Opinions on Mortgage Affordability

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#2383539 31-Dec-2019 22:53

eracode:

quickymart:

I remember Winston Peters not so long ago saying that a house price should be 2-3 times your income, not 10 times, like it is in some places. I've always felt this would make mortgages more affordable for a lot more people.

Winston has said a lot things. Like he would personally lead the walk-in to Pike River mine.

How do you think you we might reach this nirvana of house prices not more than 2-3 times income?

Only buy very small houses in places no one wants to live!

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#2383551 31-Dec-2019 23:32

That economist Shameel something (his name escapes me) says we don't have enough houses, and something like 500 000 more should be built - primarily in Auckland (I imagine, as that's probably where most of the demand is). He says that would have a big hand in helping drive down prices. At the moment he reckons a big part of it is demand outstrips supply, and I'm inclined to agree.

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#2383555 1-Jan-2020 00:38

quickymart:

That economist Shameel something (his name escapes me) says we don't have enough houses, and something like 500 000 more should be built - primarily in Auckland (I imagine, as that's probably where most of the demand is). He says that would have a big hand in helping drive down prices. At the moment he reckons a big part of it is demand outstrips supply, and I'm inclined to agree.

OK - that sounds fairly straightforward. The median annual income in NZ is $57k for a man and $47k for a woman - $104k for a married couple. So based on an average couple, all we need to do to solve the housing crisis is build 500,000 homes that will have an average selling price of around $300k each. Two guys in a relationship or same-sex marriage might have to expect to pay a bit more. Two women - a bit less.

What might be harder is catering for people on the minimum hourly wage. Two people earning $17 each for 40 hours per week earn $71k per year. Houses for them will need to cost them not more than about $200k. Could be tricky - but at least there’s no same-sex complication with this one.

These prices are based on Winston’s ‘3x income’ thinking. If you’re going for his ’2x income’ ideal, the selling prices need to be $200k and $150k respectively. That might be a whole lot harder. But yeah - Winston and Shameel are on to something.

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#2383564 1-Jan-2020 01:58

Maybe instead of expecting everyone to own their own house, look to Vienna for a model on how to create good council housing. Would ease a lot of the pressure in the big cities, for sure.

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#2383573 1-Jan-2020 07:38

And if it's tough now, this article in the Herald this morning has some pretty dire predictions.

https://www.oneroof.co.nz/news/average-house-price-in-auckland-could-hit-3m-by-2040-37028

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#2383583 1-Jan-2020 09:26

eracode:

Two people earning $17 each for 40 hours per week earn $71k per year. Houses for them will need to cost them not more than about $200k. Could be tricky - but at least there’s no same-sex complication with this one.

In NZ history has anyone earning minimum wage been able to afford a home? I agree the price to wages ratio is way out of whack, but owning a home is still tough work, so expecting to cater to a minimum wage earner may be tricky.

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#2383590 1-Jan-2020 10:01

eracode:

quickymart:

That economist Shameel something (his name escapes me) says we don't have enough houses, and something like 500 000 more should be built - primarily in Auckland (I imagine, as that's probably where most of the demand is). He says that would have a big hand in helping drive down prices. At the moment he reckons a big part of it is demand outstrips supply, and I'm inclined to agree.

OK - that sounds fairly straightforward. The median annual income in NZ is $57k for a man and $47k for a woman - $104k for a married couple. So based on an average couple, all we need to do to solve the housing crisis is build 500,000 homes that will have an average selling price of around $300k each. Two guys in a relationship or same-sex marriage might have to expect to pay a bit more. Two women - a bit less.

It fascinates me how often people assume that only couples buy houses. There are plenty of single people who want to buy a house, or at least an apartment, and it's even harder for them.

As for building more houses, well Kiwibuild was supposed to achieve that and look how it turned out...

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#2383597 1-Jan-2020 10:59

alasta:

eracode:

quickymart:

That economist Shameel something (his name escapes me) says we don't have enough houses, and something like 500 000 more should be built - primarily in Auckland (I imagine, as that's probably where most of the demand is). He says that would have a big hand in helping drive down prices. At the moment he reckons a big part of it is demand outstrips supply, and I'm inclined to agree.

OK - that sounds fairly straightforward. The median annual income in NZ is $57k for a man and $47k for a woman - $104k for a married couple. So based on an average couple, all we need to do to solve the housing crisis is build 500,000 homes that will have an average selling price of around $300k each. Two guys in a relationship or same-sex marriage might have to expect to pay a bit more. Two women - a bit less.

It fascinates me how often people assume that only couples buy houses. There are plenty of single people who want to buy a house, or at least an apartment, and it's even harder for them.

As for building more houses, well Kiwibuild was supposed to achieve that and look how it turned out...

Yes - I agree and was conscious of the couples thing when I wrote that post - which is meant to be sarcastic. I did it based on couples on purpose because the max cost of a house for a single person, using Winston’s brilliant idea, would need to be around $100k to $150k - which is even more ridiculous.

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#2383600 1-Jan-2020 11:05

My view as a baseline is that one shouldn’t be able to borrow more than 3 times the household income and that repayments shouldn’t really be more than 50% of the weekly income.

However, I think the focus ideally should be on long term rentals that actually suit peoples needs (such as decent multi-vehicle garaging and private green space).

I am reminded of Norwich council in the UK winning the RIBA Stirling price for its building of 105 houses to the PassivHous environmental standards. The same concept would work here - amended for our need to use vehicles.

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#2383620 1-Jan-2020 12:11

eracode:

Yes - I agree and was conscious of the couples thing when I wrote that post - which is meant to be sarcastic. I did it based on couples on purpose because the max cost of a house for a single person, using Winston’s brilliant idea, would need to be around $100k to $150k - which is even more ridiculous.

Is it though?

Change the word house to home. Not hard to imagine building apartments or units for that ballpark figure is it?

I think we need to be more creative and move away from the idea of freehold or nothing for home 'ownership'.

Perhaps some kind of situation like retirement homes and their 'right to occupy'.

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#2383627 1-Jan-2020 12:39

I suspect that eracode is a home owner who likes the high prices, which is great for him, but that does absolutely nothing for anyone who is trying to get into the market (or even just a foot on the property ladder) - especially someone looking to buy on their own. Do you think the current situation is totally fair for new home buyers? And sorry but sarcasm doesn't work for me.

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clevedon

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#2383639 1-Jan-2020 13:13

quickymart:

That economist Shameel something (his name escapes me) says we don't have enough houses, and something like 500 000 more should be built - primarily in Auckland (I imagine, as that's probably where most of the demand is). He says that would have a big hand in helping drive down prices. At the moment he reckons a big part of it is demand outstrips supply, and I'm inclined to agree.

Massive flaw in that suggestion - who is going to build those 1/2 million houses?

As mentioned, Kiwibuild was a huge flop as Labour didn't have enough skilled people to build them (amongst many other whimsical ideas to fufill their unrealistic targets)

So lets import 10,000 or so skilled tradesmen to build those 1/2 million houses - but where will they live for all those many, many years it takes? Because we know available rentals are in bulk over supply in Auckland particularly at the moment.

quickymart

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#2383662 1-Jan-2020 14:57

That's true and sorry for the rant, just frustrated as I would love to get into the housing market, it just seems out of reach for myself (and a lot of other people).

clevedon

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#2383666 1-Jan-2020 15:11

quickymart: That's true and sorry for the rant, just frustrated as I would love to get into the housing market, it just seems out of reach for myself (and a lot of other people).

My son, 19 and half way through his degree knows that the first thing he wants do do after Uni is save up and buy a house and is resolved to the fact that he won't be able to afford to do it in Auckland. He is already prepared to have to move to a more affordable place in NZ to do that just to get on the property ladder - and you know, worst house in the best street scenario, do it up and move on and up to the next one.

Not everyone one can do that, but a lot just won't.

alasta

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#2383669 1-Jan-2020 15:33

quickymart: I suspect that eracode is a home owner who likes the high prices, which is great for him, but that does absolutely nothing for anyone who is trying to get into the market (or even just a foot on the property ladder) - especially someone looking to buy on their own. Do you think the current situation is totally fair for new home buyers? And sorry but sarcasm doesn't work for me.

I think you are conflating the question of whether houses should be more affordable with the question of whether there is any realistic way the they could become more affordable in the foreseeable future.

The housing crisis has been building up over more than 20 years, so it's not going away anytime soon despite what some politicians would like you to believe.

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