Real estate, post level 4

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#2865187 11-Feb-2022 10:15

GV27:

quickymart:

https://www.newshub.co.nz/home/money/2022/02/house-prices-up-6-1-pct-with-new-zealand-s-national-average-now-over-1-06-million.html

Does "sustainable" mean "prices dropping back to realistic levels that people can afford" (unlikely) or "prices will level off and stop rising so ridiculously fast" (more likely)?

Chloe Swarbrick has been asking this question. Locking in house prices at 11x incomes instead of them spiraling is a step in the right direction, but does not suddenly make them affordable.

Demographia uses something like a 3x ratio to determine what is considered 'affordable' and we are so far past 'severely unaffordable' that I don't even know what they classify our house prices as anymore.

Remember, the economy relies on discretionary spending at a certain level to sustain hospo, tourism and other industries, and we have people committing at least 40% of their income for the next 30 years on accommodation costs alone - often just to get a starter home.

There just won't be enough money circulating in the economy unless something is done to reduce accommodation costs and owner-occupiers given a soft-landing so they don't just go to the mattresses

We still need people to spend and have families and we are locking a future where fewer and fewer people can afford to do that.

Indeed, I barely eat out or get takeaways now. I hear all the restaurants and places say they're finding it tough with lockdowns etc but who are all these people who can afford to eat out at restaurants all the time? I know I'm certainly not one of them. I used to be able to, but then house prices (or rents, in my case) jumped and suddenly that "eating out" budget simply disappeared.

heavenlywild

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#2865248 11-Feb-2022 10:35

And despite everything, prices continue to increase, albeit slower but still going up.

https://www.interest.co.nz/property/114305/quotable-value-says-average-property-values-are-still-going-market-slowing

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GV27

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#2865255 11-Feb-2022 10:44

quickymart:

Indeed, I barely eat out or get takeaways now. I hear all the restaurants and places say they're finding it tough with lockdowns etc but who are all these people who can afford to eat out at restaurants all the time? I know I'm certainly not one of them. I used to be able to, but then house prices (or rents, in my case) jumped and suddenly that "eating out" budget simply disappeared.

I am now spending a meal out for two's worth extra on groceries each week.

So in that regard, my weekly shop is up by the equivalent of my discretionary spend, but that's just to preserve what I need to actually live off.

I didn't take on student debt and go into the profession I went into to barely make ends meet, but here I am timing my petrol buying with paydays like my student job search days.

That was fine as a student because the whole point was I wouldn't have to do it again later, but mentally to be back in that place is just such a severe set-back.

deadlyllama

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#2865304 11-Feb-2022 11:27

GV27:

We still need people to spend and have families and we are locking a future where fewer and fewer people can afford to do that.

This.

In Wadestown, Wellington, school rolls are dropping as people of childbearing age can no longer afford to live there. It's always been a very nice area but not to that point.

I grew up in the 1980s when single income families were still pretty common. There was no field for mother's occupation on my birth certificate - they had to add one with a typewriter.

At some point the default began to be two full time workers in a family. Sure, you don't see as much of your kids but you can have nicer things / live closer to town / etc.

Now, you need two incomes just to stay afloat. And there may not be much left over for nice things, and you may have had to buy way out of town anyway. Traditionally working class areas are gentrifying like mad. I know people who bought a house during the pandemic and have had to substantially downscale their lifestyle as a result.

And that's if you're middle-class-ish. If you're in a lower income bracket, and live in an expensive city, it's ultra hard. It's not like you can stack shelves from home, we need people to do lower income jobs in our high cost of living cities. To afford to live you'll need a really long commute, or live in overcrowded housing. If your commute is suburb to suburb (supermarket workers, teachers, ...) public transport won't be a very good option, so yay for more cars on the roads, and the costs of keeping those running.

quickymart

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#2865322 11-Feb-2022 11:43

deadlyllama:

If your commute is suburb to suburb (supermarket workers, teachers, ...) public transport won't be a very good option, so yay for more cars on the roads, and the costs of keeping those running.

Not necessarily true in Wellington - a flatmate used to live in Kilbirnie and commute to Miramar each day. That was fairly easy.

In Auckland it would be a little harder though. I agree with the rest of your points however.

deadlyllama

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#2865325 11-Feb-2022 11:48

quickymart:

deadlyllama:

If your commute is suburb to suburb (supermarket workers, teachers, ...) public transport won't be a very good option, so yay for more cars on the roads, and the costs of keeping those running.

Not necessarily true in Wellington - a flatmate used to live in Kilbirnie and commute to Miramar each day. That was fairly easy.

In Auckland it would be a little harder though. I agree with the rest of your points however.

One of the staff at Mobil Karori commutes from Kelson.

One of our ACC helpers when my wife had concussion last year commuted in from Wainuiomata, and her rent had just been put up by $100/wk! What do you do when you're being priced out of Wainuiomata?

quickymart

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#2865334 11-Feb-2022 11:59

Mm that stinks. Both Kelson and Wainuiomata (mostly the former) aren't exactly well-known for being transport hubs though - Wainuiomata has a fairly decent bus service to Lower Hutt/Queensgate.

I had no idea Wainui was so expensive now.

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kingdragonfly

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#2865437 11-Feb-2022 13:47

41 KM northwest of Whangārei,
194 KM northwest of Auckland (3 hour drive with tolls)

Stuff: Bach prices at Matapouri soar beyond $2 million, and that's not beachfront

It's 15 houses back from the beach, but this 64sqm 1960s bach sold for $2.55m at auction - and it follows a similar $2.35m sale.

MikeAqua

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#2865482 11-Feb-2022 14:22

quickymart:

Indeed, I barely eat out or get takeaways now. I hear all the restaurants and places say they're finding it tough with lockdowns etc but who are all these people who can afford to eat out at restaurants all the time? I know I'm certainly not one of them. I used to be able to, but then house prices (or rents, in my case) jumped and suddenly that "eating out" budget simply disappeared.

Inherent in your question is an assumption that people only do things they can afford. There are plenty of people who never had the opportunity to learn basic financial skills. School didn't teach them and neither did their parents.

"There is a strong association between neighbourhood deprivation and geographic access to
fast food outlets in New Zealand"

doi:10.1016/j.amepre.2007.01.009 (otago.ac.nz)

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martyyn

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#2865527 11-Feb-2022 15:23

Three bed, two bath, double garage, new builds with no section other than a ring of grass around the house have hit $1M in Otaki in the last couple of weeks.

There is a subdivision just up the road where 42 of 44 are already sold and the houses are going up in a matter of weeks. Phase2 has even more houses going up and this is just one of half a dozen subdivisions being built on right now.

The infrastructure around here can barely cope as it is, it will be a nightmare when there are 2/3/4 people in each one of them.

I had a wee LOL at the person who considers Kilbirnie to Miramar a "commute" :)

mudguard

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#2865542 11-Feb-2022 16:07

deadlyllama:

At some point the default began to be two full time workers in a family. Sure, you don't see as much of your kids but you can have nicer things / live closer to town / etc.

Now, you need two incomes just to stay afloat. And there may not be much left over for nice things, and you may have had to buy way out of town anyway. Traditionally working class areas are gentrifying like mad. I know people who bought a house during the pandemic and have had to substantially downscale their lifestyle as a result.

Imagine if they did the affordability index based on one income??? I still think with student loans, increasing house prices (requiring two incomes) will see the natural population growth flatline if not plummet. I don't have kids but it's probably a gloomy prospect for those that are growing up now. Imagine the personal tax rates to sustain our potential super-annuitants.

quickymart

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#2865549 11-Feb-2022 16:14

martyyn:

I had a wee LOL at the person who considers Kilbirnie to Miramar a "commute" :)

That was me, I was using it to illustrate the point that you don't need a car in Wellington to commute back and forth from work. Of course, if you like up on the hills in Kelson or somewhere, that's a different story.

Handle9

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#2865550 11-Feb-2022 16:16

GV27:
There just won't be enough money circulating in the economy unless something is done to reduce accommodation costs and owner-occupiers given a soft-landing so they don't just go to the mattresses

You can have one or the other. You can’t have both. Someone is getting screwed, it’s more about how many by how much.

The only real hope for housing is for high inflation coupled with low housing demand. That has a whole heap of other, very negative, consequences.

alasta

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#2865554 11-Feb-2022 16:20

quickymart:

martyyn:

I had a wee LOL at the person who considers Kilbirnie to Miramar a "commute" :)

That was me, I was using it to illustrate the point that you don't need a car in Wellington to commute back and forth from work. Of course, if you like up on the hills in Kelson or somewhere, that's a different story.

My girlfriend used to commute from Island Bay to Miramar every day. It was a nightmare as it required three buses, with changeover points at Newtown and Kilbirnie.

Needless to say she has since changed jobs so that she can commute to the CBD instead.

quickymart

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#2865557 11-Feb-2022 16:26

I guess it depends on your situation. When I lived in Wellington, I only ever worked in the CBD, so it was probably quite simple.

I was looking at a job in Lower Hutt at one point, but yes, the commute would have been quite difficult.

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