The sure fire way that a young person can own a house in Auckland

Written By: - Date published: 9:53 am, April 3rd, 2017 - 36 comments
Categories: housing, making shit up, Media, the praiseworthy and the pitiful, you couldn't make this shit up - Tags:

The Herald is getting a bit of a bashing on social media for its latest in a long series of articles about young people who have been able to own houses in Auckland.  The article is here.  If you prefer to avoid the clear clickbait nature of the article here is a synopsis of what is required for a young person to own a house in Auckland,  and the answer is not to give up lattes or smashed avodaco:

  1. Buy on the outskirts of Auckland where the prices are more reasonable.
  2. Have a good job, it helps to be a unionised job, that is well paid and lets you work lots of overtime.
  3. If necessary get a second job and work up to 97 hours a week.
  4. Live at home rent free if you have the chance.
  5. Rent out spare rooms to friends.

And this is by far the most important thing that a young person can do to make housing in Auckland affordable:

6. Find a functional time travel machine and go back 5 or more years.

See it is as easy as that.  The Herald said so.

 

36 comments on “The sure fire way that a young person can own a house in Auckland”

  1. Draco T Bastard 1

    Didn’t they mention?

    7. Have the very well off parents buy it for you

    • DoublePlusGood 1.1

      Yeah, that’s the real way that anyone under 30 is buying a house in Auckland.

      • aerobubble 1.1.1

        Ten years ago, become a real estate agent, surf housing prices as they grew out from Auckland. Nowadays, quadruple bunk out a four bedroom home to migrants.
        As Key said aspriational, meagre chance of home ownership when he came to power but by the time he left only slumlandlords get ahead.

        • AB 1.1.1.1

          Key is the model – vast, unearned riches from speculating on the movement of currencies. His supporters do a similar thing with unearned income from capital gain on residential property.
          To reverse a famous line from Yeats – his admirers became him

  2. dv 2

    There is NO comment about how a bank will loan a 20 year old upwards of 300k.

    • They will quite happily apply the normal criteria to you. However, if you’re actually 20 and not say, 28, then the “normal criteria” will require a stable, well-paying job on permanent contract that you won’t have had enough time in work to qualify for. (And good luck getting a permanent contract these days, christ, almost everything is fixed term)

      • dv 2.1.1

        I suspect the 28 year old will require a stable income too.

        My guess is that parents gave a guarantee to the bank. But the herald article doesnt say.

        • Sure, but at 28 it’s actually quite possible to have got yourself into a permanent contract with a substantial enough income that you can present a good prospect for a mortgage. (assuming you’ve been living on a strict budget, working overtime, have a partner to help contribute, etc, so basically you have to be a Best Case Scenario to actually afford a house without something like parental bailout or an inheritance mostly buying it for you)

          The issue of default collateral is a tough one. I would expect you’re correct that they had family to underwrite their loan for them, which isn’t something everyone can rely on.

          • Wayne 2.1.1.1.1

            By age 28 a large number of people will have in in good jobs for some years.

            For instance a teacher with a four year degree, one year teachers training and a one year OE will have started their first serious teaching job at around age 24. So by 28 they will be half way up the pay scale on around $65,000 to $70,000. In a relationship, probably between the two, able save $10,000 per year. Coupled with the KiwiSaver grant for first home buyers they will have around $60,000 deposit.

            Enough for a basic starter house/unit/apartment. It does mean a mortgage of $500,000, which will seem pretty scary. However at 4% Interest cost would be $20,000, so less than rent (at least in Auckland).

            It is doable, but not easy. It would be better if there was a capped mortgage payment for say 5 years, perhaps a bit longer, to reduce the risk for the new home buyers on low/middle incomes (say up to household income of $100,000). I would say capped at 4%, but 5% would be plausible. The mortgage risk increase would have to be a govt incentive/subsidy. At the moment it would cost the govt nothing, but if rates go above 4% it would. Each extra 1% would cost $5,000.

            • Matthew Whitehead 2.1.1.1.1.1

              The issue is nobody is making houses for $500k anymore, Wayne, especially not when they have to build the infrastructure themselves, as that extra sunk capital makes luxury housing the only economically rational decision for private construction. Ultimately, what solves the problem will be a jigsaw approach with several policies designed to ameliorate it put together. National is right that private housing should be in the mix. (that said, they’ve done nothing to keep those private builds affordable or ensure they’re in rational places, and they’ve done little to incentivise outflow to the regions which can actually hold more people than they have) The three other List parties are right that foreign demand and over-reliance on immigration for economic growth needs to be addressed. The left-wing parties are right that more measures taxing wealth need to be implemented to balance out the economy and cool down the housing market. And Labour and the Greens are right that having government step in to make its own affordable housing projects will help, too. (They could also set up some subsidies for infrastructure available to affordable housing projects to ship out some of the job to the private sector) Consenting some more high- and medium-density apartments or similar in the inner-city or city-adjacent suburbs is one way to get around this that everyone agrees on, but the government haven’t really acted on it sufficiently because it hurts their supporter base to do so, so they just put up a smokescreen around the RMA.

              Even TOP’s silly asset tax approach would help. (Of course, TOP’s solutions cause problems in other political areas and will increase the squeezed middle problem they’re worried about)

              Also, most young people don’t have sufficient capital to make a $500,000 mortgage work without assistance from parents or other older family members. No offense Wayne, but I’d be surprised if you understand what the labour market is like for millenials right now. I can count the number of people I know my age or younger who own a house on one hand, and they’ve all either been in ideal economic circumstances or have had help from their family. It’s a bit better for those on permanent contracts, (which is the new version of having a flash job, FYI- basic job security is increasingly rare in Wellington for the younger generations) but it’s by know means the majority of people I know. I literally passed someone my own age on the street the other day in a custom suit talking about his flash job and how he couldn’t afford a house too. (I suppose he could be blowing his income on a collection of tailored suits but I doubt it) You shouldn’t have to win the economic jackpot to be able to exit the rental market. Everyone knows that in the long-term it’s cheaper to own a house, but not everyone can make the equation work.

              • McFlock

                I would totally get half a dozen flash suits before saving for a house lol

                But I agree entirely – it’s a complex problem that will require a load of different policy changes working together, locally and nationwide.

                The Auckland disease is quickly spreading to the regions, where job security is even worse. It’s becoming not just urgent, but frantically so. Saying “it is doable, but not easy” is no longer anything other than a joke. We’re talking about the last few people holding onto an upturned lifeboat using their parents’ belt buckles to do so.

            • Draco T Bastard 2.1.1.1.1.2

              By age 28 a large number of people will have in in good jobs for some years.

              I’m sure that a large number will. The majority won’t. Not with today’s contracting and casual labour.

            • DoublePlusGood 2.1.1.1.1.3

              “By age 28 a large number of people will have in in good jobs for some years.”

              Dear me, you are in fairyland.

              So your double teacher scenario has them both magically skipping half way up the pay scale in four years. It also has them saving 10k per year and paying 20k rent, so you’re assuming they don’t have kids in their 20s or that just barely possible scenario goes out the window.
              Then you think the bank will loan for a mortgage for them for 500k on a 60k deposit with no collateral, which no sane bank would do.
              Then assuming they can even get this 500k house, which probably has to be at least 30k from the Auckland city centre or be a 1 bedroom shoe box, they can’t afford to have kids for at least another decade. They’re probably forced to buy miles away from where they work, so they have massive transport costs and long commutes that erode their wellbeing.
              It also requires that neither of them ever get sick and have to stop work, or have a car crash injury, or require a claim that would put up their insurance premiums, and so on. Any small financial shock would sink them.

              And that’s in a favourable scenario where you’re picturing two people each earning significantly above the average wage in stable jobs. Most people don’t have that income or stability these days. I don’t have that high an income, and I am vastly more qualified than a teacher, and I have more work experience than your magical 28 year olds. I can’t buy a house because house prices rise in a year by more than what I can save in a year.

              Of course, all that’s irrelevant, because they wouldn’t be able to get the house at auction because they’d lose out to a property speculator.

              • Wayne

                The cost of the property I envisaged was actually $560,000 ($60,000 deposit and $500,000 mortgage).

                The cost of the mortgage at 4% is the same as $400 weekly rent. A lot of people are paying more than that.

                People aged 28 on $65,000 to $70,000 would cover just about everyone working in the public sector who has a degree or other tertiary qualification that is relevant for the job. It cover a huge number of people in the private sector, including large numbers of tradespeople.

                A couple on a family income of $130,000 should be able to save $10,000 per year.

                When they have children, with $65,000 family income, accommodation supplement and WFF may well kick in – not sure how these abate.

                Obviously this scenario does not cover everyone, such as those on or near minimum wage levels (basically everyone on $20 per hour or less).

                But it does cover a lot of people, probably hundreds of thousands.

                • DoublePlusGood

                  “People aged 28 on $65,000 to $70,000 would cover just about everyone working in the public sector who has a degree or other tertiary qualification that is relevant for the job.”

                  You’ve clearly not seen public sector salaries recently.

                  Also, $130,000 with a $60,000 lets you borrow $240,000 for a total of $300,000, according to the mortgage calculators I tried.
                  The couple you describe would need a deposit of $140,000 to borrow for a $560 k house, not $60,000. I don’t know what insane bank would allow a $60k deposit on a $560,000 house.

                  So a couple with the favourable income circumstances you describe need to have saved $140,000, which is five years of aggressively saving $28000 a year – and if saving that aggressively they likely cannot afford to have kids. Then, after just squeaking a $560000 home loan (assuming they can even get that much) they are incentivised to aggressively reduce that home loan, which again likely means they cannot afford to have kids for a number of years.

                  And people who earn $50k or less? No way they are ever getting a house. And that is far more people than your group of under 30s couples with a combined income of $130k+.

                  • lprent

                    I suspect he is referring to the inflated wages in the parliamentary enclave in Wellington. Certainly the majority of public sector staff outside of profs and judges that I know in Auckland are doing pretty well if they get up at the 70k level. For instance that is pretty much at the TOP of the salary bands for secondary teachers. https://www.education.govt.nz/school/working-in-a-school/teachers/secondary-teachers/

                    Typically from what I see, they hit those kinds of salaries in their 30s or 40s. Partially because they actually spend time at uni which impacts on the time that they have to pick up work experience. BTW: I don’t know any without relevant degrees. So I’m missing the whole cadre of ones with limited qualifications.

                    Public service pay in Auckland is pretty damn low considering the housing costs. Very hard to see how anyone could get a house on it and afford to have kids for quite some time. To be able to pay for $400k odd (assuming that they could get something at 560k) they would need to continue coughing up at least that $28k per year for the foreseeable future while praying that interest rates won’t rise and that neither loses their job.

                • lprent

                  How far was it to the CBD? Or to the nearest major center in Auckland?

                  Basically transport costs are a major factor in everyone’s analysis of buying a place in Auckland these days and is routinely factored into the cost equation. I’ve looked at a number of cheaper houses. But they invariably have transport costs (and time) that outweigh any price advantage.

                  BTW: 60k as a deposit on 560k sounds extraordinary. But you are aware that banks won’t lend on anything like a 10% deposit these days? And that we’re likely to get some rises in interest rates sooner rather than later?

    • Antoine 2.2

      Based on anecdotes, it seems to me that banks have tightened lending over the past year – over and above what Government has mandated. People with substantial deposits and good incomes are not getting loans, where they would have in the past.

      Could that be right??

      A.

  3. saveNZ 3

    Find a functional time travel machine and go back 5 or more years, DO NOT read the Herald and so called experts and blogs that advise you not to buy as the market is falling at that time.

    Go back a further 9 years and vote Labour or Greens and keep the immigration criteria that they used to have 9 years ago, that actually had a criteria and was not a scam.

    Hopefully then in Auckland we would not have the supercity and the unitary plan already driving up prices further.

    • Wensleydale 3.1

      Ah, good old Rodders and his ‘grand plan’ for the Auckland Supercity. I sincerely hope he doesn’t get a wink of sleep at night due to the cacophony of voices in his head all shrieking at him, telling him what a massive bastard he is.

      I’m all for the time travel plan. We could cobble together some sort of time capsule — a general run-down of the major news stories (not sourced from Granny Herald obviously), snap-shots of all the beggars and homeless clogging the streets, video interviews with young families forced to live in their cars, a selection of highlights from Key’s reign of terror (Pike River, state asset sales, the Christchurch debacle, his penchant for the unwelcome fondling of female tresses, Mossack Fonseca, etc…), perhaps a glossy calendar of New Zealand’s most poisonous waterways with informative commentary by Key’s favourite scientist, Dr Mike Joy, and if we really wanted to pour salt into the wound, copies of Nicky Hager’s ‘Dirty Politics’ — that sort of thing. If we hurled it back through time to pre-election 2008, I’m sure even die-hard National voters would experience the pangs of self-doubt.

      Or perhaps I’m giving them too much credit.

      • Antoine 3.1.1

        Be sure to send back a capsule from the alternate future in which Labour won the 2008, 2011 and 2014 elections as well, so the people of 2008 can make an informed choice

  4. 1. No more smashed avocado
    2. No more Netflix
    3. No more mobile phone

    That’s a saving of $100 per week right there. Now do that for 100 weeks and you have $10000. Now go back to 1970 and buy a house for $10000. Lazy millennials!

    • lprent 4.1

      Don’t laugh.

      In a lot of cases of the types of obsolescent fools who say these kinds of things, that is exactly what they do think – that this is like 1970 or even the 1980s when they brought their house.

      Or they live in the provinces like Wellington or Christchurch ( 😈 ), look at somewhere like lower house prices in Huntly or Ranui without considering transport geography. `Its only 30-70kms to work. You can do that in less than an hour.` Whereas a daily commute into Auckland for say 3 working adults each to their own jobs will then cost more than the exorbitant monthly mortgage for the household in monthly transport costs in crowded streets. And the daily commute for the household is a combined 8-10 hours.

      But then they’d follow up with `why do you want to be in Auckland?`. The answer to that is that outside a few transportable professions almost every place in NZ only has service town jobs which are hard to get into, pay badly, and just outright boring. You go to Auckland, Sydney, Melbourne, and the like for interesting jobs.

      As much as I loved Dunedin and even Wellington and the other provincial towns, the only way I am going back there is if I retire. And I’m more likely to find a rural/semi-rural area with decent data.

      • ropata 4.1.1

        I know people in Auckland that would love to leave, but the job market isn’t the same in Whangarei or Hamiltron. Family friends who were renting in Auckland have been able to escape by finding work in Christchurch, and even bought a house in Rolleston.

        For others, leaving Auckland would mean a massive pay cut and huge upheaval breaking family ties & lifetime friendships. So the family stays here, crammed into 1 or 2 rooms. That’s pretty much my situation, and I don’t wanna go back down to Christchurch, it is such a small town and I was underpaid there for years.

        And it’s not just Millennials shut out of housing, immigrants and many Gen Xers and anyone below the top 5 to 10% of income can forget about it.

        You are so right about the old fogey demographic, I guess the Herald really knows its audience.

    • The New Student 4.2

      Netflix is $15/month, phone is $60/month. Apparently I’m spending ~$325/month on smashed avo. If only!! Yum…

      • ropata 4.2.1

        Well then you will have to find some more stuff to give up. No more fancy gym membership, stop going to the dentist, and wear jandals more often to save on shoes.

        My comment was intentionally stupid, at the same level as this offensive Herald campaign

  5. Keith 5

    Look, its their duty to present this fantasy world to voters in election year on behalf of the National Party to hide the grim reality of their party’s failings!

    You could add;

    Moving to the tip of Coromandel
    Living in an old van on the tip of Coromandel
    Using the vast amount of unpurchased Heralds to wear as clothing, use as blankets and carpets in your old van on the tip of Coromandel
    Or alternatively having a very wealthy set of parents to cash in on.

    All perfectly obtainable

    • saveNZ 5.1

      +1 Keith – especially like your idea of using unpurchased Heralds to wear as clothing.

      Sadly due to council regs and massive tourism and growing homelessness, I doubt you could freedom camp anywhere anymore. So far as I am aware, you can park outside Bunnings if you live in your car.

      Another idea could be if immigration have a criteria to sponsor ‘wealthy parents’ who could adopt a local Kiwi (kinda like world vision) and buy them a house here in return for free citizenship. It could be the government’s next big idea to grow the construction sector.

      • greywarshark 5.1.1

        savenz
        Very creative – would work I think. Its time to change how we go seeing that we have stalled, so let’s have this amongst a suite of options.

  6. bwaghorn 6

    right wingers always use the exception to try and prove that their bullshit inaction or nastiness isn’t the cause of people’s struggles

    • Draco T Bastard 6.1

      +111

      The norm doesn’t fit their ideology and so they just look for the exception that fits their bias.

      • ropata 6.1.1

        Using anecdata to tell a different story than the reality experienced by 90% of younger kiwis. Fake news

        A decent fucken newspaper would be headlining families in cars and kids with third world diseases. But our MSM priority is keeping the status quo, they know who pays for the 90 page property section

  7. AsleepWhileWalking 7

    I’m buying lottery tickets as my “house savings plan”.

    People think that’s risky but I think Kiwisaver carries more risk.

    It is often said that your chances of being hit by lightening are higher than winning lotto. You might be surprised to know that there were 30 lotto millionaires in NZ last year. Not sure if we had anyone struck by lightening.

    Of course I don’t buy NZ lotto tickets anymore due to the high costs and low jackpots. $6 minimum entry for Powerball? Are you kidding? I’m a gambler not a limitless money pit.

  8. Muttonbird 9

    Here’s another from the Herald’s I-bought-a-house-at-23-but-my-family-is-loaded file.

    http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11831078

    I know this woman, the one on the left. I’ve no wish to criticise her for having a wealthy family but I am criticising the Herald for promoting this and other similar stories as normal in New Zealand.

    Not only to Granddad giver her $100K but her parents are totally loaded too. I’ve been to their house the one she lived in while ‘saving’. It’s a multi million dollar, high-end architectural tilt-slab number overlooking one of the Eastern beaches.

    The Herald is mistaken if they believe this sort of story is inspiring to ordinary young Kiwis.

  9. ropata 10

    Perpetuating one of the core myths of capitalism: that with hard work and good character anyone can get ahead. What a crock of shit.

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