A house with no land to put it on is not an affordable first home

Prime Minister John Key today told Auckland families, locked out of the housing market, to stop complaining and go look at Trade Me, saying there are more than 2000 sub-$400,000 homes they can buy.

Even if that was the truth, Key’s glib response that there are plenty of cheap homes (and therefore no housing crisis) would be insulting to the families who are locked out of home ownership by LVR’s, low wages, and skycrocketing house prices.

These people know only too well how many affordable homes there are on Trademe.

Which is why Key made the insult even worse, by getting the number of affordable homes available completely wrong.

Most of the ‘2000’ affordable homes Key reckons are available in Auckland are either homes for removal sitting in a demo yard, shoe box apartments, homes on leashold land which incur huge annual rents or with asking prices well above the minimum set in the Trademe search field.

When you remove those homes from the search there were only 11 homes with 3 bedrooms or more available for less than $300,000 under a Trademe search in Auckland City and 36 available for less than $400,000*.

A search under North Shore City revealed just six 3brm+ homes under $400k, and in Manukau, it was better with 224 homes. Though the actual number available to buy for less than $400,000 is likely to be much fewer because, when we looked further into listings with asking prices stated we discovered that in most cases sellers underestimated the minimum price in the Trademe search field.

John Key may think that a home in a demo yard is a good bet for a first home buyer, but families wanting to get their foot in the door of the housing market need bedrooms for their kids, land on which to put a house and preferably a safe place for their children to play in.

John Key has shown how staggeringly out of touch he is by refusing to even concede there is a home affordability problem in New Zealand.

The fact is, John Key’s ‘go look at Trademe’ message was designed as a distraction to the OECD’s findings this week that New Zealand homes are the least affordable in the developed world, and Key’s continued refusal to introduce a capital gains tax because that will annoy his rich mates.

*Our Search included 3brm + homes on Trademe excluding sections and apartments. Homes with headline asking prices above $400k were manually excluded along with homes on leasehold land and homes for removal or relocation.

18 thoughts on “A house with no land to put it on is not an affordable first home

  1. As it’s easy to throw rocks, but not produce policy, how will you reduce home costs. Points off for cgt. I think it will increase govt revenue, but not reduce prices.

    Like or Dislike: Thumb up 2 Thumb down 2 (0)

  2. Key hasn’t tried to live on a budget since he worked in the FOREX market.

    http://www.rollingstone.com/politics/blogs/taibblog/everything-is-rigged-vol-9-713-this-time-its-currencies-20130613

    http://www.reuters.com/article/2014/04/01/us-forex-lawsuit-idUSBREA301WC20140401

    http://www.theguardian.com/business/2014/mar/11/forex-rigging-claims-prove-bigger-libor-mark-carney-bank-of-england

    $400000 is not “affordable” on a normal paycheck either.

    Understanding the difference between Key and other PMs we have had one would want to examine (among other things) the holiday home he maintains… in another country. The question of who he is actually working for ALSO has to be asked.

    Worse of course, is the condition of most of the houses in the “cheap” price ranges. I have a house now, and it will cost another $30k to make it habitable. Yet it was more expensive than the house I sold in LA when I moved here, AND more expensive than the one in the Waikato, and of the 3 the only one that had adequate insulation, heating, cooling and windows was the one in LA.

    You can’t pay more, and get less for it, anywhere else in the world.

    However, blaming Key OR National for the housing problem, despite all their “flaws” is unfair. This problem has been being “built” since the sixties and before. We have had decades of utter rubbish being built on valuable land.

    I’ve never seen a house in the US without secondary glazing (way cheaper to build this at the start than to do double glazing) and insulation. Even those built in the fifties. I’ve never seen a house in NZ with it. Beer-can windows are the RULE here and I seem to be making a career out of fixing them.

    It is fine to have a plan for low interest loans to do a solar installation, and that’ll work best North of the Bombay hills… but if we really wanted to address the issues with houses in NZ we’d have a multi-pronged approach… going after it with torches and pitchforks seems about right :-) – some suggestions.

    No foreign ownership
    Low interest loans for double glazing
    Low interest loans for insulation
    Land Tax
    State loans for new builds
    Revisiting the LTC (successor to LAQC)
    CGT explicitly for homes
    Examination of deductibility rules for Landlords vs Homeowners
    Investment in shifting the cultural center southward.

    .
    .
    .

    I could probably think of a half dozen more if I put my mind to it.

    Like or Dislike: Thumb up 8 Thumb down 0 (+8)

  3. Sounds like Mr Key is totally ‘out-of-touch’ with the ‘centre voters’ he claims that he ALSO represents.. sounds like ‘planet-key’ is in reality a ‘millionaires fantasy-land’ where the residents either don’t know or remember what its like to struggle from week to week. I’m certain he doesn’t really care either.. as long as ‘I’m Alright Jack !’
    Roll on 20/9 & fingers crossed, a Govt. that does care about ALL kiwis !

    kia ora

    Like or Dislike: Thumb up 3 Thumb down 0 (+3)

  4. Tell me again how foreign buyers aren’t breaking the housing market?

    http://www.newyorker.com/talk/financial/2014/05/26/140526ta_talk_surowiecki

    Auckland isn’t the only place it is happening. We put an international airport nearer Invercargil or Dunedin or Christchurch and “raise the parking fees” in Auckland and maybe we can fix it without making it flat illegal for foreigners to buy our country. I think however, that the right answer is to simply do the latter.

    Like or Dislike: Thumb up 4 Thumb down 0 (+4)

  5. Why does a first home have to be a three bedroom house? I found 1500 homes under $400,000 in Auckland with 2 or more bedrooms. Yes, many were town houses or apartments, but with the difficulty of getting land past the people who protest any land use other than “as is” apartments are the way to go. Check out apartment density in Toronto – a successful city.

    Like or Dislike: Thumb up 5 Thumb down 1 (+4)

  6. Because by the time you save up the down payment you’ve got three kids and your parents have had to move in with you. :-)

    Two kids and a dog make it hard enough if the kids are different genders. Dave… the market is distorted. Just accept that.

    Like or Dislike: Thumb up 3 Thumb down 1 (+2)

  7. Not true BJ
    Four of our seven children are home co-owners (with their banks) and all started out saving as soon as they were earning. They range in age from 33 to 44, and all bought their first home in their mid twenties. Yes, they had to forego some thingsb that their peers thought of as ‘basic necessities’, like new everything, annual overseas vacations and boozing their weekends away, but they did that and are now benefitting from the decisions they made.

    Two have children of their own, two don’t. Those that do have three bedroom houses, and no live in parents, the other two have two bedroom town houses that they are totally content with. None of them are in the top 1% of earners or wealthy, in fact I would say they are pretty average for their age and generation.

    By saving regularly with the same bank for several years they were able to get low deposit mortgages without penalties, they don’t seem to regret what they have done, they seem quite content with their lot. Two of the other three are single, with healthy bank accounts, and want to stay that way. The last rents a b ig house for far less than they would pay on a mortgage, and are happy to do that, and save, until their children are ready for college, at which time they will buy based on the school they prefer at the time.

    In all, this generation is no different to any that has gone before it. If they are prudent and have a financial plan they can achieve good goals, if they want assets without equity, they must go without. (When I bought my first house the deposit I needed for a $5,000 home was two years gross wages, about the same as it is today on average in NZ, and the most you could borrow was three times the income of the highest earner IRD twice the total family income. As a result of greedy bankers, these prudent ratios were lost in a nine year period when house prices managed to double, despite double digit mortgage rates.)

    Like or Dislike: Thumb up 4 Thumb down 2 (+2)

  8. In other words, they bought BEFORE the prices turned bubblicious ? ;-)

    Was intended as much as humour as a serious response, but the fact is that most people looking for a first home aren’t couples with one kid. This is not a matter of virtuous saving being the answer Dave, there are problems up and down the line and I did touch on a fair few of them upthread.

    If I am living and working in Auckland, making anything less than $100k and need a decent school for my kids to attend I’ll be living paycheck to paycheck. Both parents working isn’t going to cut it when one of them gets pregnant. The prices are too fucking high and the reasons are so numerous that one is hard pressed to enumerate ‘em. The market is distorted to beat hell, and both National AND Labour are ultimately to blame for that situation, and both have partial answers, which if applied together would STILL be a partial answer, there are that many problems.

    I blame Key for a lot of things, but I don’t blame him alone for the housing mess… it took us more than 2 decades to wind it up, and there’s 40 years or more worth of crap houses built on good land now. At least 20 years to wind it back.

    There was a study published in the Dumb Post day or two ago saying that keeping the kids bedrooms warm prevented asthma, wheezing and colds… like its a DISCOVERY for New Zealanders that this is how houses should be insulated and heated.

    It makes me wonder if, now that I’m a citizen, they have a special unit to lobotomize me so I can fit in. :-)

    ciao
    BJ

    Like or Dislike: Thumb up 5 Thumb down 1 (+4)

  9. Sadly, Te last one to buy (7 years ago) paid twice what his sister did eight years earlier for an identical house, so I think the got caught in the bubble.

    But in essence you’re right.

    The average NZ house should cost three times the average wage, and be appropriate for the environment it exists in. (In most of Canada that includes tripple glazing to combat the -30 degree winters. In California double is probably enough to keep out the traffic noise (lol).

    PS the lobotomy is done under general anaesthetic during the drinks after the citizenship ceremony. Doesn’t stop the USA Infernal Revenue demanding taxes though.

    Like or Dislike: Thumb up 2 Thumb down 0 (+2)

  10. Oh
    Forgot to mention, Aunty Helen owed three overseas properties when she was PM, probably got a few more in the USA now.

    Like or Dislike: Thumb up 2 Thumb down 3 (-1)

  11. Three? I have never heard of any more than the one her husband inherited through his family in GB. The others are all domestic AFAIK. Nor have I any reason to suspect that she has 40 million dollars that she didn’t actually earn.

    You put your faith in your “smiling assassin”. Aunty Helen was better for the country. Russell Norman would be better for the country. Cunliffe would be better for the country. Shearer would be better for the country. Even Bill English would be better for the country (as I would at least be able to imagine that he isn’t be working for someone else).

    Unfortunately I can’t even trust that Key even believes that he is working for the best interests of New Zealand.

    He’s clever, but… his history and presentation does not make “trust” my first reaction. Not my second or third either, it isn’t even in the top 10. New Yorkers don’t see people the way New Zealanders and Brits appear to, and Key triggers all the warnings.

    Like or Dislike: Thumb up 4 Thumb down 2 (+2)

  12. @dave Also need to take student loan repayment into account – a young couple with two student loans can’t afford to save as much as their parents’ generation, because they’ll be paying thousands and thousands of dollars a year in student loan repayments.

    Like or Dislike: Thumb up 3 Thumb down 1 (+2)

  13. Bit of a misconception there Suzanne. When we were buying our first house, the higher tax rates, meant we had less proportion of our income to pay for a mortgage than someone paying back a student loan.

    Most boomers did not have “free” tertiary education, because most of us did not go to University. We paid in taxes for the rich kids that did, though..

    60% top rate and the lower rates in proportion.

    Not to mention 28% interest rates and wages which always lagged behind galloping inflation.

    Yes, if you sold your house and did not buy another you would be better off, same as now.

    The problem is the offspring of the well off, who want free tertiary education, but refuse to vote for the higher progressive taxes which paid for it.

    My sympathy is entirely with the kids who would have got a decently paid, Unionised, job in my time, with an apprenticeship and training paid for by the employer, not by them! Now the best, most of them, can hope for is a precarious, “flexible”, job at minimum wage with an employer who takes advantage of every gap in employment law. They really are doing it tough.
    Which is why we have to swing the balance of labour laws and have a liveable minimum wage.

    I have none at all for those in well paid professional jobs with degrees who bleat about the cost of a student loan, like my accountant who doubles their fees every two years. Before “84” they would have had to pay much more in tax, than the student loan and tax combined.
    Monthly payments on a 70k mortgage, plus taxes, when we bought our first, small house on a cross lease, took all of one income. And neither of us had a “free” tertiary education.

    When I did go to University it was on a student loan.
    Pre, student loan, I would not have been able to do it. Like many of you.
    Student loans have enabled many more students to go to University than previously.
    Unfortunately the commercialisation of eduction means that a lot of the course offered are all but useless. Like training builders, by sitting in chairs in a tech, so they can get “bums in seats” for more funding..

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  14. BJ. In the Christchurch earthquake it was what you consider “basket-weave” houses which are still standing. The solid buildings fell down.

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  15. Not discussing the nature of sticks vs steel&concrete vs monolithic reinforced shells vs bricks & mortar. If you can find it I recall I posted the opinion that in Christchurch it should be illegal to carry a brick up a ladder.

    I come here from LA. I know how to deal with earthquakes. What to build. What NOT to build. I looked at the houses with peeled away brick facades and dropped chimneys and wondered to myself if they had any clue that they were in an earthquake zone. Surely not.

    A house that is insulated however, is not necessarily solid by that process.

    The worst of it here are the windows. The obscenely impossible to fix windows. The 20k per house to fix windows. The can’t fit a flyscreen to windows. It isn’t possible to imagine how anything as dumb as NZ windows got installed in so many houses here.

    The sparsely scattered insulation – R 0.7 in your attic… if you’re lucky. I haven’t a real understanding of how people could live here get away with building such utter crap. Then too, it appears from the article in the Dom Post, that the fact that kids (and adults) don’t get as sick or as often sick in bedrooms (and other rooms) that are actually heated to some reasonable degree, is only JUST now being discovered by New Zealanders? That’s sort of, well, nuts. It’d explain a lot I suppose, but it’s still hard to swallow.

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  16. Then too, it appears from the article in the Dom Post, that the fact that kids (and adults) don’t get as sick or as often sick in bedrooms (and other rooms) that are actually heated to some reasonable degree, is only JUST now being discovered by New Zealanders? That’s sort of, well, nuts.

    What is weirder is that this “discovery” is repeated every couple of years.

    But, of course, nothing of any importance is ever done to address this issue. Classic non-joined-up thinking.

    Like or Dislike: Thumb up 2 Thumb down 0 (+2)

  17. BJ – we knew we were in an earthquake zone. After all, nowhere in New Zealand is that far from a known fault line. We knew about the Alpine Fault and other fault lines running along the alps 50+km away. What we didn’t know about was the faults running pretty much under Christchurch. And until they started moving, we didn’t have the signals from the geological instruments to work out what was under the soil.

    Part of the issue is that Christchurch is built on an aluvial fan. The fault lines are buried under a layer of deep shingle and sand, so there are no visible surface features to show us where they are – until now.

    Of course having builders failing to comply with building standards doesn’t help.

    Trevor.

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  18. Pretty much what I thought Trevor… the dots were not connected. There aren’t any really safe areas in NZ, but the nature of the risk in ChCh was seriously under-appreciated. There is a picture taken from the hills I saw once showing the quake as it happened. Looked like the whole city was just “dropped” a couple of meters.

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