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964 posts

Ultimate Geek
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  Reply # 1867921 18-Sep-2017 10:57
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tdgeek:

 

 

 

So whats the housing shortage? Lower end, middle end or upper end?

 

Whats the result that this housing shortage causes?

 

 

Affordable housing is where the shortage really lies. I do however think its unrealistic for all people on the lower end to expect to buy affordable housing. Also unrealistic in fact for those middle end people to afford it without lots of savings/sacrificing, and even the odd overtime job. We had to do this to raise enough money for our first home, it was lots of hard work and lots of saving. (The trend nowadays seems people dont want to do this)

 

There are many houses currently available (not getting sold) which one could argue means there is no shortage. Honestly I could argue against a housing shortage, or for a housing shortage. I am not really sure which to go for.

 

Throwing a lot more housing into the market probably wont do much, people still won't have the money to buy, and it will just lead to more empty houses on the market.

 

One thing is certain, there is definitely a shortage of money to buy affordable housing, it makes no difference if you on the lower end, middle end or upper end of the wage scale. The upper end of wage earners do have the advantage, they are normally able to purchase either cash, or with much bigger deposits and less risks for banks.

 

The real question though is what is affordable housing?

 

My opinion on that would probably be around the $400k - $500k mark. And yes that means not eveybody is going to be able to afford one, and those that can, generally would save heard to get there.

 

Edit: My opinions are for outside Auckland. 

 

Another thing I find interesting is peoples opinion on home ownership. Most people don't own their own homes, banks do. People have to serve their debt just like people in rentals have to pay rent. The real issue here then is perhaps not "home ownership", but rather why certain people cannot get the finance. Getting the finance does not make you a home owner, and in fact is far riskier than renting, especially in the current market where a drop in house prices and some interest rate hikes will severely disrupt the lives of many Kiwis. Do we want people at the lower ends exposed to this?


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Uber Geek
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  Reply # 1867926 18-Sep-2017 11:01
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I know some people who can't get the deposit, but can service it but are turned down.  Some are willing to pay a $1M home, they see that will just increase and it's better to get in if you can for whatever price, as long as rent isn't going to the landlord.  

 

 

 

Even if the loan was attainable, even if the deposit requirement drops to 10% it's the servicing.  For middle and under income people to spend 50-60% of their take home pay just for the house and for 30yrs?  Not including insurance, rates etc.  Plus that more people nowadays voluntarily choose to rent for lifestyle reasons.  

 

 

 

Esp after the election.  The thing is either house prices keep growing or we have an issue.  If they consistently slow down, investors may start pulling out of property and the banks start working with people to get their loans down a bit more, if it's not from equity it will need to be from elsewhere.  At the affordable end I don't think price will go down much, more people will just downscale to a smaller one and enough demand will prop it up.  There may be enough control to prevent a bank meltdown.  


 
 
 
 


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  Reply # 1867933 18-Sep-2017 11:12
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Wiggum:

 

tdgeek:

 

 

 

So whats the housing shortage? Lower end, middle end or upper end?

 

Whats the result that this housing shortage causes?

 

 

Affordable housing is where the shortage really lies. I do however think its unrealistic for all people on the lower end to expect to buy affordable housing. Also unrealistic in fact for those middle end people to afford it without lots of savings/sacrificing, and even the odd overtime job. We had to do this to raise enough money for our first home, it was lots of hard work and lots of saving. (The trend nowadays seems people dont want to do this)

 

There are many houses currently available (not getting sold) which one could argue means there is no shortage. Honestly I could argue against a housing shortage, or for a housing shortage. I am not really sure which to go for.

 

Throwing a lot more housing into the market probably wont do much, people still won't have the money to buy, and it will just lead to more empty houses on the market.

 

One thing is certain, there is definitely a shortage of money to buy affordable housing, it makes no difference if you on the lower end, middle end or upper end of the wage scale. The upper end of wage earners do have the advantage, they are normally able to purchase either cash, or with much bigger deposits and less risks for banks.

 

The real question though is what is affordable housing?

 

My opinion on that would probably be around the $400k - $500k mark. And yes that means not eveybody is going to be able to afford one, and those that can, generally would save heard to get there.

 

Edit: My opinions are for outside Auckland. 

 

Another thing I find interesting is peoples opinion on home ownership. Most people don't own their own homes, banks do. People have to serve their debt just like people in rentals have to pay rent. The real issue here then is perhaps not "home ownership", but rather why certain people cannot get the finance. Getting the finance does not make you a home owner, and in fact is far riskier than renting, especially in the current market where a drop in house prices and some interest rate hikes will severely disrupt the lives of many Kiwis. Do we want people at the lower ends exposed to this?

 

 

The affordable housing is a consequence of the high pricing. When buyers (who have ZERO interest in the lower end) bid up the higher end, it trickles down, and to a point where houses that anyone can buy, say $350k are now 550k+

 

There is a shortage of those houses I assume, and also a shortage of the buyers. No buyers, as too high. Probably MANY want to be buyers but priced out of the market. 

 

As you say, the key issue is what happens soon, post election, post Winter. Sales are slow, prices are flat at the moment. If the Govt of the day allowed more leeway, to increase affordable demand, that would be great, but only to a price limit, so that new buyers dont jump in on the 700k+ market, and add demand to that. Grants is an example, and ONLY for builds. Allow LONG mortgages as in the US, so you have your piece of paradise and you can pass that down




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Ultimate Geek
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  Reply # 1867935 18-Sep-2017 11:14
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rayonline:

 

I know some people who can't get the deposit, but can service it but are turned down.  Some are willing to pay a $1M home, they see that will just increase and it's better to get in if you can for whatever price, as long as rent isn't going to the landlord.  

 

 

I have heard this argument too. But think about it, are these people looking for a home, or is it more about an investment? Many people are buying up for the wrong reasons, even FHB's.

 

If you want to ride the property market and even make some good money out of it one does not necessarily need to invest in a home. Putting your money into a property growth fund for example will achieve the same thing.

 

Renting can still work out cheaper, and in fact in the current market many people will probably advise you to rather rent. There are all sorts of expenses which come from owning a house. Rates/taxes etc, then add the maintenance issues and before you know it you throwing a lot of money at it. Our current rental for example developed a leaking roof, + we had some recent major plumbing work done. The costs are high, the tenants don't see it. Now add to this the rates/water fixed charges and the tenants are actually getting a good deal. As the owner of the rental we have been running it at a loss.

 

 

 

 


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  Reply # 1867937 18-Sep-2017 11:15
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Looking at the other direction.  Given that house prices may not fall a lot.  Renting could be a way.  With just $50/week set aside at a 8% average can provide $720k at retirement after 35 odd years.  With a mortgage a lot the gains are eaten by the bank and the opportunity of time is gone.  We have a property boom now and it has helped thousands of fortunate homeowners but looking at 20yr or 40yr the average would probably be lower.  




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Ultimate Geek
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  Reply # 1867952 18-Sep-2017 11:30
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rayonline:

 

Looking at the other direction.  Given that house prices may not fall a lot.  Renting could be a way.  With just $50/week set aside at a 8% average can provide $720k at retirement after 35 odd years.  With a mortgage a lot the gains are eaten by the bank and the opportunity of time is gone.  We have a property boom now and it has helped thousands of fortunate homeowners but looking at 20yr or 40yr the average would probably be lower.  

 

 

Kiwisaver can come into play here. I'm not sure about other kiwisaver schemes, but with AMP you are able to fine tune your investment funds. You can for example change the fund to a high risk high return property fund for a certain percentage of your contributions. It works well for this.


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  Reply # 1867970 18-Sep-2017 11:42
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Wiggum:

 

rayonline:

 

Looking at the other direction.  Given that house prices may not fall a lot.  Renting could be a way.  With just $50/week set aside at a 8% average can provide $720k at retirement after 35 odd years.  With a mortgage a lot the gains are eaten by the bank and the opportunity of time is gone.  We have a property boom now and it has helped thousands of fortunate homeowners but looking at 20yr or 40yr the average would probably be lower.  

 

 

Kiwisaver can come into play here. I'm not sure about other kiwisaver schemes, but with AMP you are able to fine tune your investment funds. You can for example change the fund to a high risk high return property fund for a certain percentage of your contributions. It works well for this.

 

 

 

 

Yes Kiwisaver gets this same $50/week to $1.2M with the same 8% given the employer and govt contribution.  I just took something that was non Kiwisaver what it could mean without the employer and govt contributing.  


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  Reply # 1868826 19-Sep-2017 19:51
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lokhor:

 

rayonline:

 

Yes it's the serviceability.  Pretty much screwed unless one doubles their income.  A modest $700k home with a deposit achieved, let's say they were living with parents or the inlaws, serviceability of the loan requires $800 a week (Westpac calculator) under a 30yr plan.  With a mortgage the house price gets locked down, and wage increases a modest 2 or 3% per year on average overtime maybe.  So that helps a bit.  

 

 

 

One might argue it might be better renting for life and invest.  A 1 bedroom is a lot easier but then there is the $4,000 PA for the insurance the body corp but those things can increase over time too.  

 

 

 

 

A modest house costing $700K is insane. How did the market get in this state? 

 

Oh wait, you can watch this documentary and find out. It's pretty depressing btw. 

 

https://www.threenow.co.nz/shows/who-owns-new-zealand-now/S1344-012

 

 

Just watched it, very interesting. 


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Ultimate Geek
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  Reply # 1869689 20-Sep-2017 19:24
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Wiggum:

 

Fred99:

 

 

 

OTOH National seem to have an agenda of wanting to keep property prices high - so perhaps that's their angle on this.

 

 

I don't know of a single home owner in NZ that wants property prices to drop. Do you?

 

 

 

 

Yes - any home owner having to sort out a mortgage - I'll take a lower home price with lower mortgage payments in the hand than any higher returns 10 years in the future.

 

 





nunz

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  Reply # 1869691 20-Sep-2017 19:28
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rayonline:

 

Even if the loan was attainable, even if the deposit requirement drops to 10% it's the servicing.  For middle and under income people to spend 50-60% of their take home pay just for the house and for 30yrs?  Not including insurance, rates etc.  Plus that more people nowadays voluntarily choose to rent for lifestyle reasons.  

 

 

 

 

Most average / low incomes who are renting already pay 50% or more of income - a mortgage at least gives you control, possible profit and an investment of that 50% into your property not a landlords.

 

Us - we pay around 52% of our income on rent. Enough to cover around a $350 -$400k mortgage - I'ld rather pay that into a mortgage. We can service a mortgage, we cant raise the 80k plus required.

 

 





nunz



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Ultimate Geek
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  Reply # 1869965 21-Sep-2017 09:21
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nunz:

 

rayonline:

 

Even if the loan was attainable, even if the deposit requirement drops to 10% it's the servicing.  For middle and under income people to spend 50-60% of their take home pay just for the house and for 30yrs?  Not including insurance, rates etc.  Plus that more people nowadays voluntarily choose to rent for lifestyle reasons.  

 

 

Most average / low incomes who are renting already pay 50% or more of income - a mortgage at least gives you control, possible profit and an investment of that 50% into your property not a landlords.

 

Us - we pay around 52% of our income on rent. Enough to cover around a $350 -$400k mortgage - I'ld rather pay that into a mortgage. We can service a mortgage, we cant raise the 80k plus required.

 

 

$350-$400k mortgage? I'm sure there are lots of people that can service such a small mortgage. Just not sure what you going to get for that amount of money.

 

Here is a curve ball on all of this.

 

Which of the two options are better?

 

- Lower house prices with high interest rates.

 

- Higher house prices with low interest rates.

 

One sure way to get the house prices down is to push up interest rates. But at the end of the day, are you not still going to be paying back a similar amount? If house prices go lower, what you save on the cost of the purchase will just go to the bank as extra interest anyway. I will need to go do some calculations to get some real figures.

 

Personally, out of the two options above, I would rather see higher house prices, with low interest rates. In other words, what we have now.


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  Reply # 1870022 21-Sep-2017 10:13
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Pushing interest rates up will solve nothing. The way to stabilize prices is through supply. We need to stabilize and not bring prices down more than around 10-15% doing greater will result in a huge risk of bad mortgages and negative equity, a recipe for disaster.





Mike
Retired IT Manager. 
The views stated in my posts are my personal views and not that of any other organisation.

 

 It's our only home, lets clean it up then...

 

Take My Advice, Pull Down Your Pants And Slide On The Ice!

 

 


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Master Geek
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  Reply # 1870137 21-Sep-2017 11:56
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Wiggum:

 

 

 

Personally, out of the two options above, I would rather see higher house prices, with low interest rates. In other words, what we have now.

 

 

People who have houses usually do. People looking to buy houses and not have to defer having a family etc any more probably don't want high house prices. 




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Ultimate Geek
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  Reply # 1870167 21-Sep-2017 12:20
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GV27:

 

Wiggum:

 

 

 

Personally, out of the two options above, I would rather see higher house prices, with low interest rates. In other words, what we have now.

 

 

People who have houses usually do. People looking to buy houses and not have to defer having a family etc any more probably don't want high house prices. 

 

 

I agree with that. But banks normally become even more stricter when interest rates are higher. So for FHB's higher interest rates wont really help much either.

 

Higher interest rates will affect both FHB's and people that already have mortgages.


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  Reply # 1870277 21-Sep-2017 14:38
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Higher interest rates will damage the whole economy, it will make the NZ dollar rise meaning exports earn less and our balance of payments suffer and there will job losses in the exporting sectors. Consumers will have less spending power thus slowing the economy, unemployment will go up. The Government will go deeper into the red to deal with the rising unemployment and will need to borrow more which will push interest rates higher and there starts the awful spiral. The tax take drops as government spending rises again putting upward pressure on interest rates and slowing the economy and thus we have a recession.





Mike
Retired IT Manager. 
The views stated in my posts are my personal views and not that of any other organisation.

 

 It's our only home, lets clean it up then...

 

Take My Advice, Pull Down Your Pants And Slide On The Ice!

 

 


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