Housing affordability

January 21st, 2014 at 10:00 am by David Farrar

Stuff reports:

Housing is unaffordable in all eight of New Zealand’s major markets, an international survey shows.

High median house prices have been upwardly skewed by recently imposed mortgage lending restrictions and low mortgage interest rates, an economist says.

The 10th annual Demographia International Survey classified Auckland, Christchurch, Tauranga-Western Bay of Plenty, Wellington and Dunedin as “severely unaffordable”.

Palmerston North, Napier-Hastings and Hamilton-Waikato were “seriously unaffordable”, the survey said.

The survey uses a median multiple to determine the affordability rating of houses in 360 metropolitan markets in nine countries. The median multiple is calculated by dividing a region’s median house price by the median income.

Regions with house prices more than three times the median regional income are deemed unaffordable.

Overall, New Zealand had a median multiple of 5.5, up from 5.3 last year.

We need to free up more land. That is the component that has been increasing the most.

The Demographia survey is here.

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63 Responses to “Housing affordability”

  1. campit (467 comments) says:

    We need to free up more land

    That won’t make housing more affordable. Building more apartments and higher density housing will.

    http://transportblog.co.nz/2013/10/20/more-and-more-new-apartments/

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  2. campit (467 comments) says:

    Also you need to be very careful statistically when looking at the median house price over time, because the average dwelling size has been increasing as well. Need to make sure that you are comparing apples with apples.

    http://transportblog.co.nz/2014/01/20/small-can-be-good/

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  3. dime (9,849 comments) says:

    Campit – we need both. I think its going to take a while for kiwis to get used to the idea of living in apartments long term. Most of us grew up in a house with a big section.

    “Also you need to be very careful statistically when looking at the median house price over time, because the average dwelling size has been increasing as well. Need to make sure that you are comparing apples with apples.”

    True. But some of that is due to land value. Doesnt make sense to build a 120 sq/m house on a site that cost you 4-500 stacks.

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  4. Carlos (682 comments) says:

    @dime

    Have you seen that eyesore on the corner of Broadway and Remuera Road in Newmarket? What the hell were they thinking?

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  5. PaulL (5,965 comments) says:

    The underlying problem is that the left have difficulty with dealing with the consequences of their policies.

    In principle the left (and probably many on the right) would prefer to contain urban sprawl. This reduces congestion (people travel shorter distances to work), reduces pollution, and avoids our cities spreading across productive land. However, if we are going to allow more people to live in cities (we continue to slowly urbanise, we like to let in immigrants for good reasons), then that means we have to house more people in that space. So we need more dense housing.

    The logical conclusions from that are:
    – ‘traditional’ houses will be more expensive. If we’re increasing density then there will be fewer blocks of land with a single dwelling, and more blocks with multiple dwellings. Unless we think that people, given the choice, would rather live in an apartment than a single dwelling, then we’ve got to expect single dwellings to get more expensive
    – young home owners, who have less money, won’t be able to buy a house. They’ll need to buy an apartment
    – if the nimby crowd don’t allow those apartments to be built, then we’ll get the increase in prices without anywhere for that demand to spill over. Then apartments will be expensive as well.

    In short, many on the left want planning controls, but fail to understand that those planning controls do their job through increasing prices. So then they bleat about housing unaffordability as if their policies hadn’t caused it.

    So there are really two options here:
    – remove the planning controls, allowing more land onto the market and allowing sprawl to continue
    – steam roll the nimby crowd, and allow densification in the places people would like to live, which would encourage more people into apartments and thereby push down the price of apartments

    Either will work, but you have to do one or the other.

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  6. iMP (2,364 comments) says:

    Working NZers should be able to buy a section and a home. If two working adults cannot afford to do this over time, the economy is wrong. Yes, people can move to fringe country towns, but if housing is unaffordable in our main cities, we will create an elite land-owning class and trapped middle class, everything NZ was set up to avoid.

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  7. simian (29 comments) says:

    Napier – Hastings is seriously unaffordable and you think freeing up land will fix that? Maybe for Auckland

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  8. gump (1,634 comments) says:

    @PaulL

    “In short, many on the left want planning controls, but fail to understand that those planning controls do their job through increasing prices. So then they bleat about housing unaffordability as if their policies hadn’t caused it.”

    ————————–

    Planning controls on urban property aren’t a function of left-wing or right-wing thinking. Until you get to the fringe of the political compass, where both groups become authoritarian and start to impose a high level of central planning.

    Just look at our recent history for evidence of this:

    John Banks led right-of-centre councils for two terms and did nothing to ease the restrictions on house building in Auckland, and John Key led a right-of-centre government for two terms and has (so far) done nothing to east the restrictions on house building around New Zealand.

    And consider the Resource Management Act (which has had a huge impact on reducing the number of building consents that are issued). Which Government and Political Party introduced it into law?

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  9. david (2,556 comments) says:

    To paraphrase Cactus Kate, Who the hell is buying all these “unaffordable” houses. They are selling, for sure. I concede that they are are more expensive than they were 30 years ago but to label them unaffordable is just hysteria.

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  10. Kea (12,380 comments) says:

    House prices increased due to the availability of cheap debt, not because of a shortage of land or houses.

    The entire housing bubble was based on non-existent money/debt.

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  11. Kea (12,380 comments) says:

    We need to free up more land.

    Bullshit.

    The problem is affordability not availability.

    This whole subject is clouded by self interest and greed. No other financial topic generates so much emotion and fuzzy thinking as suggesting peoples homes might not be worth as much as they hallucinate they are worth.

    It is no joke and people need to get real. Overspending on housing has destroyed the worlds economy. If US citizens were taxed 100% they would still need to borrow billions just to stay where they are, which is in deep shit ! Even the banks did not profit from this madness and needed to be bailed out with more debt, to be paid back by the tax payers who hold the mortages.

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  12. safesally (47 comments) says:

    Just remember as your home grows in value so does the one you want to buy next and it has grown at a higher dollar value.

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  13. Kea (12,380 comments) says:

    safesally, it is worse than that. Much worse.

    The percentage step to your next home maybe the same but you don’t borrow percentages you borrow money. When houses go up in price 300% you have to borrow 3 x as much actual money. With 3 x as much interest.

    Who do you think profits from this ?

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  14. nickb (3,686 comments) says:

    IMO the problem is more NZ’s low wages than housing affordability. Go to Melbourne, Hong Kong or Paris and see what you get for your $. Then stop crying and realise renting in your mid 20s is not then end of the world. And if you have a large family and can’t afford to buy a good home then uppercut yourself for being so financially irresponsible.

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  15. Kea (12,380 comments) says:

    nickb, bullshit.

    If you pay people more the house prices just go up. The more money released into the economy the less existing money is worth. People will also be more likely to buy rentals and investment properties, increasing the problem.

    The housing bubble was nothing to do with availibilty of land, immigration or incomes.

    Stop talking shit.

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  16. Longknives (4,690 comments) says:

    Waah! I can’t afford a villa in Ponsonby!

    The moaners don’t want to live in Apartments or housing complexes slightly out of town while they slowly move up the property ladder- They want a Ponsonby Villa and they want it NOW!

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  17. hj (6,915 comments) says:

    The housing debate is one sided as National, Labour and Green Party are pro immigration. Professor Paul Spoonley has tracked media reaction to immigration stories and found that they (more and more) realised they had a role to explain (positively) the complex issues of immigration (but not vice versa).
    Canada takes 250,000 migrants per year and surveys show just over 50% think immigration is a good thing. You ould wonder why people dont factor that our fellow humans compete with us for lifes most basic requirement (a place of our own) as well as benefit us. Iit has been shwn that immigration creates a demand for more migrants and the sectors who benefit grow in lobbying power. Same in Aotearoa.

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  18. Kea (12,380 comments) says:

    Waah Waah !!! My house devalued 75%

    Longknives, I look forward to hearing that bleat. Already thousands of Americans are walking away from their homes rather than paying the mortgage.

    Dreamer.

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  19. MT_Tinman (3,130 comments) says:

    Longknives (3,753 comments) says:
    January 21st, 2014 at 11:32 am
    Waah! I can’t afford a villa in Ponsonby!

    The moaners don’t want to live in Apartments or housing complexes slightly out of town while they slowly move up the property ladder- They want a Ponsonby Villa and they want it NOW!

    That, unfortunately, appears to be exactly the case everywhere.

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  20. Crusader (305 comments) says:

    “Housing affordability” is calculated on a ratio of house price vs income.
    The debate seems to be only about the house price side of the equation with no mention made of the income side of the equation. i.e. It’s not that our houses are unreasonably expensive, it’s just we cannot afford them on the money we earn.
    If foreigners keep buying up our properties, they must find the houses affordable. Even with our dollar worth so much, apparently. Imagine how it will get when our dollar falls again. Foreigners will then find our houses as cheap as chips.
    By all means free up land and building. But if we as a country can improve our productivity/income levels, we will be in a better position to afford our houses again.

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  21. Kea (12,380 comments) says:

    hj, there are plenty of houses available you muppet. Pop down the real estate agents office and check for yourself.

    The problem is affordability. Even DPF says so in the title of this post, but then goes onto claim it’s about availability, a clear lie when one checks the market.

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  22. Don the Kiwi (1,705 comments) says:

    Red tape is still a major contributor. I’m retired from building now, but back in 2002 – I think – I was buying sections for $60 K, and a building consent was around $5K. The the RMA kicked in, and the council got its grubby little hands on the control mechanism, and within 2 years, the same sections were costing $150K, and building consents were$15 K. They screwed the developers by putting up their contribution from about $5K to $40 K. per section.
    Things have come back a little bit because many developers stopped developing because of the costs, and people decided to renovate instead of build new. That is changing now, but the red tape still exists to a major extent.

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  23. Kea (12,380 comments) says:

    Reading this moronic drivel is doing by head in !

    The housing boom was artificially created by banks flooding the market with trillions of dollars [globally] to benefit banks. And for no other reason.

    It might pay for some of you gibbering halfwits to find out how money is created and released into the economy. It scares me to think you are allowed to vote and breed.

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  24. dime (9,849 comments) says:

    “Waah Waah !!! My house devalued 75%

    Longknives, I look forward to hearing that bleat.”

    you nasty fucker lol

    it would be good if prices remained stagnant.. for the next 40 years..

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  25. Yogibear (361 comments) says:

    Half the problem is the overpriced building materials and the glide-time approach that BRANZ has to certification.

    US dry wall is 1/3rd the price in $NZ of Gib Board (which is a brand name, not a product), and its better quality (12mm thick as opposed to 10mm thick for Gib). 4×2 is half the price in the US in $NZ.

    The Productivity Commission found that housing materials were 1/3 more expensive in NZ than they were in Aussie, yet they went on a crusade on land availability rather than materials

    Put simply, a small number of companies control the supply chain in NZ and the costs of entry are just to high for alternative products to get certified.

    I think Nick Smith’s plans around disclosure rules for tradesmen (who right now have no incentive to source cheaper product because they are well looked after by the suppliers) are a really good step, but more needs to be done.

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  26. Yogibear (361 comments) says:

    Also, for the life of me, I can’t see why a building product thats certified in Aussie doesn’t automatically qualify here – its just blatant protectionism from BRANZ.

    Dont give me crap about NZ being colder and wetter than Aussie and therefore “different” – Houses still need to be watertight, and the temperature fluctuations in places like Melbourne (40 degrees one day, 16 the next) put as much, if not more stress on materials as our climate.

    FFS, we have joint standards on food safety, why cant we have more efficient building product regulation and get more competition in the market.

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  27. hj (6,915 comments) says:

    Why was ir necessary to make the Productivity Commision terms of inquiry “broadly politically aceptable” … Is not very brave is it?

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  28. hj (6,915 comments) says:

    @ Kea
    house price increases are strongly corellated with house price rises. And you have to factor infraastructure spending paid for by a low paid workforce (soaking up funds otherwise available for business investment).

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  29. Kea (12,380 comments) says:

    “you nasty fucker lol ”

    dime, why am I a nasty fucker ?

    You are blinded by self interest ? The overvaluation of houses has stuffed the global economy and destroyed many peoples lives. For what you now pay for a roof over your head, you could have once got a house and started a small business employing a few people. Housing is non productive debt.

    If look beyond your own short term self interest you will see what I am on about.

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  30. hj (6,915 comments) says:

    If it was just a matter of too much cheap money prices may have burst already but we have a large number of (of shore) deep pocketed people creating a perception that prices wont stop rising until we become as undedireable ss the cities thry escape.

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  31. Kea (12,380 comments) says:

    hj and others.

    If I am wrong and full of shit, or just a “nasty fucker”, then if the banks refuse to lend on houses it would have no effect on prices.

    Yeah right !

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  32. hj (6,915 comments) says:

    I recall a book titled te gret NZ house. In fact NZ houses dont seem that great; they sacrifice fun tion for diversity of style.

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  33. tedbear (135 comments) says:

    Much of this talk is about housing in Auckland, which I have said many times before, is full.
    If people really want to buy a house, there is plenty of affordable housing in smaller towns around NZ.

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  34. Longknives (4,690 comments) says:

    “If people really want to buy a house, there is plenty of affordable housing in smaller towns around NZ.”

    But I don’t want to live anywhere else in New Zealand- I’ve just spent three years getting my degree and I DESERVE a beautiful Ponsonby Villa.. Waah!
    Jacinda Adern and the Gweens will help me…

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  35. RichardX (325 comments) says:

    It is supply & demand. One factor in supply is available land. One factor in demand is available money. Both factors influence prices.

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  36. Kea (12,380 comments) says:

    hj, the quality of our housing stock is terrible, especially considering our climatic conditions.

    dime hallucinates that it is people like him, who have done ok out of the property market, that I am speaking out against. But he is wrong. It is good to see some ordinary folk benefiting, but most do not. The only winners have been a few bankers and financial institution, in spite of the institution themselves going broke and needing bailing out.

    Ultimately there will be no winners. A situation not helped by people blinded by short term self interest.

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  37. Kea (12,380 comments) says:

    It is supply & demand. One factor in supply is available land. One factor in demand is available money.

    No.

    There are plenty of houses for sale. It is the money that decides the price and banks decide how much money there is.

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  38. tedbear (135 comments) says:

    You don’t want to live anywhere else Longknives, tough shit.

    I didn’t want my career stuffed up either but it happened and I moved on.

    I’m now retired and live near the bottom of the North Island and I’m bloody sure I don’t want any more of my taxes wasted on a city that’s overfull.

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  39. Kea (12,380 comments) says:

    tedbear, billions more of the nations wealth will continue to be poured into doomed to fail attempts to make Auckland a livable city. The one and only reason is to buy votes.

    Auckland is a net drain on the economy and produces fuck all. Having your head office there does not count, as head office is a drain on the organisation not a producer.

    Most of the nations wealth comes from primary produce. Not a feature of Auckland.

    But those votes won’t buy themselves so you have to pay a tax on your fuel down South to help Auckland.

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  40. Colville (2,261 comments) says:

    Kea, there arent “plenty” of houses for sale. Average time on the market is half what it was 4 years ago so there are a lot more buyers per house availible than there were.
    Also, each house on average holds around 0.3 of a person more than 6 years ago. Families are more compressed.

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  41. Kea (12,380 comments) says:

    Kea, there arent “plenty” of houses for sale.

    Colville, I just did a quick check online. You are lying.

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  42. Colville (2,261 comments) says:

    I know what I am going to say next will be hated by most here….

    I believe if the Govt REALLY means to make houses cheaper it needs to get on the front foot and hit at the root causes.

    Population and jobs are the root cause, that is why people live where they do generally. (retirement is another reason)

    If Govt entered the market and provided FREE industrial land with rail infrastructure well away from Auckland for companies to employ people it woudl cause people to live elsewhere, a massive chunk of Auckland has no need to be there and could be elsewhere cheaper. Hawkes Bay can fit heaps of more people but there are no jobs…great port for exports/imports and a great lifestyle. Palmy should house a distribution center for every company in NZ and the jobs that go with it, Hamilton, Tauranga all are good places.

    So, Govt enters market and buys up 100,000 Ha of land around 5 cities and controls market for next 20 years.

    I am only surprised Labour hasnt thought of it first.

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  43. Tom Jackson (2,553 comments) says:

    To paraphrase Cactus Kate, Who the hell is buying all these “unaffordable” houses.

    Boomers, who then rent them to young people.

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  44. Colville (2,261 comments) says:

    Kea, prove me wrong then.

    Average time on market at the mo is less than a month, it was up over 50 days, also prices are climbing fast due to constrained supply and money is a lot harder to get now than 6 months ago.

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  45. Kea (12,380 comments) says:

    Colville, yes but the houses are there. I will accept your figures.

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  46. MH (711 comments) says:

    No,it’s bloody real estate women who dictate the demand based on PRC instructions.

    Managing director of the firm Barfoot and Thompson,Peter Thompson said the top three sales people – all women – had made sales with a value of more than NZ$200 million combined in the past March financial year.
    The three: Nadja Court, Yvonne Wang and Jane Wang finished top out of more than 1400 agents across Auckland and Northland.
    “Together the trio have sold more than 300 homes and at average price of NZ$721,000,” Thompson said.
    “Over the last decade, the number of women agents featuring in Barfoot & Thompson’s list of Top 25 salespeople has steadily increased. This year and last the number of female salespeople has outnumbered males (15 out of the 2013 Top 25 were female).”
    Mairangi Bay-based agent Nadja Court has now been the firms No 1 salesperson for the past two years.
    New female agent Kelly Zhang of Mt Albert was awarded the firm’s coveted Rookie of the Year title as well as placing 23rd in the Top 25.
    “During her first financial year in real estate the talented marketer sold more than 70 properties and even set the record in her branch for selling 19 homes in just one month,” Thompson said.
    He said he was pleased to see continuing diversity in the company’s Top 25 each year.
    “As the Auckland market continues to grow and diversify, we are seeing the same in our salespeople. No two of our 1400-strong team are the same – all bring with them different professional backgrounds, skills and approaches to getting the best results for their clients.”

    The Top 25 agents were:

    1. Nadja Court, Mairangi Bay
    2. Yvonne Wang, Mairangi Bay
    3. Jane Wang, Panmure
    4. George Fong, Epsom
    5. Raymond Li, Glenfield
    6. Daniel Huang, Meadowlands
    7. Aken Yuan, New Lynn
    8. Diana Buczkowski, Epsom
    9. Sunny Chae, Browns Bay
    10. Helen Lam, Greenlane
    11. Eddie Zhao, West Harbour
    12. Johnson Chen, City
    13. Yi Wei Lowndes, Royal Oak
    14. Lily Zhang, Browns Bay
    15. Elizabeth du Plessis, Pukekohe
    16. Karin Cooper, St Heliers
    17. Bob Qin, Northcote
    18. Francis Li, Epsom
    19. Stephen Chang, Greenlane
    20. Ann Lepper, Birkenhead
    21. Alex Wu, New Lynn
    22. Kelly Midwood, St Heliers
    23. Kelly Zhang, Mt Albert
    24. Victor Li, Northcote
    25. Cathy Li, Milford

    And that old chestnut about Asians flooding the market well that puts that to rest,once again. Of course they were sold to NZers,put your race cards on the table,so I can clearly see them.

    Why aren’t these women training to be school teachers ?

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  47. OTGO (544 comments) says:

    Once the baby boomers start to die off their houses will come onto the market and the market will adjust with a spike in supply and a leveling off of prices.

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  48. Colville (2,261 comments) says:

    OTGO, so we just wait 30 years and it will be sweet?
    A lot of those boomers will live to see 100 years.
    Bollocks.

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  49. Tom Jackson (2,553 comments) says:

    Once the baby boomers start to die off their houses will come onto the market and the market will adjust with a spike in supply and a leveling off of prices.

    That’s a long way away – about another 10-15 years before the average woman born in 1946 dies, and things like rental properties will likely be inherited. New Zealand is heading for a situation where many more people rent and a small rentier class owns a large amount of the housing stock. Now there’s not necessarily anything wrong with that, but most people would like to have the opportunity to own their own home, and the idea that young working people can’t even get on the housing ladder does not go over well.

    Personally, I can’t see the point in complaining about it. The cohort of over 50s is so large and so electorally active that there is no hope of any change benefiting those under 50 for at least 20 years, so New Zealand is pretty much a write off until then.

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  50. Tom Jackson (2,553 comments) says:

    Bollocks.

    Pretty much it. We live in a gerontocracy. Just ignore them.

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  51. OTGO (544 comments) says:

    OK if you don’t want to wait 30 years you could stop moaning and work and save hard to get yourself on the bottom rung of the property ladder and work your way up like I did and my parents did before me. I looked back into my family history and when my forebears arrived in NZ they had nothing yet within a generation they were landowners in Southland and passed on a legacy of hard work and thrift to all of their children and their children’s children etc.
    Or you could moan for the next 30 years.

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  52. Tom Jackson (2,553 comments) says:

    OK if you don’t want to wait 30 years you could stop moaning and work and save hard to get yourself on the bottom rung of the property ladder and work your way up like I did and my parents did before me.

    Sigh… that’s just what people can’t do any more, especially in places like Auckland.

    I only managed due to special circumstances (and no, I didn’t get a handout from anyone). Meanwhile, the NZ government basically gave my parents a house back in the early 1980s (they were offered their state house at such a ridiculous price with a guaranteed buyback at market rates that they were basically guaranteed a mortgage).

    We get it: the boomers got a free ride from the welfare state and then pulled the ladder up when it was their time to contribute. Everyone under 50 has known this for years, and it’s why Logan’s Run is still such a popular cult film. ;)

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  53. wreck1080 (3,881 comments) says:

    People in auckland would be happy if prices were like tauranga.

    Tauranga includes Mt maunganui/papamoa. where people cash up and retire to, and aucklander holiday houses thus pushing up prices but lowering incomes.

    I’d have to say, tauranga itself is a dog-awful ugly city in a beautiful location and saddled with 450 million in debt with little to show for it.

    Mt Maunganui on the other hand, is a great place to live :)

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  54. wikiriwhis business (3,883 comments) says:

    Bank rates and mortages are rising this year.

    soon only Chinese will be able to afford Housing

    As reported, they’ve run into our housing market with no hesitation

    We will be tenants in our own nation

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  55. wikiriwhis business (3,883 comments) says:

    ‘Once the baby boomers start to die off their houses will come onto the market and the market will adjust with a spike in supply and a leveling off of prices.’

    Unless there’s an agenda to keep Kiwi’s out of the housing market by rigged rates which is appearing very real

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  56. OTGO (544 comments) says:

    So Tom @ 2.54 pm – you have a secret desire to be a Sandman?

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  57. hj (6,915 comments) says:

    irst, one of the chief underpinnings of affordable housing in Houston is the ready availability of cheap, undeveloped land. This is made possible by…wait for it…massive government subsidy in the form of highway expansion. Because this subsidy is facilitating relatively low density residential development (i.e., 3 lots per acre), it is unlikely to produce a good return on public investment. As a result, it’s a model in which the federal government subsidizes an economically unsustainable lifestyle of low-density living. This is hardly a validation of the “less government equates to more affordable housing” statement. Rather, we could take that money and invest in infrastructure that supports higher-density housing and employment, and that would produce a better return on investment.
    ………
    comment on Houstons affordable housing. Planetizen

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  58. hj (6,915 comments) says:

    http://www.planetizen.com/node/66967?utm_source=newsletter&utm_medium=email&utm_campaign=01202014
    link to Joel Kotkin article on housing affordability.

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  59. hj (6,915 comments) says:

    I dont think it is right to blame baby boomers for high house prices as Tom Jackson does. The point is that it is elites who make the decisions. The Savings Working Gtoup blame sucessive governments citing high immigration and tax breaks for property investors.

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  60. wiseowl (869 comments) says:

    Kea is right.
    The bankers and cheap money have created housing bubbles worldwide.The UK is a prime example.

    Interest rates have been artificially low and nothing is based on production anymore.

    Looking at the list of agents also gives a clue to a distortion in the NZ market.

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  61. Kea (12,380 comments) says:

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  62. Kea (12,380 comments) says:

    Wakey Wakey sheeple…

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  63. igm (1,413 comments) says:

    Too many have sights set too high regarding areas, types of housing, and incidentals. Get your feet on the ground, buy within your means, be prepared to go without many luxuries, take on extra work, just like the baby boomers that many malign did.

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