Can you afford a home in NZ?

[Bling]

Doesn't it bother you that "investing" in property actually harms economy very badly? All these people who dump their money into property market are actually causing recession. I believe profiteering from housing market should be heavily (extra) taxed. Houses don't make anything by sitting there. All they do is devalue currency and create unemployment.
Can you imagine what economic boost it would have been, if everyone who who invested into property, instead invested into companies, which create jobs, and drive economy?

Does what bother me? I built a house to live in, the values haven't changed much since I did so. So no gain there. My wages go to paying the house off rather than rent. Should I feel bad for "investing" in my own future?

Do I sound like someone that has a property portfolio?

I just know what I want before I get to that light, so have put in place plans to get there. Meanwhile other people spend more time avoiding letting "the system" win by buying a house. I get the impression that until property prices come down to a price YOU are happy with, you're not going to let "the system" win by investing in a house.

I have no problem with this, as I don't suffer at the end of the day. Everyone of course will have their own plans, and I am not knocking them. But I will point out flaws in theory's if I think they are wrong.

[Al]

Housing creates unemployment?

Guess all those builders, plumbers, sparkies, bricklayers, labourers, gardeners, landscapers, interior designers, architects, engineers, building supply stores, real estate agents, property managers, accountants, lawyers, printing companies, sign manufacturers are just a figment of my imagination?

Sergei, sorry bud, that is the stupidest post of the year.

[sergei]

Housing creates unemployment?

Guess all those builders, plumbers, sparkies, bricklayers, labourers, gardeners, landscapers, interior designers, architects, engineers, building supply stores, real estate agents, property managers, accountants, lawyers, printing companies, sign manufacturers are just a figment of my imagination?

Yes, short term, that is correct. But once the house is built, it there for lifetime.

These jobs apply to only newly built houses, or heavily renovating. The way I see this: councils create artificial demand by putting brakes on development (either refusing subdivision or extorting on consent prices). It still does not explain why 35yo house costs as much as newly built one.

Your logic would apply more, if houses would get demolished regularly.

What people also do not understand, is that value of a house is arbitrary. Of course there is real cost involved in building it, but majority of price comes from land prices. The same piece of land in Te Kuiti costs 10 to 20 times less than in Auckland.

Just think what caused last recession. (In short banks borrowed money against the property that was not worth what they thought it was).

[Bling]

Do you want to live in Te Kuiti?

If so you just found the solution to your problem.

By the same token I can buy a house and land package down south for probably 30k all up. Does that mean land in CHCH is overpriced? Nope, just because you won't cough up the $$$$ something is worth doesn't mean it's worth any less.

[Al]

The way I see this: councils create artificial demand by putting brakes on development (either refusing subdivision or extorting on consent prices). It still does not explain why 35yo house costs as much as newly built one.

You and I can agree 100% on that. The lazy parasitic local and regional councils just add regulations and compliance costs to create revenue for themselves. We need a drastic look at the RMA and to cut back these councils to free up more free land for housing. Sergei, you sound a little libertarian here, are you realising what great opportunity that the true free market is?

Buddy of mine in Waitakere subdivided a section and then build a house on each. The compliance costs and 'contributions' ALONE before anyone even picked up a pencil let alone a hammer were over $60,000. The local councils just slowed him down. When he requested an itemised breakdown for all the costings, they charged him another $2k.

The reason a 35 year old house costs similar to a new home is the cost of the land. Chances are you can't get spare land where the 35 year old home is, the new home is usually further afield.

[sergei]

Do you want to live in Te Kuiti?

If so you just found the solution to your problem.

By the same token I can buy a house and land package down south for probably 30k all up. Does that mean land in CHCH is overpriced? Nope, just because you won't cough up the $$$$ something is worth doesn't mean it's worth any less.

take a good example: my parent's place: bough in 2001 for $240,000 (~$320,000 in today's money) now "worth" $480,000 (that is council estimate as well). Where the extra $160,000 came from, is Auckland became $160,000 better? In those 10 years nothing changed where we live, at least nothing that will make it by $160,000 better.

Which leads to conclusion that the prices in Auckland are over inflated. I will be ready to fork out $$$ when the prices come down to a saner level, which should happen in next couple of years.

See, I am in position where I don't pay rent to somebody I don't really know. I pay rent to my family, hence I have advantage of being extra cautious and not being forced into deal that I could potentially regret later.

[sergei]

The way I see this: councils create artificial demand by putting brakes on development (either refusing subdivision or extorting on consent prices). It still does not explain why 35yo house costs as much as newly built one.

You and I can agree 100% on that. The lazy parasitic local and regional councils just add regulations and compliance costs to create revenue for themselves. We need a drastic look at the RMA and to cut back these councils to free up more free land for housing. Sergei, you sound a little libertarian here, are you realising what great opportunity that the true free market is?

Buddy of mine in Waitakere subdivided a section and then build a house on each. The compliance costs and 'contributions' ALONE before anyone even picked up a pencil let alone a hammer were over $60,000. The local councils just slowed him down. When he requested an itemised breakdown for all the costings, they charged him another $2k.

The reason a 35 year old house costs similar to a new home is the cost of the land. Chances are you can't get spare land where the 35 year old home is, the new home is usually further afield.

That is exactly how I see it as well.
I don't see how it costs $60000 for a clerk to pull a piece of paper from one folder and put it into another.

I know people who used to work for council, and I am getting enraged at the stories, every time I hear about normal day-by-day they did there (or more precisely don't do).

[Bling]

Ok, answer me this. Do you think the fact Aucklands population is projected to be 45% more in 2011 than it was in 2001, has anything to do with house prices?

2001 - 1,021,616
2011 (projected) - 1,485,200

If your answer is no, then I don't think you're grasping the "supply and demand" that helps influence property prices.

[Al]

Ok, answer me this. Do you think the fact Aucklands population is projected to be 45% more in 2011 than it was in 2001, has anything to do with house prices?

2001 - 1,021,616
2011 (projected) - 1,485,200

If your answer is no, then I don't think you're grasping the "supply and demand" that helps influence property prices.

Yup thats very true. The problem can be alleviated with councils actually freeing up land to use for new housing without stupidly high compliance costs.

[Bling]

Yep, they certainly like to take a slice of the pie that's for sure. I do wonder how much leaky home sort of things impact on it. Seeing as the council has to stump up when the shit hits the fan.

[sergei]

Ok, answer me this. Do you think the fact Aucklands population is projected to be 45% more in 2011 than it was in 2001, has anything to do with house prices?

2001 - 1,021,616
2011 (projected) - 1,485,200

If your answer is no, then I don't think you're grasping the "supply and demand" that helps influence property prices.

Well, is there shortage of land here in Auckland?
And why do I see almost every day a massive banner for ~$450,000 (can't remember exact figure) 3 bedroom apartment as if it was a good deal? It isn't even in very prestigious part of Auckland, or very close to anything.

All the demand is artificial in Auckland (or more precisely limited supply).

[Al]

So you will be voting Act in the election sergei. ?

What you and I have been discussing in the last handful of posts is Dr Brash's take on the housing situation in NZ.

[solitaire]

Well, is there shortage of land here in Auckland?

No, there is a shortage of desirable housing for sale.

And why do I see almost every day a massive banner for ~$450,000 (can't remember exact figure) 3 bedroom apartment as if it was a good deal? It isn't even in very prestigious part of Auckland, or very close to anything.

Because there is a market for that sort of thing, remember these new place always sell for a bit less than what they are listed as

All the demand is artificial in Auckland (or more precisely limited supply).

It's not artificial, its real demand, people buy houses in the price range you want all the time - but you are right - its high demand because of the low supply.

[Bling]

Where do they stash the ~480,000 artificial people?

EDIT: Just asked a mate in Auckland if houses in Auckland are over priced or priced to match (real) demand. He said the later, and sent this http://aucklandpropertynews.wordpress.c ... -shortage/

So they are either talking about a shortage of houses, or a shortage of artificial houses to stash the artificial people. You decide

[Al]

It is real demand because the councils have a captive market. People need to be housed. There is an artificial shortage of land though. When the councils add the huge compliance costs onto new developments they are effectively cutting away or completely removing the margin for developers. Who wants to tie up millions upon millions of dollars for an undetermined time frame?

[BZG Wagon]

Why am I not surprised at that reply... I've probably paid 5% of my mortgage off since this thread started. Goal is another 10% in the next 12 months.

$532k = Average house price in Auckland (pet QV)
$ 53k = 10% deposit
$479k for an average family home, owned by someone first entering the market.

$479k @ 6.3% (2yr fixed rate, the lowest it's been in a while).
= $30k paid to the bank in interest, before you've even paid as much as a cent in principle. Aucklanders don't get paid that much better then the rest of the country.

To rent the same house = $22kpa, no rates, no maintainance. Assuming property prices remain flat, $8k benefit. If property prices rise quicker then inflation forever, nobody will be able to afford a house, and all property will be owned by Chinese investors.

[BZG Wagon]

The other thing I'd like to stress is the single biggest reason for not buying a house is this: there are insufficient listings. Every house we've put an offer on there have been at least 5 other offers and every auction we've been to, the house have gone well beyone everyones expectations because young families are so desperate to buy.

We are getting beaten by people who put down completely unconditional offers - they're not even interested in a building inspection because they are that desperate. I wouldn't buy a car without an inspection, I sure as hell won't do the same with a house.

Looking at the areas we want to live in, at times we're lucky if there's more then one new listing in our price bracket every 2 - 3 weeks.

Agree with the RMA comments. My friends looked at subdividing and it was going to cost $50k just to split the land. Building consents are the lowest on record. There is no incentive for those that have land banked to carve up more sections, while the strain on Auckland transport worsens & the city spreads out further. Auckland will turn into the shambles that is LA at some point.

The Auckland market is completely f*cked up.

[Bling]

Yeah sounds like not enough houses up for sale . Which may or may not be in relation to the lower values currently being seen. People only sell if they have to if they can't get what they want, they will just sit it out. Reminds me of looking for a rental and competing against a list of other applicants. Demand out stripping supply.

On the topic of Auckland prices being relatively high compared to the increased potential earnings of working in Auckland. Average asking price of a house in London = £663,087. I used to live in England, and am pretty sure our family could not afford to live in London. So we didn't.

[solitaire]

On the topic of Auckland prices being relatively high compared to the increased potential earnings of working in Auckland. Average asking price of a house in London = £663,087. I used to live in England, and am pretty sure our family could not afford to live in London. So we didn't.

That's weird... england have a capital gains tax and their housing market is still insane... but mr goff promised us that a capital gains tax would fix all our problems?????

[mr_monkey]

Loooove that post.

agree with everyone against sirgay.

If you wanted to own a house you would. Stop fluffing yourself.

-nathan