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Do you pray to take on crushing debt for the rest of your life?

Written By: - Date published: 8:58 am, July 13th, 2016 - 89 comments
Categories: housing, national, useless - Tags: , , ,

There is a pretty bloody silly leader on The Herald at the moment:

housing-crisis-silly-question

The piece reads:

Frustrated would-be first-home buyers will get a hand up as the Government moves to lift house price limits for KiwiSaver subsidies and low-deposit loans.

Housing Minister Nick Smith has told the Herald he will make an announcement this month about the house price and income caps for the Welcome Home scheme, which allows first-home buyers to get mortgages from selected banks with only a 10 per cent deposit. The changes are also expected to apply to KiwiSaver first-home deposit subsidies.

Both schemes are currently limited to single people earning up to $80,000 a year or couples on up to $120,000, and buying homes priced below $550,000 in Auckland, $450,000 in Hamilton, Tauranga, Wellington, Nelson, Christchurch and Queenstown, and $350,000 elsewhere. …

Hey look – we’ve been here before, in 2013. And that’s fine I guess, if your prayer is to take on crushing debt for the rest of your life. In other news today:

Rising NZ house prices fuel debt binge, and a hangover could be brewing

Surging household debt levels will create a lengthy debt hangover, potentially hitting growth for years to come, economists warn.

After several years of deleveraging in the aftermath of the global financial crisis as households reined in spending, New Zealand household debt levels, relative to incomes, have been climbing since late-2011. By March they had hit a fresh high, with household debt as a share of disposable income at 163 per cent.

The level has probably climbed further in the months since, with spending surging at a time of fairly flat income, driven by soaring house prices, cheap credit and a strong New Zealand dollar. …

Pathetic tinkering with loan limits does nothing realistic for first home buyers, but it does add more fuel to the debt fire. We need to actually build some affordable houses. If only there was a party that would do that…

89 comments on “Do you pray to take on crushing debt for the rest of your life?”

  1. Ad 1

    A really good question; mortgages and debt management should be part of the school curriculum because they dominate so much of our lives for so long. I’m heading for 50, and I’ve still got 3 years of mortgage left. That’s the majority of my life.

  2. DH 2

    I’m half surprised no-one has brought up the fact National has wrecked Kiwisaver with this. It’s no longer a savings scheme for retirement for many people.

    • Paul 2.1

      The media does not question the National government.

      • DH 2.1.1

        It’s not just the media Paul. I haven’t heard much from the Greens or Labour who should be furious that Kiwisaver is being dismantled & looted by National to keep house prices up.

        The whole idea of Kiwisaver was to let the earnings compound and those who withdraw savings won’t have enough to retire on.

        • Michelle 2.1.1.1

          National have a track record of wrecking retirement schemes. But people should not buy houses they cant afford they need to buy within there means.

          • DH 2.1.1.1.1

            You can’ really blame people Michelle. We only have two choices; rent or own. When house prices go up rents are sure to follow and buying your own home kills rent inflation stone dead.

            • Chuck 2.1.1.1.1.1

              DH you can’t have it both ways.

              “I’m half surprised no-one has brought up the fact National has wrecked Kiwisaver with this. It’s no longer a savings scheme for retirement for many people.”

              A first home buyer has 2 choices, save for retirement, or save for a house deposit first (most can’t do both).

              “You can’ really blame people Michelle. We only have two choices; rent or own. When house prices go up rents are sure to follow and buying your own home kills rent inflation stone dead.”

              Which cancels out your first post. A first home buyer if they want to own needs to save a deposit. The Kiwi saver option aids in acquiring that deposit.

              Rent inflation has not kept pace with house inflation.

              • DH

                I think you need to practice your reading comprehension. Kiwisaver was designed and intended solely as a superannuation scheme. That some people find it necessary to withdraw funds from the scheme is not an indictment on those people but on the Govt who put them in that position.

                “The Kiwi saver option aids in acquiring that deposit.”

                And that is not what Kiwisaver is for is it.

                • Chuck

                  Using your logic then DH, a young couple / person looking to save a house deposit then should not enroll into kiwi saver. In order so they can direct savings into a “house deposit savings fund”.

                  Look it does not matter what you call the savings scheme, main point is you create a savings discipline. First cab off the ranks is a house deposit (if they want to buy a house) next cab is retirement savings.

                  I known you are trying to bash the government…and logic does not matter!

                  • DH

                    No, using my logic a Govt doesn’t loot a retirement scheme to fund housing inflation.

                    Stop trying to twist my words and meaning, you only think you’re smarter than everyone else.

                    • Chuck

                      I will make it simple for you then…first home buyer needs to save for a deposit. Unless you earn big $$ that means diverting all resources into this task, before a retirement fund.

                      I would prefer to allow first home buyers to use kiwi saver for this purpose, as after the deposit is taken care of they can continue with phase 2 – retirement savings. The habit has already been formed – that is regular savings.

                      Now you have brought this into your argument…

                      “No, using my logic a Govt doesn’t loot a retirement scheme to fund housing inflation.”

                      Its the individuals retirement scheme, not the governments. For a purpose like a first home deposit its acceptable. A young couple would still have 25 – 30+ years to save.

                    • DH

                      I haven’t ‘brought it in to my argument’ Chuckly. That was my argument. Do read the plot.

                  • Lanthanide

                    +1

                  • Sam C

                    What’s wrong with having a house as part of your retirement scheme?

                    • Lanthanide

                      Nothing, although many baby boomers have multiple houses as their retirement scheme, ensuring that others can’t even buy one.

                    • McFlock

                      yep.
                      I’m considering the sweet spot of when my fund increase % goes below house inflation and interest rate % as the point to seriously consider using the fund as a downpayment. Probably closer to 40% deposit rather than 20%, but what they hey.

    • Lanthanide 2.2

      National super is paid at a rate that assumes you own your own house, mortgage free.

      So using Kiwisaver to achieve that component of super is sensible.

      • DH 2.2.1

        That argument might have merit if we were talking about super Lanthanide. We’re not.

        Look, there’s no secrets about Kiwisaver. It was born out of widespread recognition that super in its present form is unsustainable and that future generations will be required to at least partially fund their retirement.

        For the wannabe home owner it makes perfect sense to withdraw Kiwisaver funds to make up the house deposit. But it doesn’t make sense for a Government, those withdrawn funds create a retirement fund shortfall that someone else will have to pay for in the future.

        • Colonial Viper 2.2.1.1

          Stupid of Labour to feed workers wages to Wall St investment banks and their local commission driven profit focussed private agents.

          • te reo putake 2.2.1.1.1

            My Kiwisaver balance says you’re wrong. But I’m always keen to hear what your practical alternatives are, CV. What should workers do instead?

        • Lanthanide 2.2.1.2

          Kiwisaver is a complement, not a replacement, for superannuation.

          Superannuation assumes you have a mortgage-free house.

          Kiwisaver complements the superannuation assumption by helping people get into a house. Many of these people would probably end up with a house anyway. But there are some people for whom kiwisaver would be the difference between having a house or not.

          Also, it was Labour that had this rule as part of the initial Kiwisaver rollout, not National. National have increased the $ grant allowed and increased the threshold prices of the houses, but they didn’t introduce the ability to begin with.

        • Nic the NZer 2.2.1.3

          Its patent nonsense to claim that super is unsustainable.

          One basic premise of the argument is that the govt will run out money to pay super. Thats absurd the govt operates an institution which can not become insolvent and it literally creates money as key strokes at will. The RBNZ.

          The other premise is that large deficits will cause deleterious consequences (such as inflation) but the evidence from multiple economies is that inflation is not caused by an increase in payments its caused by high real resource utilisation rates.

          So then the only credible argument is that the lack of workforce compared to retirees will make it expensive to deal with the retired. But who believes this especially given technology and productivity increases.

          Its entirely a sham case arguing to turn over peoples retirement plans to the private wealth schemes where they will be gambled.

          • DH 2.2.1.3.1

            It’s not nonsense Nic. You may have a differing opinion but that doesn’t make the orthodox view nonsense.

            • Nic the NZer 2.2.1.3.1.1

              Uh huh. So whats the problem with a higher percentage being retired? Are you with the Labour caucus for example? Which believes that deficits are such a problem that the population will suddenly turn around and vote for a party which wants to hike the retirement age (despite many being retired and no issues having ever arisen from the govt deficit in NZ).

              The orthodox view is nonsense because its based on a model of reality where people are so cleaver that they can accurately make odds of the future. For this to be a problem the models require reality to be every bit as hyperrational as Famas efficient markets models which could not ever undergo a financial crisis. Believing in and acting on such a basis is living in a dream world.

    • b waghorn 2.3

      I started a kiwisaver for wag jr at 1 i hope it will be ok to put it towards uni fees by then.

  3. Tory 3

    Crocodile tears that are simply political posturing from the Left,

    Successive Labour Governments have thought nothing of screwing over students, along with the current National Government and creating huge debts for graduates.

    http://craccum.ausa.auckland.ac.nz/features/a-brief-history-of-student-debt

  4. jcuknz 4

    As a DIYer I guess I have a different attitude to most and did ‘my thing’ in easier times. But I have lived in a ‘new’ house for most of my life with never more than $5000 mortgage. For a total of six years maybe seven I lived in a rough old place while I built the new place which replaced it, first the family home and later my retirement cottage. Note I am not a tradie but a DIYer … though in the second form [UK] I came top of the woodwork class making a dovetail joint by using the tail to mark the slot 🙂
    I feel for ‘Ad’ and those like him whose standard of living has been compromised by feeding the banks.

    • RedLogix 4.1

      So am I jcuknz. I’m not really a tradie either, but my partner and I have built, hands on, four new houses from the ground up.

      But those days are past now. More or less when we finished the last one around 2006 the building inspector made comment that I’d probably be one of the last real owner-builders he expected to see. He said that while we usually over-built to compensate for our lack of experience, the licensing and increasing code rules would make it almost impossible for us in the future.

      Besides DIY just isn’t for everyone. And yet everyone does need a home. So while I understand what you suggest, it isn’t a whole solution.

      • Pat 4.1.1

        owner builds are still permitted under the new consenting rules and judging by the industry standard are probably superior.

    • DH 4.2

      At least you accept times were easier. I for one get a little tired of the pompous chest beating of the older generations who have no ferking idea what younger generations are facing.

      Bureaucracy has pretty much killed the DIY. People can still renovate but building your own is a minefield of rules & regulations that most people can no longer navigate.

      • RedLogix 4.2.1

        Each generation faces different challenges. But what HAS changed is nothing to do with whether us baby boomer’s had it good or not, and everything to do with the fact that since the 1980’s the top 1% or so of incomes have been steadily growing their share of global wealth, while the other 90% have been either static … or recently going backwards.

        And that is a political, not a generational, issue.

        • DH 4.2.1.1

          I think many younger people would disagree with you there. They’re the ones who largely have to pay for the housing inflation we’ve been seeing and I daresay they’re not happy about it.

          • RedLogix 4.2.1.1.1

            And if younger generations are being encouraged to blame baby boomers for all their woes, who do you think really benefits in the meantime?

            Does the term ‘divide and conquer’ mean anything to you?

            • Brendon Harre -Left wing Liberal 4.2.1.1.1.1

              I agree with Redlogix, lets not fall into the divide and conquer trap, it is not like BabyBoomers had a big meeting where there was 100% agreement to screw over their kids.

              There has been policy mistakes going back 20 to 30 years -most probably not deliberate. The pressure to do something has been part of the public debate since at least 2007 -John Key was talking about a housing crisis back then -but once in power his efforts have been feeble at best.

              What we need is everyone getting behind the Labour/Greens nation building project of building more homes.

        • miravox 4.2.1.2

          +1 and especially…

          “And that is a political, not a generational, issue.”

          ^^This.

        • jcuknz 4.2.1.3

          If you believe Thomas Picketty, and I do, the rise of the ‘1%ers’ was happening up until WWI and it took the war to even things out and likewise the rot has been going on from some time after WWII to the current deplorable state of affairs….. born in 1931 I am not sure to which group I belong but when I consider the conditions I worked in with the current I am glad I am an old fogie in retirement, well into 🙂

  5. Paul Campbell 5

    Don’t forget that a decade ago we were seeing mortgage interest rates of 10%+, before you take on a mortgage don’t just make sure you can pay it now, make sure you can pay it once the GFC slump is over and interest rates rise again.

    Remember we don’t have 30 year fixed rate mortgages like they do in the US (or my Dad had in NZ in the 60s)

    • mauī 5.1

      What if rates don’t come up again? We’ve flooded the world with debt, about 200 trillion worth. When rates rise all that debt people have borrowed starts tipping people over and we’re on our way to a major depression. Japans interest rate has been sitting at near zero for a couple of decades, maybe reflecting the hole where we’re heading towards.

  6. gsays 6

    If this hands off Tory regime are going to tutu with the ‘market’, why not make these changes available to kiwibank only?

    Help build up the local bank.

  7. leftie 7

    “We need to actually build some affordable houses. If only there was a party that would do that…”

    LABOUR WILL, they’ve got a BIG PLAN !!!!

  8. jcuknz 8

    When experience in the States shows that having a degree is not a sure-fire path to success and riches,and likely here in NZ student loans to enable many more to go to varsity was a serious error. We should educate only those capable that the country can afford to give 100% free education instead of 75% as currently I gather.
    Shades of empire building by the varsities.

  9. Greg 9

    And whats for single people, + women are outliving men by five years, wheres affordable secure accommodation for single people.
    Surely its a developers investment especially with a university nearby.
    Everything is about being a breeder, humph.

    • Lucky someone was a breeder otherwise you wouldn’t be around, able to make your foul breeding statements

      • Greg 9.1.1

        politicians have a breeding fetish, n more than a few women dont have children.

        Its actually quite offensive to call names of people who dont want to breed.
        And I’m paying tax for the breeders.

        My mother was quite comfey in her old age

        • marty mars 9.1.1.1

          Yep you’re a breeding idiot

        • Colonial Viper 9.1.1.2

          its obvious that workers without kids pay more taxes and get less services for those taxes.

          • marty mars 9.1.1.2.1

            Thank goodness you aren’t breeding. The less of your attitude the better off we’ll all be imo

          • marty mars 9.1.1.2.2

            Sorry cv that wasnt to you. But this is

            That view only holds if you have no sense of community or whānau. Lots of people pay tax and lots of services get provided. iit is not a one to one relationship.
            Btw your statement is just right wing western headed rhetoric – well done you

        • Anno1701 9.1.1.3

          “And I’m paying tax for the breeders.”

          you idiot

          enjoy your old age,

          alone…..

          • Greg 9.1.1.3.1

            retirement homes are full of people whose family never visit them.
            im limiting my tax by working less,

            many men are starting to do the same,

            • Anno1701 9.1.1.3.1.1

              “retirement homes are full of people whose family never visit them”

              like old people farming ( retirement homes ) is how your elders should treated

              my elderly mother lives with her extended whanau, like it should be

              “im limiting my tax by working less,”

              i prefer going on a benefit from time to time , i call it working class tax minimization

              “many men are starting to do the same,” and gender is relevant to this
              because……….. ?

              Yep 100% an idiot

            • McFlock 9.1.1.3.1.2

              so you’re lowering your own take-home pay to lower the amount of tax you pay.

              Seems to me that you’re cutting off your nose to spite your face.

      • jcuknz 9.1.2

        It is common sense not to breed more humans onto this finite planet and I am happy to have had just one child and one grand daughter. Scare tactics about who will look after the old do not bother me as that is just what they are.

        • marty mars 9.1.2.1

          so YOU breed more humans and thus did not exhibit common sense – good oh thanks for clarifying that jc

          personally I find the argument foolish – have children, don’t have children, make your decisions, who cares…

  10. Anno1701 10

    Mortgage = Death grip

    no thanks….

    • Ben 10.1

      Not necessarily. A manageable (and sustainable) mortgage is OK, and all part of buying a house, and in some cases can be less than paying rent.

      The death grip comes in the current Auckland market with only a 10% deposit, and worse still signing up for an interest only mortgage.

  11. jcuknz 11

    Pull the other leg Leftie 🙂 The system simply isn’t capable of it…. mores the pity.

    Anno 1701 .. the choice is either paying the bank or the landlord.
    and Greg … it was the stupid sheepie crying out for something to be done which caused the politicians to introduce the obstructive rules.

    • Anno1701 11.1

      sheepie”

      you know as soon as you use that word your credibility hits rock bottom ?

  12. jcuknz 12

    Sorry not Greg but Redlogic.

    • RedLogix 12.1

      Mainly because as a result of the leaky buildings crisis the so-called professionals in the building industry foisted on us. And that was the direct outcome of National’s wrong-headed deregulation in the early 1990’s.

  13. Keith 13

    The idea of syphoning of your retirement savings as a deposit is idiot economics. It got slammed in Aussie and rightly so. The main reason is it just adds to the purchase price, any fool knows it most especially National. But they don’t care, as long as it looks like they’re doing something and throwing fuel on an out of control fire is all they know.

    And let’s not get started on the hair on fire panic kitset houses scheme from Bennett. That has all the planning of deck chair rearrangement on the Titanic!

  14. Adrian Thornton 14

    As long as houses are traded as commodities nothing will change in the long term.
    What is going to stop any body who buy’s one of Labour’s proposed ‘affordable houses’ from jumping on the revolting property ladder after 5 years, and just starting the whole destructive cycle again?
    And here we are left subsidizing nearly the whole rental industry, as well as subsidizing the upgrade of their assets, it is an outrage, it is unethical, trading houses should have the social stigma of smoking in a maternity ward.

    Two Billion per year in subsidies.
    Subsidizing 60% of rental properties…..come on.
    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11623826

    • Chuck 14.1

      “As long as houses are traded as commodities nothing will change in the long term.
      What is going to stop any body who buy’s one of Labour’s proposed ‘affordable houses’ from jumping on the revolting property ladder after 5 years, and just starting the whole destructive cycle again?”

      No argument with that. I know some commentators here (Draco for example) want the state to legislate for all housing to be brought / sold in narrow band determined by the government (eg housing no longer subject to market forces or used as an investment / retirement fund).

      Of course it will never happen, as any political party that suggested that would be decimated in a election.

  15. johnm 15

    Why German House Prices have been Flat

    The picture below says it all – German house prices have been flat (in real terms) for the past 30 years, while over the same time ours have increased by 150%. This despite the fact that Germany is the one of the most successful economies in the world and their per capita incomes have risen faster than those of New Zealanders. Why is that, why have we lost the plot and what can we learn from them?

    The German government has a history of getting involved in the market whenever the private sector gets too out of control. After the re-unification in 1989/90 there was a law that controlled rapid house price rises to a maximum of 4%, and any capital gain had to be the result of investment made in improving the property. This policy effectively killed speculation post re-unification.

    To summarise – the Germans have policy settings that encourage the population to see housing as providing shelter, and as part of their basic infrastructure, rather than an investment. This is driven by policy. The policymakers have known for a long time that true prosperity comes from investing in business and generating income and employment – not setting policy to encourage people to bid up the prices on the same property year after year. That’s not wealth creation – it’s wealth redistribution.

    http://morganfoundation.org.nz/german-house-prices-flat/?utm_campaign=coschedule&utm_source=facebook_page&utm_medium=Gareth%20Morgan&utm_content=Why%20German%20House%20Prices%20have%20been%20Flat

  16. Ralf Crown 16

    The problem is simple, the solution is even simpler. Speculators, gamblers, buy up homes wholesale, let the tenants pay the mortgage, and walk off with the loot – tax free. There is well oiled system of real estate agents to promote and drive the speculation. Tax speculators to the hilt, put horrendous fees on their activity, raise the rates for them, dismantle the real estate system, forbid auctions, go after the individuals causing the home mayhem. Homes are to live in, not investment for tax free capital gains. To be reasonable, the home prices need to drop with a factor of 75%, and hopefully it will come. Let the speculators pay that price, not the young people.

    • johnm 16.1

      100% right RC! 🙂 There is no party in Parliament with the guts to do this even remotely. 🙁

      • mikes 16.1.1

        There will be eventually once home ownership rates dip below 50%. When the majority of the voting age population are unable to buy a house then politicians will be forced to change things

        • Siobhan 16.1.1.1

          Of the current percentage of renters, a good number will eventually own a home, or THINK they will own a home.

          The change will only come when a significant number of renters are in a situation when they realise they will NEVER own a home and that the terms of rental in NZ are having a negative impact on peoples lives and their childrens prospects.

          They will then start looking for a political party to vote for, one that is willing to stand up and say the system is no longer fit for purpose for the majority of citizens.

  17. Smilin 17

    Show us the money Key not our growing debt balance you Ponzi PM

  18. Dave 18

    That is pure madness the last thing a first home buyer should even consider is buying a home in today’s market and the government to use kiwi saver as a cash cow to prop up the houseing market that is a ponzu scheme will just add the ruin of legacy to add to there already disastrous list even doctor brash has come out with a honest warning nz is sitting on a debt bomb that will go bang

  19. Jack Ramaka 19

    Quite frightening what has happened with housing prices here in NZ rubbish houses in Auckland going for $1.0 million, it is mindless stuff, letting foreign investors into NZ having a free for all is ridiculous. First home buyers can not compete with overseas investors with deep pockets.

    The banks are the big winners in this game as they keep increasing their lending as the house prices increase, they are making more interest on home owners borrowings as their mortgages increase. If the market falls the banks still win so long as the market doesn’t drop more than 20-30% as the homeowner is the loser as their equity will have disappeared.

    How horrible would if be for a first home buyer to lose their equity in their first home.

    The Auckland Housing market is National’s Ponzi Scheme?

  20. Gangnam Style 20

    Checkpoint had someone who has been trying to get on the waiting list for an ‘affordable home’ in the new ‘special housing areas’ in Auckland, she had been given the run around no one has been able to find out how to get on the waiting list & no one knows if there even is a waiting list as no one is over seeing it. Sounds dodge huh?

  21. Jack Ramaka 21

    Sounds like a hoax to me, it is a charade just something to get the masses thinking that this Government has a solution, the horse has bolted on the Auckland Housing market and the only solution for this Government and future Governments is to start building social housing again, rather than cashing up State Assets. It worked in the 1930’s through to the 1960’s why would it not work again ? National has done nothing for the past 8 years the least they could do is try and do something ?

    The Government is the only organisation in the country with the financial clout to solve the problem which this National Government has created, by selling our housing stock to absentee offshore investors.

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