10 ms·

Average home prices in New Zealand reaches 8.8 times average household income

103 points by thomasfl 4y ago

lqet 4y ago
Where I live (southern Germany), you cannot find a house under 600,000 EUR. The average net household income in Germany is around 43,000 EUR. That means that house prices here are over 16 times the average household income. Yupp, it's bad. My wife and I both have university degrees, we have good and secure jobs, and our net household income is above average. But we have generally accepted the fact that it is impossible for us to fully own a house before we are dead here, even with the national or state-wide support programs for families (we would not get much, if any, support because our income is too large). Our parents don't quite get this. When my parents were our age in the early 90ies, my mother was a homekeeper and my father worked as a carpenter at a small company with a completely average salary. Yet it was no problem for them to build a fairly large house in a very nice neighorbood, without any financial support from their families. I remember we didn't go on vacation for 2 years in the late 90ies "because we now have to pay off the mortgage", but that was it. Their house is today worth so much (> 1,000,000) that it would be impossible for us to find a bank willing to lend us the money to buy it. We currently rent a 4 room apartment, but lived in a 2-room apartment with our daughter for 2 years before because we couldn't find an apartment in a 30 km radius around our home town. The problem was not money - there was simply nothing available. For our current apartment, we were one of around 500 families that were initially interested, and one of 50 families who made it through the various hoops and obstacles created by the estate agent to get that number down to something managable. This is completely standard here. We only got the apartment because we were lucky. At the same time, we are now starting a legal battle with our local district for a kindergarten place for our 3 year old daughter, which she is very clearly entitled to by law and for which we applied years ago. But their are no free places anywhere, and nobody in our local town seems to care anymore. Our local mayor basically said "well, sue the district". The people in charge at our town hall also regularly quit. The previous person, who has now also left, told us she cannot bear parents in tears anymore who scream and yell at her because they have to both work full-time to pay of massive mortgages, and don't know what to do with their children. Again, this is something our parents cannot even remotely understand, because the situation was completely different 30 years ago, when it was absolutely standard for a child to enter kindergarten when it was 3 years old. You just went to the town, asked for a place, and one was assigned to you. The situation for families here has become so bad that we are seriously considering leaving the country.
- jurmous 4y ago
  Very similar here in the Netherlands... House prices are growing fast.
- mdrzn 4y ago
  I'd say same in Italy, even in small cities of 100k residents you cannot find a barely basic and nice home for less than 400k, which is over 10x the average household income.
- lnsru 4y ago
  Well… 100 km around Munich €600k brings one 3-4 room apartment with the size of ~100 square meters. No house under 1 million EUR and it gets more and more worse every year. With rather average salaries and lots of borrowed money in the family we managed to get a mortgage from the bank for a super old house. Then a super surprise came in - there was no handyman or a company who wanted to work for less than 1000€ a day. Every free minute goes into renovation, even very promising side project was put on hold. I already mastered plastering. Thinking about getting electrician’s license, then I will make more than McKinsey consultants.
- Escapado 4y ago
  It's pretty much the same for anything around the city of hamburg in the north and most of the time it's less about the houses and more about the land they sit on. Building got more expensive but land even more so. 1.000 EUR/m² of land for adjacent cities are becoming the norm. Most of my friends graduated from university with either a bachelor or a masters degree and only those who stand to inherit a sizable sum of money or their parents home are going to have houses. A 50k salary simply won't cut it. Most have given up on the dream entirely since 30+ years of debt is not something they can justify. As a quick back of the envelop calculation: Let's say you had a household income of 86k for two people (43k+43k) which translates to about 4550 EUR per month after taxes, health insurance and pension fund. Their cost of living on average (not including rent) in the hamburg area would be somewhere around the 1900 EUR mark, leaving about 2650 EUR per month. Since people need to save at least a little money, or go on vacation once in a while or repair their car or maybe they have kids it's probably generous to assume they could use 2000 EUR per month to pay off a house. Let's say you'd get a house for 600k all inclusive and you had to take on 500k of debt. With a current interest of about 2.76% fixed for 20 years and paying off 2000 EUR per month, then after 20 years you'd still be at about 224k of debt and you'd have paid 203k in interest. Assuming the same interest thereafter it would take a total of 30 years and 10 months to pay the house off entirely. During that time larger repairs or renovations are likely needed which would most likely forbid to pay off more than 2000 EUR per month. Now one could argue that people could find places for half as much in rural areas but then again, lots of professions won't find any jobs there and those that do often get paid way less. Somehow the situation saddens me. My parents bought a semi-detached house 20 years ago for 200k (which would be 264k today adjusting for inflation). Two identical semis in the same street got sold last year, each for more than 500k, so pretty much double the inflation adjusted prices albeit being 20 years older houses now.
thomasfl 4y ago
The problem with New Zealand seems to be that if you have an education, it is often no where else to use that education than Auckland or Wellington. I have never been to New Zealand, but the problem seems to be very similar to the housing problems we have in Norway. The sub arctic capital city of Oslo, has ridiculously high prices.
- ajsnigrutin 4y ago
  Stupid question... is the problem with not enough land (eg. if you want to live in manhattan, you literally have nowhere to build, unless you demolish something else),... or is there enough buildable (physically) land in "near-enough-to-commute" locations, but the government doesn't allow people to build (large enough) housing there?
  - bigbigbiga 4y ago
    There's a lot of land. New Zealand is about the 2/3rds the size of California. It just has to do with lack of development. About the same size if you include the habitable land / non desert.
  - xupybd 4y ago
    New Zealand has lots of land available. Zoning can be an issue. That said we have very low density housing. I think compliance costs and times don't help. Neither does our building code. We should allow the use of materials that have been approved in more advanced countries like Germany. The real cause has been low interest rates. People borrow as much as they can. At sub 2% rates they can borrow a lot and are pushing prices up.
  - berkut 4y ago
    In Wellington at least (where I live), there are limits on the density of housing that can be built (and height). Recently, the council was going to free up some of these restrictions a bit, but there was a lot of backlash by residents who didn't want the "character" of their neighbourhoods to be affected, so the relaxation in the rules has been a lot less. Wellington is a bit different in that there is a limit on the amount of empty land in the centre and the neighboroughing regions: it's quite hilly and pinned in geographically, and most of the central regions are fairly built-up already. Some areas (near the CBD) were also built up on reclaimed land from the harbour, and what with earthquakes, that's not great...
HPsquared 4y ago
Housing prices and income have a skewed distribution (more like a lognormal than a normal distribution); therefore the mean is higher than the median. What's the median home price and median income? Also, can the average household get a mortgage on these houses? Affordability is pretty much arbitrary and depends on the banks' lending criteria and interest rates (which depends on regulatory factors mostly). Edit: this is on top of supply and demand for the houses themselves, of course.
- ClumsyPilot 4y ago
  'Affordability is pretty much arbitrary and depends on the banks' lending criteria and interest rates' Well, we are at a point where significant % of the population will pass awat before they can pay off their mortgage
muchtest 4y ago
It annoys me when they compare countries and don't consider income tax - you don't pay with pre tax income... If you earn 150k in High Tax Euro Country you're losing 50% of that. In low tax US state you're closer to 33%. Thats the difference between 75k and 100k.
- creakingstairs 4y ago
  IIRC we pay 33% after 70k NZD ish. Usually people opt into KiwiSaver (3~6%) and fair bit also goes out into paying their student loan.
  - dx034 4y ago
    In many European countries university is either free or nearly free, so you'd have to add that to the tax burden to make it comparable to Europe.
- msh 4y ago
  But then you also have to consider what services are included in the tax that the lower tax rate might have to pay out of pocket.
  - netjiro 4y ago
    > you also have to consider what services are included in the tax Yes! And a lot more as well. Many are under the impression that income tax is the majority of their major tax burden. Total taxation from billing to salary net + vat of normal spending. This must include all forms of employment, social fees, and other government imposed costs for the employer. This is higher than income tax for many regions and income brackets. On top of this should be added other taxes for a given lifestyle. E.g. fuel and vehicle taxes, property taxes, etc. Then the services provided: health care, schooling, child care, child support, pensions, etc. Things look a lot different when making a complete cost comparison between countries, and varies a lot depending on what is included as a "normal" lifestyle. E.g: couple with 2.2 children at median income looking at retirement at 70 vs a single high income earner looking to retire at 50... and ... so ... on ... On top of that we can also include other living costs ... but we started somewhere at average house price vs annual family income?
NiekvdMaas 4y ago
Compared to some other countries: The Netherlands: €31.5k average household income, average house price €387k - so 12.3x. UK: £31.4k average household income, average house price £274k - so 8.7x.
- smcl 4y ago
  I see your housing bubble and raise you 18x in Prague, 16x in Brno: https://www.numbeo.com/property-investment/country_result.jsp?country=Czech+Republic https://www.numbeo.com/property-investment/country_result.js... Feels really unsustainable, I don't know how it can continue and I really feel for anyone here who's not earning tech-sector wages
- ipsi 4y ago
  That's not correct. I suspect that the source you saw said: > As of 2017, the average annual real disposable income of Dutch households was roughly 31,500 euros. Disposable household income would be, at a minimum, after tax, and possibly after accommodation. You'd want to increase that by about 60% to account for tax/etc, which would be 50.4K. That seems more reasonable to me, and would put the multiplier at 7.7. Not sure about the UK - that could very well be accurate, but London throws averages completely out of whack.
  - jvvw 4y ago
    I don't think London throws them out of whack all that much. I'm around Milton Keynes/Bedford so SE but a bit further than most folk would want to commute to London (and I'd imagine a reasonable percentage of the population live within a similar radius of London) and that average house price feels about right. You'd might manage to get a three-bed terrace or two-bed semi for that sort of amount I'd say.
    - ipsi 4y ago
      I dunno - I always assumed that London-proper prices (i.e., not Milton Keynes) being so outrageously high, upwards of £1,000,000, would throw out the average. Though perhaps the number of slightly cheaper apartments brings it back down again (although of course statistics can't tell you that's because the apartments are the size of a shoebox). Plus as I understand it, a bit further north you could probably start getting a decent house for £300,000 or less. And in really out of the way places, under £150,000. Trying to talk about "average" house prices in most countries is generally a bit daft IMO because the range between "remote little country town" and "centre of the largest city" is vast.
AndrewDucker 4y ago
More importantly, mortgage payments have gone from 1/3 of income to 1/2. That's reaching unsustainable levels.
- dijit 4y ago
  That's not normal? I paid half my income to rent when living in London 10 years ago, and prices have only gone up since then.
  - dazc 4y ago
    I lived up North 10 years ago and my rent for a 2 bedroom house was £320 a month. It wasn't in bad area either.
    - philjohn 4y ago
      Until 9 years ago I was living in a 3 bed semi detached within commuting distance of Birmingham, near a trainline, monthly season ticket was £90 - mortgage was around £400 a month - interestingly, houses there are still relatively affordable.
      - dijit 4y ago
        Coventry is/was that cheap, the downside is you’re extremely likely not to make it home from the train station. Hardly a reasonable trade off.
        philjohn 4y ago
        In what way were you not likely to make it home? This was a place in South Staffordshire, on the chase line.
        dijit 4y ago
        it is an extremely violent and dangerous place, and not reflected in crime statistics due to peoples distrust of the police and general motivation to "not be a dirty grass". I hear it's getting better with the students these days, but, as mentioned, it's quite dangerous to be any amount of affluent in Coventry. It's actually hard to convey how frightening it can be, to randomly be targeted while walking through the streets.. I'm having a mild panic just thinking about it.
xupybd 4y ago
I live in NZ and my home has more than doubled in value over the last 5 years. The rapid increase in prices is scary.
- mpol 4y ago
  Can you explain what the cause of this sharp rise is? The linked article has nothing on that. It even feels a bit alarming without much depth. And is anything being done? In the Netherlands, many investors, big and small, are buying up houses to rent out. Airbnb renting was a part of this as well. Many local governments are now creating rules, like, you have to live in the house when you buy it. Also, some taxes for investors have increased a lot. What is happening in the last few months is that less investors have bought houses and more have been bought by people buying their first home. The sharp rise in prices has been more normalized. Still, there is a shortage of housing and the low interest caused over-bidding by people in a rushed market. The result was that only investors and people which had financial support from their parents could buy houses. Of course somewhat to their own detriment with paying too much and having too big loans.
  - berkut 4y ago
    A lot of demand for housing (both to buy and rent), and in my experience (live in Wellington) a lot of the newer apartments being built seem very much architected with buy to let in mind, so I think renting is a large part of it, along with limited supply. The government did tighten the rules a bit several years ago so that effectively (there are ways around it), you needed to be a resident to buy property, but I don't think that had that much impact (although maybe it would be even worse if that wasn't done?)
    - chii 4y ago
      foreign buyers don't truly make up much of the market - any rules set against them is really just there to win political points imho.
  - nikanj 4y ago
    New Zealand has built more rules. Maybe they should have built more homes instead.
donmcronald 4y ago
So, if the average person can save 10% of their income, it takes 8.8 years to save a 10% down payment? Factor in tax and the time it takes to save a down payment is starting to look close to the time it took my parents’ generation to own a house free and clear.
- throwaway3b03 4y ago
  > if the average person can save 10% of their income, it takes 8.8 years to save a 10% down payment Not according to this article, where it mentions the average household income, not the average per-capita income. So you can expect it to take quite a bit longer than that to save for that down-payment, for the average person.
  - dzhiurgis 4y ago
    Sun article half year ago said 27 years assuming no price change
  - sgt 4y ago
    Then the average person just needs to leverage some pre-existing wealth. Sell some property that you already have, make a decent profit! /s
- edf13 4y ago
  Most mortgages (At any reasonable %) will require more than 10% these days... you're looking at 20-25% in many cases.
  - beardedetim 4y ago
    In USA this isn't true. We bought a house using an FHA loan and put down less than 5% and our interest rate was lower than 3% if I remember correctly. Maybe not as reasonable as you are imagining but it was really low in our mind.
    - edf13 4y ago
supernova87a 4y ago
Here is something I would like to get opinions on -- whether this is a valid historical viewpoint. Talking very macro here. We (the world) have spent the last 80 years in a period of relative prosperity, peace, and general building up of countries' (and people's) wealth and productivity. Currencies -- stores of value -- have not defaulted generally, and as everyone engaged in producing more over the last decades (real physical goods and services representing raw materials and labor), we have accumulated all those years worth of output and stored value. Any properly operating controller of currency has to issue more currency as physical output increases (money supply, etc). As long as there are things that do not grow as fast as wealth or people / population grows and are finite in supply (land, housing), that accumulated 80 years of wealth has to go somewhere, and we are seeing it go into rising prices of finite housing by people and institutions searching for where to put it. Everyone is actively seeking ways to spend / invest it for a return and not sit idle. So much money seeking a return has exhausted the growth of demand for capital, and returns are pretty much 0% these days. (think of it as, how could so much capital all earn 10% interest like it did at one point?) And that money seeks out wherever it can find appreciation -- housing. Gripe as much as you want about wealth inequality, etc. and debate/tinkering around the edges of who in particular has more money or power to purchase. There is no escaping this fundamental buildup of 80 years of postwar resources in the average person's bank account or that of governments and institutions. Is this off base? Is my interpretation wrong? Are we just seeing the fundamental force of wealth accumulation manifest into the one place that it finds value? This is a long-term problem, isn't it, if we can't escape this truth? Especially for someone born today, who finds that everyone existing already has tons of money in the bank and you're trying to start on that ladder too, but have nowhere the same resources to compete for limited supplies of the hot item?
- JohnJamesRambo 4y ago
  Maybe that 80 years of wealth in bank accounts is largely just a bunch of bs. Money is just an abstract idea we all agree upon. https://www.investopedia.com/terms/k/kondratieff-wave.asp https://www.investopedia.com/terms/k/kondratieff-wave.asp https://www.bridgewater.com/big-debt-crises/principles-for-navigating-big-debt-crises-by-ray-dalio.pdf https://www.bridgewater.com/big-debt-crises/principles-for-n...
martinsuchan 4y ago
Similar or worse situation is here in Prague, Czechia, person working in Prague needs about ~16 yearly incomes to buy average home here, it's insane, see: https://www.idnes.cz/ekonomika/domaci/praha-byt-cena-bydleni-dostupnost-hypoteka-finance.A211214_111621_ekonomika_mato https://www.idnes.cz/ekonomika/domaci/praha-byt-cena-bydleni... Also Czech National Bank just increased the base interest rate to 5.75% this week, you can imagine how expensive regular mortgage is currently.
- Markoff 4y ago
  it's household, not person income, which is consisting usually from 2+ people at least in Czechia the problem with mortgages is that they should be heavily regulated long time ago requiring at least 20-30% first downpayment, cheap mortgages are just pushing prices for everyone including poor people, I'm glad for current regulation, but sadly it's way too late, my apartment in Prague also doubled value in last 5 years, which is insane. I'm idiot, so I paid it in cash. I am also idiot, I could buy next apartment in cash again without being mortgage slave (I have savings roughly worth 40 m2 Prague flat currently), but nowadays mortgage slaves are preferred instead of people who can save their own money and stupid people happy with cheap mortgages don't realize these are just pushing prices up, instead with inaccessible mortgages prices would be much more stable and you would need to scrap money elsewhere but without greedy banks. But there are good news, recently prices started to go down and need to be already cut, because they are even beyond of mortgage slaves already.
- yafinder 4y ago
  What does an average home in Prague look like? Is it an apartment or a detached house, how many bedrooms? In Eastern European countries, the quality of housing varies greatly, from cramped apartments in gray concrete buildings to elegant mansions. I wonder, which of this is worth 16 times annual income.
  - Markoff 4y ago
    65 m2 apartment is Czech average, obviously it will be apartment as well in Prague, since houses are reserved only for extremely wealthy or people with family here who inherited it, though I'd not guess what's average m2 in Prague, I'd assume less than Czech 65m2 average, which is btw. quite small 2BR+1LR apartment and it will be mix of old brick buildings, commie concrete block buildings and new brick/concrete buildings, msot of the people live for sure in commie block ghettoes (8-13fl usually), I am lucky one bought apartment in concrete building but with only 5 floors which looks also from outside like brick building (only around 50 of these models built in Czechia) and right next to my building is older brick building owith almost same height, lot of green and quite close to city center unlike those commie block ghettos which are on the edges of city
Markoff 4y ago
As European - wow, that cheap?! Though still with horseface management...
- nizmow 4y ago
  Quite unnecessary. I’d almost suspect you’re not actually European.
  - Markoff 4y ago
    She is well known abroad for her Chinese style approach to COVID.
matsemann 4y ago
How have other countries dealt with that? In Norway, the cap you can borrow is 5x your income. This cap is total of all loans (student loans, mortgages, limit on your credit cards etc) Not sure of the effect, but perhaps it has cooled it somewhat You notice certain "bands" on apartment prices. An apartment for a single person is capped at ~5x what a single person makes, then there is a gap until the next band etc. One problem is that normal people are capped, but someone with upper class parents can get help to win the bidding round by bidding just above what most people can. So it can feel unfair, at the same time one probably shouldn't be liable for that amount of loans as well. Dunno.
- cianmm 4y ago
  In Ireland we've got a cap of 3.5X income (which banks can sometimes stretch to 4.5 income but it's pretty difficult to do due to government limitations) and that hasn't seemed to have helped house prices much (although it was iirc more to stop a housing bubble and crash rather than to keep house prices down). It's just meant that it's easier for investment firms and cash-buyers to outbid everybody else.
Manheim 4y ago
In Norway the median income is NOK 550 920,- and the average income is NOK 609 480,-. The average price for a home is NOK 4 483 328,-. So respectively 8,1 and 7,3 times.
- Markoff 4y ago
  Are you quoting average income per capita or household?
  - Manheim 4y ago
    per capita https://finanssans.no/gjennomsnittsl%C3%B8nn-i-norge https://finanssans.no/gjennomsnittsl%C3%B8nn-i-norge
    - Markoff 4y ago
      but the article is per household, so you should slash your prices by half since household usually consist of two people, so it seems Norway has extremely cheap properties
      - Manheim 4y ago
        true - many households here are with double income, but you can't double the income just like that since there are many single person housholds. I find statistics that say that for all households the median after tax, is NOK 546 700 (2020). I can't find the official statistics over income before taxation. I do however, find a public research article that indicate that just under fifty percent of the poulation has a household income lower than NOK 750 000.
- sgt 4y ago
  And in Norway it's still very common for young people (25-50) to buy property. Often couples buying together, but it's almost a given that you buy instead of renting.
andi999 4y ago
ok, I am pedandic, but they probably mean 'annual'.
- jacquesm 4y ago
  That's a really funny comment.
varispeed 4y ago
The prices are artificially inflated by WEF connected funds. They pay above market price for properties, pricing out locals out of the market. This is part of Great Reset. The artificial financial crisis will force people who own homes to sell as well and by the target date of 2030, people will own nothing.
- jurmous 4y ago
  Do you have any sources that support this? And what makes this an artificial financial crisis? As far as I see it, much of recent inflation is happening as an effect of all COVID financial support programs and the effects on supply system because of lockdowns and turning down factory production too aggressively. And now additionally the effects of sanctions and stopping of energy imports from Russia after Russian aggressive move into Ukraine. Hardly artificial except if you believe that Covid or Russian aggression is manufactured by a conspiracy of some rich people in the WEF... And what will force current home owners to sell a home? Since in this country you loose more money renting than owning.
tjpnz 4y ago
I'm currently living in Tokyo and have family visiting from NZ. I've already had a few uncomfortable conversations about when I'll be coming back. Realistically I won't be, not only would I lose more than half my salary, but I would then have to dedicate a large portion of what's left on an overpriced hovel that's probably rotting from the inside. It's no wonder that most of the people I graduated with left the country long ago. Those who stayed had well off parents who could get them onto the property ladder.
- chii 4y ago
  > I've already had a few uncomfortable conversations about when I'll be coming back If they truly care for you, they'd understand that where you are right now is better than back home. If a place is expensive and unaffordable, the best option for you (and anyone really) is to leave.
te_chris 4y ago
NZs on its way to a crash. Debt to income ratios of recent mortgages are insane, and they don't do long-term fixes there. Either lots of defaults or massive drying up of disposable income. https://www.stuff.co.nz/business/128396590/world-watching-nz-housing-market-as-auckland-labelled-canary-in-coal-mine https://www.stuff.co.nz/business/128396590/world-watching-nz...
goodpoint 4y ago
A world map of the house price VS income ratio is available here: https://www.numbeo.com/property-investment/rankings_by_country.jsp?title=2022&displayColumn=0 https://www.numbeo.com/property-investment/rankings_by_count... Please stop spamming the thread with anecdata.
TrackerFF 4y ago
How are the lending laws in New Zealand, if they're regulated? Here in Norway, one can loan 5x of annual gross income (minus any debt you have), and at least a 15% down payment. Average annual household income here is 610000 NOK (~64500 USD). Average home price here (end of April) is 4483328 NOK (~473914 USD), so the ratio here would be 7.34 - but that's assuming single income household. For double income, that ratio would obviously halved. In any case, the average person buying an average home here would have to save up a down payment equivalent to 2.34 annual gross incomes, in order to get the maximum possible loan/mortgage (5x annual income)...and that's assuming this person is completely debt-free. If this person managed to save up 25% of their annual income, it would still take almost 10 years to save up for that down payment - but the housing market will likely outpace the saving potential of a your average person. So now you have to save up 2-5 extra years to afford the down payment. All while you're paying rent that is much higher than the mortgage would be. Lesson learned is that being an average single person trying to buy an average house sucks, at least over here. (Caveat: obviously most people do not purchase "average" homes, but start on the lower end - and most will save up with partners, as well as enjoy appreciating value of their first "starter" home)
- svth 4y ago
  > Average annual household income here is 610000 NOK (~64500 USD). Norway's GDP per capita is about USD70.000. Surely you're using GDP per capita, or average individual income, not household income? I have a very hard time believing that Norwegian average household income is just over half that of New Zealand.
  - TrackerFF 4y ago
    Yeah, per capita - not household income.
- IMTDb 4y ago
  Public policies are now heavily favouring public transport and cycling, which both require higher population density than single family homes to be effective. As a consequence, a higher share of the population is expected to live in apartments rather than homes compared to the 70's and 80's. Additionally, averages tend be impacted by outliers. Take the example of a rich heir buying a multi-million dollar mansion. His property will heavily influence the average house cost and his income is close to 0 since he lives off his capital, thereby reducing the average household income. This can twist the perception of what's actually happening for most people. The best way to fight that is to use medians instead of averages. I am not able to find reputable sources for data in Norway, but what does your analysis look like when looking at median household income and median appartment prices. As this will more likely reflect the reality on the field. Of course, people will want to own houses, but large - car optimized - and low density suburbs, are an anomaly of the last 50 years. They actually aren't sustainable, so their expansion has to stop, and the expectation is that the median worker will be steered towards appartment, while the richer elite will be able to afford houses - but that will gradually become a minority.
jgalt212 4y ago
I think in CA in 2006, they hit 10X. So getting close to crash levels.
yardstick 4y ago
In NZ we have created a culture that obsesses with house prices. It's been this way since at least 2000, if not earlier. Many peoples retirements plans hinge on them being landlords or holding large amounts of property. The NZ share market is a joke. Pretty much any serious global company that started in NZ moves away from NZ without even entering our sharemarket. There are a few exceptions of course, but by and large it's a dull, depressing market and there are very few incentives to invest in businesses rather than property. NZ's tax regime also actively discourages investment outside of NZ. Holding growth shares in US tech stocks will result in annual wealth taxes, even if you hold and never sell. No wonder property is easier and more profitable. Last year a friend was gloating at how they purchased 5 rental properties in the South Island (with mortgages of course). Yes a degree of rental properties is required but what we're doing in NZ is way out of proportion.
- mrep 4y ago
  > Holding growth shares in US tech stocks will result in annual wealth taxes, even if you hold and never sell. Can you explain this more?
  - sgt 4y ago
    I wonder about this as well. Let's say Amazon did really well for 5 years and you paid significant wealth tax from these shares. Then Amazon plummets and you lose 50% and then you sell shares. Would the NZ government reimburse a part of the wealth taxes you already paid?
  - yardstick 4y ago
    It’s NZ’s CFC/FIF rules. See https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-income/foreign-investment-funds-fifs https://www.ird.govt.nz/income-tax/income-tax-for-businesses... https://taxsummaries.pwc.com/new-zealand/individual/income-determination https://taxsummaries.pwc.com/new-zealand/individual/income-d... No I don’t believe you can get tax credits for paper loses. But you definitely do have to pay for paper gains. Most financial firms in NZ wrap US/growth stocks in a special type of investment called a PIE, which essentially they handle the tax issues for you (Ie your net % gain includes after this wealth tax is taken into account).
ZeroGravitas 4y ago
This seems a fairly easy thing to fix except for the politics. (Similar to climate change) Anyone got a good solution including the politics angle? You'd need to give people an off ramp from their house investments and give them confidence that they'd get a share of the economic goods that they currently receive by holding a house plus a bonus from the bounty unleashed by the sane housing market.
- dannyw 4y ago
  There's no need: Stubbornly high inflation due to loose monetary policy (which is the largest contributor into asset overvaluations; including housing) is forcing central banks to raise rates. Higher interest rates means buyers can afford to offer less, causing property prices to fall. Home prices in Auckland is already down 10-20% and the RBNZ is continuing to hike. The same is happening in Canada, and if you check Zillow's latest report, it's happening in America too although likely to be more muted (i.e. take longer) due to the US's fairly unique 30-year fixed rates and people's 3 month interest rate locks expiring. Just give it another year or two, the housing bubble will have sorted itself thanks to normal levels of interest rates.
Pete-Codes 4y ago
Only 8.8? In lots of UK cities it's well over 10x.
elliottkember 4y ago
I can’t believe this hasn’t been mentioned, but NZ has no capital gains tax, making property an interest-free investment. People put their wealth into the housing market ever since the 80s and are putting their untaxed profits back in. Source: kiwi.
- ferdowsi 4y ago
  Americans are exempted from a great amount of capital gains as well.
  - Tiktaalik 4y ago
    It's not just a primary home exemption. No capital gains at all, so it's a huge incentive toward secondary home ownership as well.
- Tiktaalik 4y ago
  This! It's wild, so wild.
bgro 4y ago
Is this a NZ-caused problem like the article seems to imply? Or is it foreign countries / companies buying up houses in place of stock like seems to be the case everywhere else? Or is it just more billionaires (from other countries) buying backup/vacation homes in NZ?
belter 4y ago
80% are Google Managers who moved and are now working remote...

103 points by thomasfl 4y ago

lqet 4y ago

Where I live (southern Germany), you cannot find a house under 600,000 EUR. The average net household income in Germany is around 43,000 EUR. That means that house prices here are over 16 times the average household income. Yupp, it's bad. My wife and I both have university degrees, we have good and secure jobs, and our net household income is above average. But we have generally accepted the fact that it is impossible for us to fully own a house before we are dead here, even with the national or state-wide support programs for families (we would not get much, if any, support because our income is too large). Our parents don't quite get this. When my parents were our age in the early 90ies, my mother was a homekeeper and my father worked as a carpenter at a small company with a completely average salary. Yet it was no problem for them to build a fairly large house in a very nice neighorbood, without any financial support from their families. I remember we didn't go on vacation for 2 years in the late 90ies "because we now have to pay off the mortgage", but that was it. Their house is today worth so much (> 1,000,000) that it would be impossible for us to find a bank willing to lend us the money to buy it. We currently rent a 4 room apartment, but lived in a 2-room apartment with our daughter for 2 years before because we couldn't find an apartment in a 30 km radius around our home town. The problem was not money - there was simply nothing available. For our current apartment, we were one of around 500 families that were initially interested, and one of 50 families who made it through the various hoops and obstacles created by the estate agent to get that number down to something managable. This is completely standard here. We only got the apartment because we were lucky. At the same time, we are now starting a legal battle with our local district for a kindergarten place for our 3 year old daughter, which she is very clearly entitled to by law and for which we applied years ago. But their are no free places anywhere, and nobody in our local town seems to care anymore. Our local mayor basically said "well, sue the district". The people in charge at our town hall also regularly quit. The previous person, who has now also left, told us she cannot bear parents in tears anymore who scream and yell at her because they have to both work full-time to pay of massive mortgages, and don't know what to do with their children. Again, this is something our parents cannot even remotely understand, because the situation was completely different 30 years ago, when it was absolutely standard for a child to enter kindergarten when it was 3 years old. You just went to the town, asked for a place, and one was assigned to you. The situation for families here has become so bad that we are seriously considering leaving the country.

jurmous 4y ago
Very similar here in the Netherlands... House prices are growing fast.
mdrzn 4y ago
I'd say same in Italy, even in small cities of 100k residents you cannot find a barely basic and nice home for less than 400k, which is over 10x the average household income.
lnsru 4y ago
Well… 100 km around Munich €600k brings one 3-4 room apartment with the size of ~100 square meters. No house under 1 million EUR and it gets more and more worse every year. With rather average salaries and lots of borrowed money in the family we managed to get a mortgage from the bank for a super old house. Then a super surprise came in - there was no handyman or a company who wanted to work for less than 1000€ a day. Every free minute goes into renovation, even very promising side project was put on hold. I already mastered plastering. Thinking about getting electrician’s license, then I will make more than McKinsey consultants.
Escapado 4y ago
It's pretty much the same for anything around the city of hamburg in the north and most of the time it's less about the houses and more about the land they sit on. Building got more expensive but land even more so. 1.000 EUR/m² of land for adjacent cities are becoming the norm. Most of my friends graduated from university with either a bachelor or a masters degree and only those who stand to inherit a sizable sum of money or their parents home are going to have houses. A 50k salary simply won't cut it. Most have given up on the dream entirely since 30+ years of debt is not something they can justify. As a quick back of the envelop calculation: Let's say you had a household income of 86k for two people (43k+43k) which translates to about 4550 EUR per month after taxes, health insurance and pension fund. Their cost of living on average (not including rent) in the hamburg area would be somewhere around the 1900 EUR mark, leaving about 2650 EUR per month. Since people need to save at least a little money, or go on vacation once in a while or repair their car or maybe they have kids it's probably generous to assume they could use 2000 EUR per month to pay off a house. Let's say you'd get a house for 600k all inclusive and you had to take on 500k of debt. With a current interest of about 2.76% fixed for 20 years and paying off 2000 EUR per month, then after 20 years you'd still be at about 224k of debt and you'd have paid 203k in interest. Assuming the same interest thereafter it would take a total of 30 years and 10 months to pay the house off entirely. During that time larger repairs or renovations are likely needed which would most likely forbid to pay off more than 2000 EUR per month. Now one could argue that people could find places for half as much in rural areas but then again, lots of professions won't find any jobs there and those that do often get paid way less. Somehow the situation saddens me. My parents bought a semi-detached house 20 years ago for 200k (which would be 264k today adjusting for inflation). Two identical semis in the same street got sold last year, each for more than 500k, so pretty much double the inflation adjusted prices albeit being 20 years older houses now.

thomasfl 4y ago

The problem with New Zealand seems to be that if you have an education, it is often no where else to use that education than Auckland or Wellington. I have never been to New Zealand, but the problem seems to be very similar to the housing problems we have in Norway. The sub arctic capital city of Oslo, has ridiculously high prices.

ajsnigrutin 4y ago
Stupid question... is the problem with not enough land (eg. if you want to live in manhattan, you literally have nowhere to build, unless you demolish something else),... or is there enough buildable (physically) land in "near-enough-to-commute" locations, but the government doesn't allow people to build (large enough) housing there?
- bigbigbiga 4y ago
  There's a lot of land. New Zealand is about the 2/3rds the size of California. It just has to do with lack of development. About the same size if you include the habitable land / non desert.
- xupybd 4y ago
  New Zealand has lots of land available. Zoning can be an issue. That said we have very low density housing. I think compliance costs and times don't help. Neither does our building code. We should allow the use of materials that have been approved in more advanced countries like Germany. The real cause has been low interest rates. People borrow as much as they can. At sub 2% rates they can borrow a lot and are pushing prices up.
- berkut 4y ago
  In Wellington at least (where I live), there are limits on the density of housing that can be built (and height). Recently, the council was going to free up some of these restrictions a bit, but there was a lot of backlash by residents who didn't want the "character" of their neighbourhoods to be affected, so the relaxation in the rules has been a lot less. Wellington is a bit different in that there is a limit on the amount of empty land in the centre and the neighboroughing regions: it's quite hilly and pinned in geographically, and most of the central regions are fairly built-up already. Some areas (near the CBD) were also built up on reclaimed land from the harbour, and what with earthquakes, that's not great...

HPsquared 4y ago

Housing prices and income have a skewed distribution (more like a lognormal than a normal distribution); therefore the mean is higher than the median. What's the median home price and median income? Also, can the average household get a mortgage on these houses? Affordability is pretty much arbitrary and depends on the banks' lending criteria and interest rates (which depends on regulatory factors mostly). Edit: this is on top of supply and demand for the houses themselves, of course.

ClumsyPilot 4y ago
'Affordability is pretty much arbitrary and depends on the banks' lending criteria and interest rates' Well, we are at a point where significant % of the population will pass awat before they can pay off their mortgage

muchtest 4y ago

It annoys me when they compare countries and don't consider income tax - you don't pay with pre tax income... If you earn 150k in High Tax Euro Country you're losing 50% of that. In low tax US state you're closer to 33%. Thats the difference between 75k and 100k.

creakingstairs 4y ago
IIRC we pay 33% after 70k NZD ish. Usually people opt into KiwiSaver (3~6%) and fair bit also goes out into paying their student loan.
- dx034 4y ago
  In many European countries university is either free or nearly free, so you'd have to add that to the tax burden to make it comparable to Europe.
msh 4y ago
But then you also have to consider what services are included in the tax that the lower tax rate might have to pay out of pocket.
- netjiro 4y ago
  > you also have to consider what services are included in the tax Yes! And a lot more as well. Many are under the impression that income tax is the majority of their major tax burden. Total taxation from billing to salary net + vat of normal spending. This must include all forms of employment, social fees, and other government imposed costs for the employer. This is higher than income tax for many regions and income brackets. On top of this should be added other taxes for a given lifestyle. E.g. fuel and vehicle taxes, property taxes, etc. Then the services provided: health care, schooling, child care, child support, pensions, etc. Things look a lot different when making a complete cost comparison between countries, and varies a lot depending on what is included as a "normal" lifestyle. E.g: couple with 2.2 children at median income looking at retirement at 70 vs a single high income earner looking to retire at 50... and ... so ... on ... On top of that we can also include other living costs ... but we started somewhere at average house price vs annual family income?

NiekvdMaas 4y ago

Compared to some other countries: The Netherlands: €31.5k average household income, average house price €387k - so 12.3x. UK: £31.4k average household income, average house price £274k - so 8.7x.

smcl 4y ago
I see your housing bubble and raise you 18x in Prague, 16x in Brno: https://www.numbeo.com/property-investment/country_result.jsp?country=Czech+Republic https://www.numbeo.com/property-investment/country_result.js... Feels really unsustainable, I don't know how it can continue and I really feel for anyone here who's not earning tech-sector wages
ipsi 4y ago
That's not correct. I suspect that the source you saw said: > As of 2017, the average annual real disposable income of Dutch households was roughly 31,500 euros. Disposable household income would be, at a minimum, after tax, and possibly after accommodation. You'd want to increase that by about 60% to account for tax/etc, which would be 50.4K. That seems more reasonable to me, and would put the multiplier at 7.7. Not sure about the UK - that could very well be accurate, but London throws averages completely out of whack.
- jvvw 4y ago
  I don't think London throws them out of whack all that much. I'm around Milton Keynes/Bedford so SE but a bit further than most folk would want to commute to London (and I'd imagine a reasonable percentage of the population live within a similar radius of London) and that average house price feels about right. You'd might manage to get a three-bed terrace or two-bed semi for that sort of amount I'd say.
  - ipsi 4y ago
    I dunno - I always assumed that London-proper prices (i.e., not Milton Keynes) being so outrageously high, upwards of £1,000,000, would throw out the average. Though perhaps the number of slightly cheaper apartments brings it back down again (although of course statistics can't tell you that's because the apartments are the size of a shoebox). Plus as I understand it, a bit further north you could probably start getting a decent house for £300,000 or less. And in really out of the way places, under £150,000. Trying to talk about "average" house prices in most countries is generally a bit daft IMO because the range between "remote little country town" and "centre of the largest city" is vast.

AndrewDucker 4y ago

More importantly, mortgage payments have gone from 1/3 of income to 1/2. That's reaching unsustainable levels.

dijit 4y ago
That's not normal? I paid half my income to rent when living in London 10 years ago, and prices have only gone up since then.
- dazc 4y ago
  I lived up North 10 years ago and my rent for a 2 bedroom house was £320 a month. It wasn't in bad area either.
  - philjohn 4y ago
    Until 9 years ago I was living in a 3 bed semi detached within commuting distance of Birmingham, near a trainline, monthly season ticket was £90 - mortgage was around £400 a month - interestingly, houses there are still relatively affordable.
    - dijit 4y ago
      Coventry is/was that cheap, the downside is you’re extremely likely not to make it home from the train station. Hardly a reasonable trade off.
      - philjohn 4y ago
        In what way were you not likely to make it home? This was a place in South Staffordshire, on the chase line.
        dijit 4y ago
        it is an extremely violent and dangerous place, and not reflected in crime statistics due to peoples distrust of the police and general motivation to "not be a dirty grass". I hear it's getting better with the students these days, but, as mentioned, it's quite dangerous to be any amount of affluent in Coventry. It's actually hard to convey how frightening it can be, to randomly be targeted while walking through the streets.. I'm having a mild panic just thinking about it.

xupybd 4y ago

I live in NZ and my home has more than doubled in value over the last 5 years. The rapid increase in prices is scary.

mpol 4y ago
Can you explain what the cause of this sharp rise is? The linked article has nothing on that. It even feels a bit alarming without much depth. And is anything being done? In the Netherlands, many investors, big and small, are buying up houses to rent out. Airbnb renting was a part of this as well. Many local governments are now creating rules, like, you have to live in the house when you buy it. Also, some taxes for investors have increased a lot. What is happening in the last few months is that less investors have bought houses and more have been bought by people buying their first home. The sharp rise in prices has been more normalized. Still, there is a shortage of housing and the low interest caused over-bidding by people in a rushed market. The result was that only investors and people which had financial support from their parents could buy houses. Of course somewhat to their own detriment with paying too much and having too big loans.
- berkut 4y ago
  A lot of demand for housing (both to buy and rent), and in my experience (live in Wellington) a lot of the newer apartments being built seem very much architected with buy to let in mind, so I think renting is a large part of it, along with limited supply. The government did tighten the rules a bit several years ago so that effectively (there are ways around it), you needed to be a resident to buy property, but I don't think that had that much impact (although maybe it would be even worse if that wasn't done?)
  - chii 4y ago
    foreign buyers don't truly make up much of the market - any rules set against them is really just there to win political points imho.
- nikanj 4y ago
  New Zealand has built more rules. Maybe they should have built more homes instead.

donmcronald 4y ago

So, if the average person can save 10% of their income, it takes 8.8 years to save a 10% down payment? Factor in tax and the time it takes to save a down payment is starting to look close to the time it took my parents’ generation to own a house free and clear.

throwaway3b03 4y ago
> if the average person can save 10% of their income, it takes 8.8 years to save a 10% down payment Not according to this article, where it mentions the average household income, not the average per-capita income. So you can expect it to take quite a bit longer than that to save for that down-payment, for the average person.
- dzhiurgis 4y ago
  Sun article half year ago said 27 years assuming no price change
- sgt 4y ago
  Then the average person just needs to leverage some pre-existing wealth. Sell some property that you already have, make a decent profit! /s
edf13 4y ago
Most mortgages (At any reasonable %) will require more than 10% these days... you're looking at 20-25% in many cases.
- beardedetim 4y ago
  In USA this isn't true. We bought a house using an FHA loan and put down less than 5% and our interest rate was lower than 3% if I remember correctly. Maybe not as reasonable as you are imagining but it was really low in our mind.
  - edf13 4y ago

supernova87a 4y ago

Here is something I would like to get opinions on -- whether this is a valid historical viewpoint. Talking very macro here. We (the world) have spent the last 80 years in a period of relative prosperity, peace, and general building up of countries' (and people's) wealth and productivity. Currencies -- stores of value -- have not defaulted generally, and as everyone engaged in producing more over the last decades (real physical goods and services representing raw materials and labor), we have accumulated all those years worth of output and stored value. Any properly operating controller of currency has to issue more currency as physical output increases (money supply, etc). As long as there are things that do not grow as fast as wealth or people / population grows and are finite in supply (land, housing), that accumulated 80 years of wealth has to go somewhere, and we are seeing it go into rising prices of finite housing by people and institutions searching for where to put it. Everyone is actively seeking ways to spend / invest it for a return and not sit idle. So much money seeking a return has exhausted the growth of demand for capital, and returns are pretty much 0% these days. (think of it as, how could so much capital all earn 10% interest like it did at one point?) And that money seeks out wherever it can find appreciation -- housing. Gripe as much as you want about wealth inequality, etc. and debate/tinkering around the edges of who in particular has more money or power to purchase. There is no escaping this fundamental buildup of 80 years of postwar resources in the average person's bank account or that of governments and institutions. Is this off base? Is my interpretation wrong? Are we just seeing the fundamental force of wealth accumulation manifest into the one place that it finds value? This is a long-term problem, isn't it, if we can't escape this truth? Especially for someone born today, who finds that everyone existing already has tons of money in the bank and you're trying to start on that ladder too, but have nowhere the same resources to compete for limited supplies of the hot item?

JohnJamesRambo 4y ago
Maybe that 80 years of wealth in bank accounts is largely just a bunch of bs. Money is just an abstract idea we all agree upon. https://www.investopedia.com/terms/k/kondratieff-wave.asp https://www.investopedia.com/terms/k/kondratieff-wave.asp https://www.bridgewater.com/big-debt-crises/principles-for-navigating-big-debt-crises-by-ray-dalio.pdf https://www.bridgewater.com/big-debt-crises/principles-for-n...

martinsuchan 4y ago

Similar or worse situation is here in Prague, Czechia, person working in Prague needs about ~16 yearly incomes to buy average home here, it's insane, see: https://www.idnes.cz/ekonomika/domaci/praha-byt-cena-bydleni-dostupnost-hypoteka-finance.A211214_111621_ekonomika_mato https://www.idnes.cz/ekonomika/domaci/praha-byt-cena-bydleni... Also Czech National Bank just increased the base interest rate to 5.75% this week, you can imagine how expensive regular mortgage is currently.

Markoff 4y ago
it's household, not person income, which is consisting usually from 2+ people at least in Czechia the problem with mortgages is that they should be heavily regulated long time ago requiring at least 20-30% first downpayment, cheap mortgages are just pushing prices for everyone including poor people, I'm glad for current regulation, but sadly it's way too late, my apartment in Prague also doubled value in last 5 years, which is insane. I'm idiot, so I paid it in cash. I am also idiot, I could buy next apartment in cash again without being mortgage slave (I have savings roughly worth 40 m2 Prague flat currently), but nowadays mortgage slaves are preferred instead of people who can save their own money and stupid people happy with cheap mortgages don't realize these are just pushing prices up, instead with inaccessible mortgages prices would be much more stable and you would need to scrap money elsewhere but without greedy banks. But there are good news, recently prices started to go down and need to be already cut, because they are even beyond of mortgage slaves already.
yafinder 4y ago
What does an average home in Prague look like? Is it an apartment or a detached house, how many bedrooms? In Eastern European countries, the quality of housing varies greatly, from cramped apartments in gray concrete buildings to elegant mansions. I wonder, which of this is worth 16 times annual income.
- Markoff 4y ago
  65 m2 apartment is Czech average, obviously it will be apartment as well in Prague, since houses are reserved only for extremely wealthy or people with family here who inherited it, though I'd not guess what's average m2 in Prague, I'd assume less than Czech 65m2 average, which is btw. quite small 2BR+1LR apartment and it will be mix of old brick buildings, commie concrete block buildings and new brick/concrete buildings, msot of the people live for sure in commie block ghettoes (8-13fl usually), I am lucky one bought apartment in concrete building but with only 5 floors which looks also from outside like brick building (only around 50 of these models built in Czechia) and right next to my building is older brick building owith almost same height, lot of green and quite close to city center unlike those commie block ghettos which are on the edges of city

Markoff 4y ago

As European - wow, that cheap?! Though still with horseface management...

nizmow 4y ago
Quite unnecessary. I’d almost suspect you’re not actually European.
- Markoff 4y ago
  She is well known abroad for her Chinese style approach to COVID.

matsemann 4y ago

How have other countries dealt with that? In Norway, the cap you can borrow is 5x your income. This cap is total of all loans (student loans, mortgages, limit on your credit cards etc) Not sure of the effect, but perhaps it has cooled it somewhat You notice certain "bands" on apartment prices. An apartment for a single person is capped at ~5x what a single person makes, then there is a gap until the next band etc. One problem is that normal people are capped, but someone with upper class parents can get help to win the bidding round by bidding just above what most people can. So it can feel unfair, at the same time one probably shouldn't be liable for that amount of loans as well. Dunno.

cianmm 4y ago
In Ireland we've got a cap of 3.5X income (which banks can sometimes stretch to 4.5 income but it's pretty difficult to do due to government limitations) and that hasn't seemed to have helped house prices much (although it was iirc more to stop a housing bubble and crash rather than to keep house prices down). It's just meant that it's easier for investment firms and cash-buyers to outbid everybody else.

Manheim 4y ago

In Norway the median income is NOK 550 920,- and the average income is NOK 609 480,-. The average price for a home is NOK 4 483 328,-. So respectively 8,1 and 7,3 times.

Markoff 4y ago
Are you quoting average income per capita or household?
- Manheim 4y ago
  per capita https://finanssans.no/gjennomsnittsl%C3%B8nn-i-norge https://finanssans.no/gjennomsnittsl%C3%B8nn-i-norge
  - Markoff 4y ago
    but the article is per household, so you should slash your prices by half since household usually consist of two people, so it seems Norway has extremely cheap properties
    - Manheim 4y ago
      true - many households here are with double income, but you can't double the income just like that since there are many single person housholds. I find statistics that say that for all households the median after tax, is NOK 546 700 (2020). I can't find the official statistics over income before taxation. I do however, find a public research article that indicate that just under fifty percent of the poulation has a household income lower than NOK 750 000.
sgt 4y ago
And in Norway it's still very common for young people (25-50) to buy property. Often couples buying together, but it's almost a given that you buy instead of renting.

andi999 4y ago

ok, I am pedandic, but they probably mean 'annual'.

jacquesm 4y ago
That's a really funny comment.

varispeed 4y ago

The prices are artificially inflated by WEF connected funds. They pay above market price for properties, pricing out locals out of the market. This is part of Great Reset. The artificial financial crisis will force people who own homes to sell as well and by the target date of 2030, people will own nothing.

jurmous 4y ago
Do you have any sources that support this? And what makes this an artificial financial crisis? As far as I see it, much of recent inflation is happening as an effect of all COVID financial support programs and the effects on supply system because of lockdowns and turning down factory production too aggressively. And now additionally the effects of sanctions and stopping of energy imports from Russia after Russian aggressive move into Ukraine. Hardly artificial except if you believe that Covid or Russian aggression is manufactured by a conspiracy of some rich people in the WEF... And what will force current home owners to sell a home? Since in this country you loose more money renting than owning.

tjpnz 4y ago

I'm currently living in Tokyo and have family visiting from NZ. I've already had a few uncomfortable conversations about when I'll be coming back. Realistically I won't be, not only would I lose more than half my salary, but I would then have to dedicate a large portion of what's left on an overpriced hovel that's probably rotting from the inside. It's no wonder that most of the people I graduated with left the country long ago. Those who stayed had well off parents who could get them onto the property ladder.

chii 4y ago
> I've already had a few uncomfortable conversations about when I'll be coming back If they truly care for you, they'd understand that where you are right now is better than back home. If a place is expensive and unaffordable, the best option for you (and anyone really) is to leave.

te_chris 4y ago

NZs on its way to a crash. Debt to income ratios of recent mortgages are insane, and they don't do long-term fixes there. Either lots of defaults or massive drying up of disposable income. https://www.stuff.co.nz/business/128396590/world-watching-nz-housing-market-as-auckland-labelled-canary-in-coal-mine https://www.stuff.co.nz/business/128396590/world-watching-nz...

goodpoint 4y ago

A world map of the house price VS income ratio is available here: https://www.numbeo.com/property-investment/rankings_by_country.jsp?title=2022&displayColumn=0 https://www.numbeo.com/property-investment/rankings_by_count... Please stop spamming the thread with anecdata.

TrackerFF 4y ago

How are the lending laws in New Zealand, if they're regulated? Here in Norway, one can loan 5x of annual gross income (minus any debt you have), and at least a 15% down payment. Average annual household income here is 610000 NOK (~64500 USD). Average home price here (end of April) is 4483328 NOK (~473914 USD), so the ratio here would be 7.34 - but that's assuming single income household. For double income, that ratio would obviously halved. In any case, the average person buying an average home here would have to save up a down payment equivalent to 2.34 annual gross incomes, in order to get the maximum possible loan/mortgage (5x annual income)...and that's assuming this person is completely debt-free. If this person managed to save up 25% of their annual income, it would still take almost 10 years to save up for that down payment - but the housing market will likely outpace the saving potential of a your average person. So now you have to save up 2-5 extra years to afford the down payment. All while you're paying rent that is much higher than the mortgage would be. Lesson learned is that being an average single person trying to buy an average house sucks, at least over here. (Caveat: obviously most people do not purchase "average" homes, but start on the lower end - and most will save up with partners, as well as enjoy appreciating value of their first "starter" home)

svth 4y ago
> Average annual household income here is 610000 NOK (~64500 USD). Norway's GDP per capita is about USD70.000. Surely you're using GDP per capita, or average individual income, not household income? I have a very hard time believing that Norwegian average household income is just over half that of New Zealand.
- TrackerFF 4y ago
  Yeah, per capita - not household income.
IMTDb 4y ago
Public policies are now heavily favouring public transport and cycling, which both require higher population density than single family homes to be effective. As a consequence, a higher share of the population is expected to live in apartments rather than homes compared to the 70's and 80's. Additionally, averages tend be impacted by outliers. Take the example of a rich heir buying a multi-million dollar mansion. His property will heavily influence the average house cost and his income is close to 0 since he lives off his capital, thereby reducing the average household income. This can twist the perception of what's actually happening for most people. The best way to fight that is to use medians instead of averages. I am not able to find reputable sources for data in Norway, but what does your analysis look like when looking at median household income and median appartment prices. As this will more likely reflect the reality on the field. Of course, people will want to own houses, but large - car optimized - and low density suburbs, are an anomaly of the last 50 years. They actually aren't sustainable, so their expansion has to stop, and the expectation is that the median worker will be steered towards appartment, while the richer elite will be able to afford houses - but that will gradually become a minority.

jgalt212 4y ago

I think in CA in 2006, they hit 10X. So getting close to crash levels.

yardstick 4y ago

In NZ we have created a culture that obsesses with house prices. It's been this way since at least 2000, if not earlier. Many peoples retirements plans hinge on them being landlords or holding large amounts of property. The NZ share market is a joke. Pretty much any serious global company that started in NZ moves away from NZ without even entering our sharemarket. There are a few exceptions of course, but by and large it's a dull, depressing market and there are very few incentives to invest in businesses rather than property. NZ's tax regime also actively discourages investment outside of NZ. Holding growth shares in US tech stocks will result in annual wealth taxes, even if you hold and never sell. No wonder property is easier and more profitable. Last year a friend was gloating at how they purchased 5 rental properties in the South Island (with mortgages of course). Yes a degree of rental properties is required but what we're doing in NZ is way out of proportion.

mrep 4y ago
> Holding growth shares in US tech stocks will result in annual wealth taxes, even if you hold and never sell. Can you explain this more?
- sgt 4y ago
  I wonder about this as well. Let's say Amazon did really well for 5 years and you paid significant wealth tax from these shares. Then Amazon plummets and you lose 50% and then you sell shares. Would the NZ government reimburse a part of the wealth taxes you already paid?
- yardstick 4y ago
  It’s NZ’s CFC/FIF rules. See https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-income/foreign-investment-funds-fifs https://www.ird.govt.nz/income-tax/income-tax-for-businesses... https://taxsummaries.pwc.com/new-zealand/individual/income-determination https://taxsummaries.pwc.com/new-zealand/individual/income-d... No I don’t believe you can get tax credits for paper loses. But you definitely do have to pay for paper gains. Most financial firms in NZ wrap US/growth stocks in a special type of investment called a PIE, which essentially they handle the tax issues for you (Ie your net % gain includes after this wealth tax is taken into account).

ZeroGravitas 4y ago

This seems a fairly easy thing to fix except for the politics. (Similar to climate change) Anyone got a good solution including the politics angle? You'd need to give people an off ramp from their house investments and give them confidence that they'd get a share of the economic goods that they currently receive by holding a house plus a bonus from the bounty unleashed by the sane housing market.

dannyw 4y ago
There's no need: Stubbornly high inflation due to loose monetary policy (which is the largest contributor into asset overvaluations; including housing) is forcing central banks to raise rates. Higher interest rates means buyers can afford to offer less, causing property prices to fall. Home prices in Auckland is already down 10-20% and the RBNZ is continuing to hike. The same is happening in Canada, and if you check Zillow's latest report, it's happening in America too although likely to be more muted (i.e. take longer) due to the US's fairly unique 30-year fixed rates and people's 3 month interest rate locks expiring. Just give it another year or two, the housing bubble will have sorted itself thanks to normal levels of interest rates.

Pete-Codes 4y ago

Only 8.8? In lots of UK cities it's well over 10x.

elliottkember 4y ago

I can’t believe this hasn’t been mentioned, but NZ has no capital gains tax, making property an interest-free investment. People put their wealth into the housing market ever since the 80s and are putting their untaxed profits back in. Source: kiwi.

ferdowsi 4y ago
Americans are exempted from a great amount of capital gains as well.
- Tiktaalik 4y ago
  It's not just a primary home exemption. No capital gains at all, so it's a huge incentive toward secondary home ownership as well.
Tiktaalik 4y ago
This! It's wild, so wild.

bgro 4y ago

Is this a NZ-caused problem like the article seems to imply? Or is it foreign countries / companies buying up houses in place of stock like seems to be the case everywhere else? Or is it just more billionaires (from other countries) buying backup/vacation homes in NZ?

belter 4y ago

80% are Google Managers who moved and are now working remote...