 42k net), our basic mortgage payment was about 25% of combined net back then. I have no idea what the average wage was back then, I wasn't entry level (but not executive / management / professional) so I suspect it was probably around $18-20k or so. No way in hell a single "average" income person could have afforded entry level 25+ years ago, is it really that different now?? I suspect last time a single income could "afford" a house was before the currency became metric and even then my parents talk about all sorts of cost savings and sacrifices they made.

The deposit rules are tough now, 20% is a whole heap of to stump up with - as you say $170k. I live a similar distance from Christchurch CBD although commute times aren't even close (fortunately) to Akl commute times and a 20% deposit in Selwyn district would be about $ 180-200k.

I should have had tongue firmly in cheek with the "smashed avo" reference (its one the Herald loves to quote), but the point remains about lifestyle spending (whether that is indeed frivolous spending like coffee, takeaways etc) or other optional spends (holidays, TV or other electronic "upgrades" etc) savings can be made (for some). But you also have things like Kiwisaver that can be drawn on (including the employer contribution), home loan grants etc, none of this was around in recent times.

Combined average gross wage would now be about $120k ($60k average?), gross about 96k (assuming 20% marginal tax rate), combined take home pay would be about $8k/mth. Mortgage payments on a $700k mortgage about $3.5 - 4k depending on rate, so 45-50% of take home pay for "average earning couple", leaving about $ 4-4.5k to live on. Take out car, insurance, rates, food etc and I have no doubt that it would stretch the budget, but that has always been the case for "middle income earners".

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#2891209 24-Mar-2022 10:49

GV27:

All of these are papering over the fact you used to be able to pay a mortgage on an entry level home on a single mid-level salary, whereas now that's not really doable unless you have two.

A lot of these are hashed out tropes about millennial spending that data doesn't bear out. We save more than previous generations, and still ended up going backwards relative to affordability. There's no getting around that, no matter how much people want to bang on about avocado on toast or somehow managing to get overtime if you're on a salary; most contracts nowadays just say you'll work until it's done and you accept that's going to be the case from time to time.

And that's before you get to things like stripped back redundancy entitlements - in the end, getting made redundant was the only reason I was ever able to buy a home in the first place. My current role has a grand total of one week of redundancy. My next contract, given the changes in government income insurance in the pipeline, will likely have none at all.

And I'm not sure there's two many first home buyers realistically smashing back takeaways, cafe avocado on toast (is this a bingo yet) on the reg and daily coffees and wondering why they can't afford a $3m Grey Lynn villa.

Christchurch is still relatively affordable, but if a FHB wants to buy my modest three-bedroom West Auckland starter home (25km from the CBD that takes over an hour to commute from in non-Covid traffic) with a 20% deposit, they'll need $170K. If they save that over five years, that's $34K a year. So they just need to cut out $653 worth of coffee and takeaway meals a week, every week for that to make an actual difference. If there's a $20 Avo on Toast there from the local garden centre cafe, then they just need to drink 126 fewer long blacks a week.

If they are drinking more than 126 long blacks in a week, then they've got bigger problems than house prices.

Sure, when you slant the discussion like that it seems pretty much seems impossible, but there are other factors to take into account too. I would suggest there are plenty of things in a household these days you wouldn't have found in a potential home buyer from 20 years ago. Big screen TV's, multiple personal electronic devices, many costing hundreds and hundreds if not thousands of dollars, Netflix subscriptions, Sky, all sorts of things. Sure there might be some who don't have many or any of those things, but I'd suggest consumerism today isn't even on the same planetary league as what my wife parents went through to be able to afford their first home.

Not sure I'd agree that people save harder now than they did when a single income serviced a mortgage.

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