Average home prices in New Zealand reaches 8.8 times average household income
businessdesk.co.nz
businessdesk.co.nz
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.
Can you explain this more?
See
https://www.ird.govt.nz/income-tax/income-tax-for-businesses...
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).
I wonder if local investors could focus on that, even if they have to import talent. Perhaps there are regulations preventing this?
But, of course I am saying this realizing startups are not a "quick buck" like real estate.
The problem is most NZ startups don’t have the hockey stick growth due to our isolated market. We have to spend a lot more on sales before network effects kick in. The Internet can only help soo much.
Canada and New Zealand are similar in that respect. There are a sizable number of people with "investment properties", but the majority of homeowners own a single home and are counting on the price to rise indefinitely to fund their retirement.
Economists and politicians regularly brag about how much 'wealth' the average Canadian has; in reality, being able to sell your house for 1.5MM isn't that much of a windfall when other houses are at least 1MM and rising rapidly, and renting is more expensive than having a mortgage.
This is starting to hit a lot of my parent's social circle. They are retiring, mostly from the edge of a big city.
About half plan to or have retired in a small town. In that case they are able to get something with the $1.5M they sold for, but they are driving prices up in those towns in a way locals can't afford.
The other half wants something else in the city. Some remaining in the suburbs, others move more into the city, others "in the sticks" and are all surprised that that's going to use up all of their $1.5M. They expect to buy something for $200k and have the rest for retirement lol.
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.
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)
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.
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.
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.
When my parents bought their first house in the 90s you were able to loan ~120% of your home value so you could finance a new kitchen or even a car.
Home value goes up 10%, from 1 million to 1.1 million, 20% downpayment goes up from $200k to $220k. If you’re saving under $1666 per mo, you’re actually further away than you were last year.
In Vancouver, the average price is $1.36 million and it went up 21% in a year. For detached, $2.12 million/25% yoy.
Waiting and saving money is no longer a feasible housing strategy, unless you can save at least a few thousand every month.
You "save" by investing that savings in stocks (and may be some mix of bonds too if person is more fiscally conservative).
I'm not saying your wrong or that it's not a bad idea, but should you have to take risks by investing your deposit just so you can have the chance to take a bigger risk in the housing market? It's mental that that's the case these days
yes. There cannot be ways to obtain risk free returns that out-performs inflation. Where would that return come from if it was risk free? It must come, at some aggregate level, via other people's productivity growth. But this means it's a free lunch, and more and more people would try to take advantage of it, thus lowering the expected return of such a deposit scheme (however it is funded).
> the chance to take a bigger risk in the housing market?
A house is not a bigger risk than the stock market tbh. It's why the lender for the mortgage is willing to give some 5x leverage (20% deposit) vs a margin loan in the stock market (which at most they're gonna lend you 50% LVR), and at a higher interest rate even!
It's the fact that real estate is such low risk that so many people, esp. the poorer/middle income people who cannot take the risk of stock market, want to buy real estate.
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.
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?)
For some inexplicable reason they decided to remove the LVR requirements for lending in response to covid.
This suddenly caused a huge surge in ability for people to buy houses that were previously not able to.
Another 20% growth and PM wouldn’t be able to afford her house on $470k a year salary
See these banks for examples:
- https://www.kiwibank.co.nz/personal-banking/home-loans/
- https://www.asb.co.nz/home-loans-mortgages
- https://www.westpac.co.nz/home-loans-mortgages/
Also, it appears that our central bank has an interest rate of 1.5%: https://www.cnbc.com/2022/04/13/new-zealand-central-bank-hik....
It's crazy. Great to feel you have more equity on the surface, but it's meaningless really as you have to sell to buy if your moving and then things like rates and stamp duty are higher than ever.
I think the best solution is cap how many properties people can own. Homes are good for people or investors, not both. While interest rates are the main driver, a country like Australia has little ability to far steer outside global rates. From that I think the best solution is to place a limit of ~3 residential properties per person, or something like than with a grace period to ease the new rules. Get the big investors out of the market. Make homes for people again. Action should have been 15 years ago before it was todays problem, but was still obviously heading this way. It's going to be hard to unwind now without creating serious pain somewhere.
If you limit it to 3 houses per person you'll get people buying houses for their three year olds (which already happens). It's an improvement, for sure, but it'll be rorted.
What we really need is 1960s Chinese Land Reforms
That's easy enough to rule against, much like they do with income shifting to children.
> What we really need is 1960s Chinese Land Reforms
Not really into violence. Also where has it landed them 60 years later? The best is sensible structural rules for the long term.
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.
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.
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
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.
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.
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
> 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.
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.
TIL the capital of my country is really out of the way :D
It would take me 30 years of saving to get 500k, that's like 70-80% of my working life. That's assuming you don't get sick or lose your job.
This metric annoy me because only a fraction of your income can go toward rent or mortgage . You would pay over 100k in interest fees alone on a long term mortgage.
What's most depressing to me is that the only time a party promised to slow down this madness they were destroyed in an election.
People voted for this. The majority voted for this.
Mortgages. This is why they exist.
> You would pay over 100k in interest fees alone on a long term mortgage.
You pay 100k of today's money in interest and fees over the course of 30 years. 100k in 1992 was worth far far more than 100k is worth today.
https://www.kurzy.cz/zpravy/630209-prijmy-a-zivotni-podminky... https://www.seznamzpravy.cz/clanek/za-rok-a-pul-pres-milion-...
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.
Well, we are at a point where significant % of the population will pass awat before they can pay off their mortgage
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?
https://www.investopedia.com/terms/k/kondratieff-wave.asp
https://www.bridgewater.com/big-debt-crises/principles-for-n...
I think for luxury goods like artwork boats etc what you say is correct, but what I think doesn’t work is property prices. There’s no reason for the majority of the world to be struggling with rent given all the advancements in the world. it is human generated scarcity that doesn’t make no sense except to existing capital owners taking advantage of the rest
This! What I think most people missing is that all the money and wealth in the world is just a substitute for future consumption. There is at least billion people in this world that expect that their investment (delayed consumption) will be recouped. Those are not only wealthy capital owners, but simple people that believes in their pension funds or state provided pensions. This is the system that we live in - the real culprits are not only those in castles on top of the hill but millions of old people counting on the young to fulfill social contract that they did not sign.
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.
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...
[1] http://eggcorns.lascribe.net/forum/viewtopic.php?id=7251
And if you build a house you're adding to the housing market (assuming it wasn't a teardown/rebuild) whereas if you buy it's just shuffling existing stock around.
? links to good job boards ?
I know several people (stem MSc / PhD)s who are on and off looking into migrating. They would come with around NZD 0.8-2.4M net capital from selling their current houses.
https://www.seek.co.nz/jobs-in-information-communication-tec...
We have Massey and plant and food research that often have more academic roles. You'll normally see a few pop up each year.
Hardly a reasonable trade off.
This was a place in South Staffordshire, on the chase line.
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.
The banks used 33% as a hard limit and recommended much less toward housing - but now that 33% has become “this is what you should spend”.
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.
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.
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.
* i know it's not exactly the same, e.g. you need a downpayment and you have to pay for maintaining the house but it's not like you wouldn't have had to pay rent the same 30+ years had you rented instead of bought.
I can empathise. 10 years ago, I had friends in their early 20s "buying a house" (signing up to a debt of $1.2m+ dollars over 30-35 years for a $700k house), and could not see the value propositon for the emotional turmoil.
Looking back years later, they don't seem so stressed by it, but it's definitely affected their ability to make decisions around their job, relationships, social life, etc. But they've all made pretty strong profits (on paper, assuming they ever sell).
I bought a house for cash instead. The trade off of living further away is much better to me than feeling enslaved and not in control for decades.
Buy some land if you want - a small package in a small town 30 minutes past all the developments. You'll probably find once you've paid off the mortage in 5-10ish years, the area has built up and you're in a non rural position with a good block.
1.65 % for a 5 year fixed mortgage at sparda bank. While inflation is at 7.4% in germany...
Each year you don't pay any interest, you are paid 5.75% to have debt. They(mainly retirees) are giving you roughly $34,500 each year to buy a house. Mind you, they(mainly retirees) want to sell their homes. Hence the beneficial arrangement for you.
Even when inflation gets under control and they get back to ~2%. You'll still be earning some small stipend.
If you don't buy a house, your rent is literally equity that you lost. That's coming out of your retirement fund.
Moreover, that $600,000 isn't going to be paid in 5 years. You'll amortize it for ~25 years. In 15 years the remaining mortgage will feel like it's nothing. Your salary will be $100,000 or more and the remaining mortgage will be nothing.
In high inflation, low interest rate environments. Buying a house is a no brainer with only 1 exception. Are you betting the housing market will crash? That you'll be able to buy homes for much cheaper and possibly cheaper rates? That's the only bet you're playing right now.
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.
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.
https://www.numbeo.com/property-investment/rankings_by_count...
Please stop spamming the thread with anecdata.
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.
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?
I agree at lower taxes the difference is more stark.
If you want to take a train and you've got time to kill, take Amtrak.
- Free university education, with a stipend payed to study (so no student loans, no need to save for the kids college fund). - Social security net so you have to save less for that kind of thing. - unemployment benefits, so less need to save for that - No co pay on medical expenses. - cheap and good childcare - good public schools, cheapish private schools
US Social Security is actually very generous with the max pension pay out ($3,300USD per month per person). Lots of American retire with nothing more than their SS pension. SSI is disability insurance if you can't work. You can also qualify for free Medicaid or Medicare if you're poor or can't work due to illness. Once you hit 65 you get very generous healthcare coverage.
Unemployment benefits are very generous. During the 2008 crash they were extended for 2 years at 80% of your normal up to a cap (like $4,000 per month in CA I believe). Even during normal times you can get 26 weeks. Welfare after that.
Medical maybe but in Europe, private insurance isn't uncommon along with premium payments and co-pays. So I wouldn't act like Europe is entirely "free" unless it's like the UK and you stick entirely with the public system. In the US your employer pays much of it, you can get HSA (tax free) money to help with out of pocket. It's a massive paperwork hassle and annoy bureaucracy I'll agree.
Childcare if it's subsidized sure.
The US has plenty of great public schools. Don't let the movies fool you. I lived in a small town in Michigan and the public schools were outstanding and entirely free.
I always chuckle when people say "the US has no safety net" when 50% of our taxes go to "safety net" programs.
30% at 50k
40% at 100k
49.5% at 250k
52% at 500k
53.5% at 1000k
Capital gains is 30%-34%.
The average in Belgium is around 45k, in Germany 47k, France is ~40k. So aside from Belgium if by close to 60% you actually mean close to 50% then yeah you’re right…
And it's not just $30k. That same role is likely paid less in the EU. So it's more like $50-70k extra.
Though still with horseface management...
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.