Are young people that earn decent salaries too privileged to be thrown a bone by the Government? Jenée Tibshraeny thinks not

By Jenée Tibshraeny

I would like to thank Housing Minister Phil Twyford for validating my generation’s “Ponsonby problems” as real problems.

By setting the income caps for KiwiBuild eligibility at $120,000 for a single person and $180,000 for a couple, he is recognising the difficulties otherwise privileged young people face getting into their first homes.

How dare we avocado-eating Auckland “yo pros,” who want everything now, make even the slightest whimper in the face of increasing homelessness and poverty?

True. We are fortunate in the scheme of things. We have good jobs, can afford to pay rent and the odd big expense that comes our way, and have a decent standard of living.

But our “privileged people’s problems” are legitimate and essentially highlight just how tough things are for the less privileged.

The most vulnerable should be the Government’s main priority. Now that we have a new government, I feel like it is.

But in addition, it’s vital the Government looks out for a generation ridden with student debt and locked out of the housing market.  

A business person recently told me my generation hadn’t done anything ground-breaking for society. Ouch. But are we really going to take financial risks to pursue our big ideas at age 30 when we’re still flatting and paying off our student loans?

The finances of the fortunate 

According to Statistics NZ’s latest figures, the median student loan size of someone who graduates with a bachelor’s degree or graduate diploma/certificate is $31,310. The median time it would take them to repay this loan is 9.4 years.

The median loan size for someone who graduates with a post-graduate qualification (honours, masters, doctorate) is $35,310. The median repayment time is 7.9 years.

Five years after study, the median earnings of a bachelor’s degree holder is 1.39 times that of New Zealand’s median income earner, while the earnings of a master’s degree holder is 1.60 times more.

Accordingly, the median bachelor’s degree holder earns $69,317 a year (gross) five years into their career, while the median master’s degree holder earns $79,789.

Let’s dig into the finances of the person with a master’s degree.

Gross salary per annum: $79,789

Less tax: -$17,250
Less student loan repayments: -$7,241
Less KiwiSaver contributions at 3%: -$2,394

Less rent, power, internet, etc ($280/wk): -$14,560
Less food ($100/wk): -$5,200
Less transport ($40/wk): -$2,080

= $31,064 per year, $597 per week

Less other expenses/spending money, the master's degree holder might save about $18,000 a year - give or take.

Remember, this is five years into their career - they would’ve saved less earlier on.

With a KiwiBuild home costing $600,000, even this “privileged” person would have to spend several years solidly saving, and be willing to withdraw all their KiwiSaver to afford a deposit.

Importantly, they would have to be able to convince a bank they could service a mortgage.

If they made a 20% deposit, and took out a 30 year mortgage at an interest rate of 4.5% pa, their weekly repayments would be $631 (according to interest.co.nz’s mortgage calculator). This would be teetering on unaffordable.

Combining a second income would be a game-changer.

But ultimately, it would take a master’s degree, having a smooth path from school to university to employment, finding a well-paid partner, not forking out for a wedding, baby, travel, support for a struggling family member, etc, to afford a lower quartile home in Auckland by around 30.

There are a lot of ducks that need lining up.

Bigger trends support case study

House price growth really has dwarfed wage growth to the point even the most privileged young people - supposedly New Zealand’s future movers and shakers - are struggling to put down roots.  

Sure, many value other things and are choosing not to. Others are also settling in cheaper parts of the country.

But it’s significant that only a quarter of adults under 40 own their own home, compared to half in 1991.

Along with households that earn less than $23,900 a year, those that earn between $97,600 and $117,699 a year, experienced the biggest drops in home ownership between 2007 and 2017.

Finding ideal solutions in an un-ideal world

So, are people that earn decent salaries too privileged to be thrown a bone by the Government - simply by being given a chance to put their name in a ballot to buy a modest home for $600,000?

I don’t think so, provided the Government sticks to its commitments and also invests more in state houses, Working for Families and the Families Package for example.

The issue is of course that above average income earners - particularly those who are single - will still struggle to service a mortgage for a $600,000 house.

While 92% of first home buyers will meet KiwiBuild’s eligibility criteria, a smaller portion will meet banks’ lending criteria.

This is not a failure of the KiwiBuild scheme, but one of the housing market and of the previous Government that let it get to where it is.  

Until the building of lower cost homes ramps right up and supply of KiwiBuild homes meets demand, we will hear stories of young teacher couples on combined incomes of $120,000 missing out on KiwiBuild homes to engineer couples on $180,000.

This is unfair, but these situations should become less prevalent over time. Once building is well underway, it’s essential the KiwiBuild eligibility criteria is broad enough to prevent the Government being stuck with an oversupply of low-cost homes.

KiwiBuild eligibility one piece of a bigger picture

Yes - I am assuming the Government’s ambitious goal of building 100,000 homes over 10 years will actually be achieved.

This is crucial in ensuring house price growth peters right off, and that house price to income ratio starts looking healthier.

It’s also crucial in ensuring KiwiBuild houses remain affordable, and the market isn’t such that buyers can flog them off after living in them for the minimum period of three years, only to pocket hefty capital gains.

Given the Government isn’t doing anything to restrict capital gains earned on the sale of KiwiBuild homes, or requiring KiwiBuild home owners to live in their homes for say five years, it’s showing it’s pretty confident it’ll be able to fix the housing market.

While upping supply, restricting foreign ownership, extending the bright-line test, etc are key, so are tweaking the broader tax incentives that make property investment more attractive than other types of investments.

Hopefully public sentiment shifts so that the Tax Working Group can present real fixes that may in the past have been politically unpalatable.

Coming back to the KiwiBuild eligibility criteria - the success of it will hinge on the success of efforts to fix housing market fundamentals and ensure the needs of our most vulnerable are met.

It's from this base that a boost to the "privileged" young will be fair and effective.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment or click on the "Register" link below a comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

153 Comments

The flip side of all of that is that 'older' generations have now become so dependent on selling the large family home or the renter(s) for their retirement funds that the choice is between having a generation of young poor, or old poor. Don't we all know even retirees, who've cashed in their business of a lifetime to 'invest' the proceeds in....yep...(more) rental properties? Why wouldn't they, as property always goes up in their experience.
The answer appears to be, more State Housing. Bring back the Ministry of Works and set about building 1,000 houses at a time - all the same, and house those who will now never have a home. But that's not feasible is it? So it will be one generation or the other that now gets to be poor...take your pick.

its way past that. The boomers have lived way past a typical expiry date ... Every year they hang on is one more of resources that DIDnT and will NEVER get passed on to future generations...

It jobs courtesy of leverageable resources that you must inherit. And when the only resource left is rental properties (cough) then you are in a Ponzi.

When the debt ponzi snaps, the only "viable"job will be hunting and collecting.

Of course , most are under the impression they are passing on wealth....

Of course the are passing on Wealth, no one will take the money or the B&Ts with him to his grave.

Everyone is looking after himself and his family ... and that is an undeniable FACT.

There is no law in the Capitalist system obliging everyone to be equal...so get over it

At the risk of repeating myself ... Jobs! Jobs! Jobs.... Thats what you need to inherit.

Money is just DEBT.
A generation of banker speak has tricked everyone into thinking we live off money (debt) ...
Your wealth is only ever a claim over the FUTUREs ability to generate MORE out of the available resources.... you know the ones .. the ones that seem to be showing disturbing signs of pressure by human activity ...

"Money is just DEBT" this belief is the biggest hurdle to your financial advancement

Yvii ... youve illustrated my point beautifully.
A whole generation of bank speak has indeed dumbed us down ...

The wealth is passing on to the likes of Ryman's and Bupa

So your point is; if we fix the housing market we bankrupt old people?

I don't think the situation is that simple.

My point is, that someone(s) ( as individuals, regardless of age) is going to get hurt by recalibrating an unsustainable asset.
It should never have been allowed to get to this stage. By 2007 the problem was obvious. John Key told us, rightly, that we had an extended market back then, and did sod all about it. That was our last chance at a 'fair' rebalancing. But here we are. Jenée's article is one view, and my post is another. There are dozens of others in between, but by and large, New Zealanders are going to lose out of this. It's just a matter of ( old or young?)...who.

You could have just said "Yes"

Silly scaremongering. The elderly aren't going to be out on the street if house prices drop.

Very few retirees these days will have mortgages on their homes, so what the house is worth on paper is irrelevant.

The only "fear" is that the Scrooge-like retired take a look at their property empires one day and see that they're worth less than they were the year before.

Australian "research showed that nearly half of older working Australians expect to retire with debt, with one in five believing they will still have a mortgage when they finish work".

Most are leveraging up to help their kids buy houses, or to pay for their elderly parents retirement homes.

up
13

If only New Zealand didnt grant permanent residency to 28,000 immigrants a year, who immediately qualify to enter the Kiwibuild ballot!

But we need them to build the houses in the first place right? That's what Taxida said, despite saying that we would train locals during the champagne.

lol

up
10

No, they would come in under the non-permanent residence visa scheme. But I hope everyone appreciates the irony of bringing in more foreign immigrants to build homes for foreign immigrants.

up
15

Irony indeed .....

And thats why I voted for Winston ( the joker ) , he told me he would "hit the pause button " on immigration .

Heres a message to Winston "the pause button on your TV remote is the wrong one you clown !"

I hear you Boatman, I'm under whelmed with the progress we are seeing to date. It feels like we are starting to move in the right direction but the cols have been so slow and so all over the place we can't be sure we will stay on this course.

up
11

Yup I totally agree with you. We need to sort out immigration as well or kiwibuild will do nothing in the grand scheme of things.

yeah, immigration is fine but it's being abused by the people who shouldn't be able to qualify for permanent residency, and it's very late in the game to do anything about it.

Lots of whinging about the coalition and immigration but little comment about the cohorts in our business community that whinge loudly for evermore cheap labour. And lets not forget the desperate cries of the property spruikers.

I'm not sure your teacher/engineer example is unfair. What would be unfair is preventing someone from buying the house that they want because they chose to get a well paying degree..

You seem oddly keen on giving these s&%t boxes to the wealthy.

What's your angle Jimbo?

I don't think they will all be s&%t boxes - some will be well located modern townhouses. If they are s&%t boxes then the wealthy wont want them so why bother.
I don't have any personal reason if that's what you are getting at - I own a house and we earn less than those thresholds anyway.
I just really don't like the fact people could miss out on hundreds of thousands of dollars of subsidy just because they tried a bit too hard in life. In saying that I think the thresholds are high enough that this is unlikely to happen too much.

Fair enough, like you I have a house so not directly affected by the criteria. And I agree we should be very careful about suppressing the efforts of young kiwis.

I'm pretty sure a state house in Meadowbank was bought by the long term tenant recently. I doubt he paid market value - if he did you have to wonder how he was able to finance a million or whatever it was worth. So basically this guy got a massive subsidy just because he had been lucky enough to rent a discounted house from the state for years.

up
12

Useful comments and analysis for those of us in a different generation. The issue is that Auckland in particular has been caught in an enormous ponzi scheme that has damaged the financial position of an entire generation. It has rewarded the undeserving and penalised the struggling. I think the strength of KiwiBuild will be if it changes the fundamentals of the property market. My perception is that the market will change because of KiwiBuild. That Auckland house prices will reduce and the offerings of developers change. I suspect that there will be few people 'missing out' on KiwiBuild as the product is not significantly out of line with current market prices for the product offered.

I like the way this article is presented, such that I can see numbers and start to picture scenarios that actually show what the ideal NZ life-path looks like. I think we all have such a concept in our head and its so easy for it to be inaccurate.

I would slightly adjust the scenario painted by the numbers above,
- The average single person aiming to purchase a lower-quartile house should certainly factor in their housemate, paying $200 a week (perhaps 45 weeks a year)
- In the nice situation, when house-purchase day arrives I think student loan repayments would be likely to stop? +$100 a week
On the other hand, maybe general house-ownership/maintenance costs are going to be $100 a week anyway. A $40 a week transport cost will probably become $80 a week if you also have to buy in a lower-quartile NZ suburb.. ouch.

Yes, buying a house and being the only occupant is probably not the normal scenario. In the absence of capital gains, it is questionable as to whether buying a house in that position is actually a good move. Being mobile with less long term commitments might be beneficial. Sharing someone else's house vs sharing your own house might also be easier. I was basically in that exact position 10 years ago (including income and expenses). I only bought a house once I wanted to 'settle down'. The main reason people think you should own a house is because it is a 'good investment'. Without the capital gains it is marginal for many people.

Most $180k earners can buy a good property now or in the near future. They don't have to wait another year to get drawn from a ballet competing with another 30000 + people on 1000 KB shoe box homes.

Unfortunately, every step these noobs take just proves that they is no plan and they are clueless as to what to do next .

To get a brand new well located property in Auckland you need at least a mil - even for a 'shoe box'. That is a lot of debt with uncertain times ahead - I personally would be a bit scared of that.

The point that gets me is even if they pay it off in a work life they will have no material financial independence as they will not have built up other assets to a level over and above.

Really? I can't find anything decent in Central Auckland (with a good school zone) for 1mil. Maybe I'm expecting too much...

$180k earners can buy a house now (subject to having a deposit). Bought one 18 months ago for $1.165m. We kept our old house too. Would have been able to borrow even more if it wasn't for already having a property etc.
Since when did people get a brand new house as their first one? The shoe box homes you refer to are not shoe boxes by world standards. The best thing you can do to help $180k earners get a house is reduce the deposit requirement. Let them buy sooner. Insure the loan to cover the potential loss. Basically extend welcome home loans. Better that than gifting equity by selling them a house if they are lucky to be selected below market value.

I think you miss understand what happened here.

During the election Labour said they would build 100k of affordable homes and sell them to FHB that were struggling to get into their own home due to house prices. Since then they got elected and have now found out that there was a good reason house prices were so high and that's because land cost a lot of money and building is expenses. So now they have to find someone to buy the 100k houses they promised or they will look like they were lying the whole time (when in fact they were just dumb).

So now they have a product that only the relatively well off can afford but they have to sell them or they will get lynched. Basically this is a sales champagne.

Limited Stoke only!
Get into win or you might miss out!

It wouldn't be pandering if it didn't include the voting classes.

up
12

The 'system" is skewed against the young, I can see this with my eldest 2 children , still at home in their early 20's both graduates with good jobs .

Student loans , easy store-credit , and horrific housing costs , expensive food , high nett taxes and zero rebates if they dont have children ( like working for families ) are the order of things .

One staffer in my office gets $300/ week in WFF making her a net zero taxpayer , while another staffer gets no rebates or wff .

Quite simply no young people can really do this property- ladder thing without parental help and that in itself assumes the parents can help, many cannot help

I have done everything to ensure student loan debt is kept to an absolute minimum , it is actually a long-term burden and not all its cut out to be .

I have insisted they pay rent , which goes into a savings account , and which they can have back as part of their deposit when they need it .

This was necessary because while my eldest son is like me , as tight as a tick , my daughter is the opposite and this arrangement is forced saving .

My offspring were raised in a time of relative affluence , and they are of a generation of cheap cars , cheap clothes , cheap flights to Aussie for the weekend, easy credit , and peer pressure to keep up............

I did not have these pressures growing up , we were all the same , that means and almost all poor.

Times have changed indeed

up
13

The girls need to get with the Labour/Greens programme! Leave school, have a baby or five (no need to name the fathers any more, them and their child support are now irrelevant), go on welfare, have the Govt fund your education while you defraud WINZ by having a live in boyfriend (note it appears to be compulsory that he not be related to any of your children), graduate and get a job while collecting even bigger taxpayer benefits on top of your salary, then apply for a Kiwibuild. That's how you win the game of life under this Government.

While there are a few people who do that, I doubt they are winning. I have children and know it would be a pretty stupid way to make money (going to work is much easier!)

The children are only necessary to get WINZ to subsidise your degree or vocational training with the Training Incentive Allowance, and to collect WFF once you graduate and have a job. It beats getting a student loan.

there has been a slice of our society that has been doing exactly that under any Gov for decades now .. so this knowhow is being passed from Nannas to grand daughters ...

Everytime a labour Gov comes in , it gives these guys a pay rise and more money to spend - No one dares to cut the incentives - maybe we should ask Metiria Turei for her contribution in promoting this career.

I had few tenants in the start of my business who mastered this profession and saw at least two generations administering the same teaching and training. I decided to never rent to these people again.

up
10

Ok, so we get that you have a problem with Maori and Pacific Islanders and you don’t want them in your flea pit rentals. Your call. We’ve heard your dog whistle comments before, we get it. So can we just the beneficiary bashing off the forum please, it’s not nice

up
11

No one mentioned race. It may shock you to learn this - but plenty of nz euros do the exact same thing.

It’s a dog whistle thing, eco bird has form....sad but true

up
11

While I often disagree with Eco bird. I do think he is hinting at a serious issue that is crippling this country. The generational dole family needs to stop!!!! I just wish as a society we would be more hard press on these parent/s that uses their kids as money trees. Maybe they need to wear a badge on them when ever they move around so the public can shame and humiliate them to stop this disgusting act.

That sounds familiar was it in the 1930s in a country called Germany.

Godwin's Law. Even here.

Thank god. I was about to ask what they want to do with the disabled & chronically ill beneficiary families who cannot find jobs, smoke them?

So because Hitler did X, X must be bad, so let's do the opposite of X and pay loads of dumb people to have kids.

Adolf also liked public infrastructure like highways and railways. I guess we should get rid of that too?

This guy is going to be shocked when he finds out NZ schools require their youth members to wear uniforms.

Policies that encourage the most unproductive in our societies to breed far more freely than its productive members must eventually crash. When they do crash, many productive members will also die in the ensuing chaos. There is an enormous risk that Europe with its currently uncontrolled MASS immigration from many of the most rapidly growing populations on our planet will lead the way to civil breakdown. We hear little of this in our mainstream media but fortunately there is a mass of information on YouTube. Of course, one must learn to find what is factual among much propaganda. I suspect that do-gooders are societies worst danger in these situations.

Please watch your tones and keep the conversation respectful. 

You can twist it anyway you like but if it looks like a duck, and sounds like a duck.

With about 30% (maybe more) jobs being taken over by technology I don't like your chances. Not everyone is able to upskill a lot and even if they could, all that would do is put pressure on wages further up the foodchain.

What's crippling this country is methamphetamine, I wonder where that comes from?

Fellow North Shore Auckland property owners, they had million dollar meth shipping deals in the supermarket carparks until the police cracked down on that a bit.

Free trade is killing our jobs. Think about the poor mongrel mob trying to compete with all this cheap light bulb powder.

You keep talking dog whistles but all I see are dogs chasing their tails

I decided to never rent to these people again.

As Bob says who are these people?

Didn’t you hear the dog whistle? It’s Maori, Pacific Islanders and beneficiaries. He’s tooted that whistle before

Can you really blame him? https://en.wikipedia.org/wiki/Crime_in_New_Zealand#Ethnicity

Insurance companies employ very smart mathematicians to compute risk factors for age and sex and other 'undisclosed' attributes. I don't see why a landlord shouldn't.

As a Maori yes. Just glad I don't know you guys, I would easily class that as xenophobia and racist. But I'm comfortable being me, and wouldn't care what you guys think.

No Maoris in the UK, Spain, Germany etc. What's the excuse for crime there.

https://en.m.wikipedia.org/wiki/Crime_in_the_United_Kingdom

I see it all the time on the Winz Advocacy Facebook page.

A Solo mother of 10 asked if Winz would pay for a heat pump to be put in the rental "coz my land lord is useless.. windows allways full ov water.. blankets are always damp an wet in the morning."

Someone else was complaining that their rent had done up from $420 to $450 but their benefit hadn't changed from $730 per week......What, like what someone getting paid $22 an hour for 40 hours a week of work gets???

Surely you feel some sympathy for the kids waking up with damp blankets? Personally I think WINS should sue the landlord on her behalf for providing a product not fit for purpose.

I suspect the windows and doors all open and towels are cheap + machine washable and reusable. It's a technique we often use in our house. I do feel sympathy for the kids though, nobody chooses to be born out of wedlock for financial gain.

You are saying the parents are having the kids as a nice little earner with WINZ, is that right?

Well, each kid you pop out now is worth an extra 3 packs of fags a week.

Yeah, it is a nice little earner. Have a fiddle around with a Working for Families calculator some time if you're bored. Click Here .

I put 8 kids in a calculator of random ages, a $10,000 part time job and $20,000 in benefits and it told me i was entitled to an additional $751 per week in family tax credits. This number moves up and down depending on the number of kids you have.

$30,000 + $751 per week is $70k per year.

WFF is tax credits. They reduce your tax payments. Not sure how much they will help you on a $10,000 salary

Here. Income of $0 - $821 per week with 6 kids gets you $569 family tax credit + $117 in work tax credit. Beneficiaries get FTC as well.

https://www.workingforfamilies.govt.nz/tax-credits/payment-table.html

Yeah, you might want to check that. I don’t think positive WFF balances are paid in cash

I’ve provided you with the information. It certainly correlates with the amount we were entitled to while my wife wasn’t working due to our baby (only 1!!!).

From the payment table link I provided you.

Family tax credit (FTC) is paid regardless of your source of income.
In-work tax credit (IWTC) is an additional payment for families who normally work a minimum number of hours each week for salary and wages.

Note, payment is via direct debit. They’re not paying in Doritos.

They are a credit.. if the credit is greater than your tax you get paid it in cash. If you have six kids, and earn less than $821/pw (42.7k/year)before tax, your total IWTC and FTC is $686 per week ($35k per year). I'm guessing at that income level tax is probably only $150 per week to start with, so you get all your tax back, plus $450 odd.

hell, if you earn $83k per year you get credits of just shy of $500 per week with 6 kids.. bringing you from being a tax payer to being a tax leech. (PAYE + Kiiwisaver @3% is only $422/week at that level)

We gotta stop paying morons for procreating.

Totally for it !! I would rather we tax payers pay more tax so the state can take these leecher's kids away into a well runned and funded programme to build them up into decent human beings for future society. The parents can whim and cry all they want as the kids are no longer theirs and they are not getting a dime from the tax payers.

Sieg bloody heil

I think Trump has been trying that idea, hasn't had very good publicity.

Long term non-removable contraception should be a mandatory requirement for people on benefits. No way should you be having more children when you cant even afford to support the one's you've already got. If you want more kids, get off the benefit. And we need to stop paying people for having children via WFF - it just encourages even more low income people to be a burden on the country.

Amen! I've said the exact same thing many times. One look around my extended family structure and you'd understand why.

WFF just encourages employers to pay lower wages, they are the burden. And while on the subject of welfare - accommodation top ups are the same for landlords, they are a burden as well.

Time to change that number, so the more you have the less you get..

That just punishes the poor kids. Need to stop the parents from breeding more and break the poverty cycle. Compulsory contraception is the answer.

Not necessarily.. Keep the status quo with existing children and in 9 months change it..

You are assuming that will change something.. I doubt very much these kids are planned as such. They just take no/inadequate steps to avoid kids and let nature take its course.

Child support and WFF for the third child onward should be conditional on a long term birth control method like an IUD.

Why third? Why not first or second?

You forget Labour's winter energy payment. $31.80 a week for a solo parent. Paid for 5 months a year. Adds up to about $700.

Bit of both, the house is probably a shitbox, but I doubt the mum is taking the easy steps to keep the house dry.
The rental we are in isn't the greatest, so on the colder mornings I open the windows, run the squeegee down them so the condensation drips outside then wipe off the window frame with a rag to get rid of the rest of the moisture. And open a window of two during the day to air the house out. It's not rocket science. And they probably use an unflued gas heater indoors too. (which is dumb on many levels)

Jimbo have you not noticed that every turd of a policy comes beautifully gift wrapped in the "think of the children" narrative?

I agree that our rentals should be better value for money. That's not a welfare issue as it affects everyone renting. However throwing the accommodation supplement around certainly doesn't help with rent inflation.

Just food for thought.

You mean like what Paula Bennett did?

If I'm reading this correctly - Pump out six kids $569 per week.

https://www.workingforfamilies.govt.nz/tax-credits/payment-table.html

But that's not all... if you choose six different fathers and succeed in getting custody you get six different child support payments!

I hope I got that right. It's quite confusing there are now so many gibs-me-dats.

Yeah $569 per week on top of their $334 per week (after tax) benefit, and accommodation supplement of between $120 and $305 per week depending on the area they live in.

So $1023 per week in the hand, someone on $70,000 a year gets paid $1057 per week in the hand without Kiwi saver.

Pretty sure child support doesn't get paid to the mother, as this is recovered by Winz to subsidize the benefit payments to the mother.

.

So they let 1 fella pay child support for his sprong, but make a private arrangement with fathers 2,3,4 and 5. None of those will be recovered by WINZ.

up
12

".... even the most privileged young people - supposedly New Zealand’s future movers and shakers - are struggling to put down roots." Nice point.

Also I think it's dangerous to our enduring social cohesion to have too larger percentage of the general population having "no stake" in the system. That's the old addage isn't it? People have to have a stake or they don't give a damn and there's political blood letting of some sort.

With respect, housing in New Zealand is not unaffordable!
It is very expensive in Auckland.
Why does this COL talk about housing being unaffordable when it clearly,is not in most parts of NZ.
In Chch you can still buy a 2 bedroom unit for 250k, admittedly it is not in the prestige areas but it is cheaper than renting.
I buy property that is cheaper to own rather than renting and this is one sure way of getting ahead and being financially secure.
You can buy a good family home for just over 400k and an executive new home for around 700k in a new subdivision.

up
11

Its not just Auckland that is expensive - Tauranga, Hamilton, Hawkes Bay, Wellington, Queenstown, etc.

In most of those places you would struggle to buy a good family home for under half a mil.

"Unaffordable" is a subjective term without a uniform benchmark. Better to say that the cost of housing relative to income is high compared to other OECD countries.

Nicely put. I don't think that situation will ever change. Our incomes to housing costs have been out of whack for as long as I can remember. Auckland is geographically tiny compared to some of the other bigger desirable cities in the OECD. When you add the complication of rubbish infrastructure to get from A to B, the cost of houses closer to city centre is astronomical. I don't see this changing ever and anything with 10kms of City will continue to go up. This pushes a lot of buyers to outer surburbs that also creates more competition for limited supply. Then throw in immigration to keep the economy ticking and growing, their is no respite. You need a lot of luck and/or balls to dive in to property and take a big debt. History has shown that Auckland has never ever had the kind of falls people are hoping for and in fact it keeps on going the other way. There is a lot of scaremongering that keeps people as renters forever. Now $180k earners need govt help, just does my head in. I did it the hard way, saved up with the wife in less than $50k annual each to buy our first house. it was relatively very expensive at the time.

“Our incomes to housing costs have been out of whack for as long as I can remember“.

Rubbish. Maybe your memory’s not so good. The Auckland house to income multiple long term average is about 5 times. At times it has been less than that. 5 years ago it was about 6 times, which is high historically and flirting with bubble territory but not crazy. Since 2013 the multiple has been varying degrees of crazy. There is nothing in the reasons you cite that support prices where they currently are, it’s all about the crazy expansion of bank lending. That’s not a permanent thing

Doesn't 5 times earning get $180k joint earners to $900k. You can't tell me you won't get a house for that in Auckland. Of course you don't need to be in Mt Eden or Remuera. $900k will still get you a decent house.

$180k is not the average income in Auckland, You can have a debate about whether that should be household or individual income, but the average ratio of prices to income in Auckland over the long term is 5 or less. At current multiples it’s about a 40% overvalue. A household income of $180 is far above the average in Auckland, and far far above the average individual salary, yet it would barely buy you the average house? What we are seeing now is a wide deviation from the long term average

.

$900k should be enough for my garden shed. You can call it a sleep-out if you like ^^

bollocks, 20 years ago house prices were reasonable, and fairly manageable on a reasonable single income or two mediocre incomes. since then incomes haven't more than doubled, but house prices have. Lower interest rates has help with servicability, but not to the point of making up for house prices that have doubled, or raising a deposit.

you must be referring to you village in Antarctica?

Yeah, But you see TM2, they want a brand new house in a good location for under 650K in Auckland ... because paying 1-1.2M is too much ... and yet some are afraid to even commit for a 30 year mortgage ...

Not sure if the new generation knows the difference between a home loan and a student loan or a Car loan ?

Yeah, But you see TM2, they want a brand new house in a good location for under 650K in Auckland ... because paying 1-1.2M is too much ... and yet some are afraid to even commit for a 30 year mortgage

$650K is too much for most people. Committing to a 30-year debt and servicing the debt on something that you don't associate with any value are stupid moves, even if Mike Hosking insinuates otherwise.

Then realistically, these people should apply for housing NZ homes to live in with the State's Help ...or wait for the RH PT to build it for you.
https://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=120...

house prices can not come down to meet the affordability of 10% of the population...let's at least get real.

As I said before , NOT everyone have to own a house, some people just cannot afford that , simple

house prices can not come down to meet the affordability of 10% of the population...let's at least get real.

Not what I said. I said "most" first home buyers can't afford $650K houses. Your 10% is irrelevant.

If we are to accept large numbers of people renting for life, then tenancy laws must change so they too can have a home, and done right, something to aspire to, even if it is not ownership, at least stability.

And affordable. If the private sector cannot do that without hand outs, then the state must do it.

up
10

In Chch you can still buy a 2 bedroom unit for 250k

With no wall insulation, single pane windows, and mould. Give your children the gift of respiratory diseases in the bad part of a glorified provincial town for the low price of a quarter of a million dollars.

No, not unaffordable at all...

So spend another 10k to retrofitting insulation and a heat pump. 4% difference in cost.

Or after a few years working in Auckland you can buy a brand new 3 bedroom house within spitting distance of Christchurch for around 500k and be mortgage free before 40. Try leaving Auckland, I did. I love my life.

I have been looking at the approach and it seems bang on. The middle class has been farmed hard and the long forgotten cohort. The low income classes are subsidised up the wazoo, at the expense of the middle class.
There used to be a time you could buy an average house on an average salary. No longer... So why not even the playing field for a change. I say good on this government for sorting out this mess. Years from now we will thank them for it.

Great analysis Jenée. I'm getting reports from friends in similar pay brackets as your analysis that do not have permission from their bank to lend them the amounts they would need to get into a first home.

So they want house prices at no more than 5 x income. Average household income in Auckland is $76K so that's $380K. Oops can't find or build a house for less than $600K in Auckland so let's bump up the income 'qualification' to $180K. Something don't stack up?

Might as well have 'unsustainable' written in the fresh concrete of every driveway of everyhome built under this initiative, because thats what it is. The intentions are sound but the methodology is not. Goodmorning Australia!

You young gits need to buy something with a long life in it...plus a few income merits as well...

Broaden your mind....

Sorry that is 'Old Gites' you should be looking at...for way less than the price of a Kiwi Build...,,plus there is leeway in the price.....these will
last your life time plus....they have already the test of..Time.

http://www.frenchestateagents.com/french-property-for-sale/view/87799ABE...

Great article. Well done.

Jenée, I generally value your work at Interest but your article sounds very much like a cry for someone in your own situation

This is an opinion piece and one’s opinions are generally formed by one’s experiences. My demographic is the one targeted by the KiwiBuild, so I can relate to this issue. However the case study I have used in this piece is based on Stats NZ data. 

Opinion. I think the widespread idea that studying to get a good job, in order to make good money is an expired ideal from the last generation. Yes education is very important but not to get into a job. I tell my 13 year old that jobs will generally get you to
- work inflexible hours
- generally in one specific location
- pay a lot of taxes
- only 4 weeks holiday pa at best
- kill your creativity and limit your say
- stuck in traffic with all the others also going to their jobs
Jenée, you say above "are we really going to take financial risks to pursue our big ideas at age 30", hell yesss, absolutely! The alternative is to stay stuck in the rat race

Opinion, I think you are a danger to yourself and others

Fact, I'm writing this from Spain, while I'm on a 6 week holiday (during which I work about 2 hours a day) and I have rented my house in Ponsonby for $1'200/week for the 6 weeks to pay for the airfare. Be creative

Well, you’ve obviously had too much wine or sun or both, so better lay off it for the rest of the day, seriously

The day is only just starting here and yes I intend on having some more sun, thanks. Actually I promised my daughter to go on the inflatable obstacle course at sea today.

Stop telling fibs. You're sitting in suburban Auckland punching away on the keyboard. Empty tin cans littered around the place.

It's amazing that people don't believe others. Would you like me to make a comment every hour until I go to bed tonight? (= 9am NZ time) a bit childish I think

At the end of all these comments, Lets just be frank, talk is cheap, House prices will never go down to where it's affordable along side inflation on everything else, nothing ever becomes cheaper or affordable hay? Just have to go with it. Hope is a part of human autonomy

Agree, and want to say that the only way houses would become affordable is if they were less desirable. As in, if no one wanted them any more, if no one could get jobs in the area, if an earthquake ripped the community apart...

Interesting view, and in my opinion likely to come true.

https://www.stuff.co.nz/national/105278941/double-jackpot-for-kiwibuild-...

Yep, when there's government intervention there are generally big winners and also big losers

So many problems living in dull af AKL these days. I don't know why everyone doesn't move to SYD when they can...oh wait

I will encourage my children to move to Australia, at least for a few years, as I suspect the Coalition of Cultural Marxists will stuff up their prospects, but there's no point in me moving. I'm less than 10 years away from troughing on Super, I have a mortgage free home less than 500 meters from an inner city beach and this has been my ancestor's country for 170 plus years and my wife is Tangata Whenua.

Yeah I'm with you. No need to move when we live mortgage free and sleep easy at night. It is a great life we have.

This generation that are currently looking to build need to wake up and smell,the roses.
Living in NZ is paradise compared to most other countries in the world.
It is a generation that demands that they need the best of everything and are generally pretty ungrateful for what they have.
You may not be able to afford a home in Auckland I understand that, but Auckland is not the great city that you think it is with all of its problems.
I have children and yes they are fortunate that we have set them up for life financially but they have saved money and from what I have gathered from them are so much more financial than their mates.
Thing is that to get ahead if you haven’t got the foresight to do it yourself, is to get alongside a financially successful person and get their advice.
Reality is though that it does take effort and many aren’t prepared to do that and expect it all,to be given to them.
Even if I was starting out today I could still achieve what I wanted to achieve, but then I am a doer rather than a sit back and hope person.

I didn't need help from my parents to buy my first home. The fact that you needed to help your children finncially, just proves how much the banks have managed to squeeze your equity out, to help finance your children into their own homes. It is a zero sum game for you and a sure winner for the banks and their shareholders, of which I am one.

Jenee, I wonder about your description of the Ponsonby problem. It perhaps shows how a matter a few decades can change context. Do you know the history of Ponsonby? Even into the mid 80's it was almost slum like. It had been the domain of new immigrants from the Islands brought into New Zealand to do the dirty work kiwis would not do. It was in some ways a place that was feared, alongside the legendary Otara. The place looked awful, extending out into Grey Lynn also. All the old uninsulated villas full of mold. Although the reality of the generally god faring pacific islanders was underserved, they were all here to make a step up in the world (bar the violence generated by a lack of alcohol tolerance).

If you think I am off the mark then talk to a few older ones about this. As kids we used to tell jokes about the minimum speed limit in these types of suburbs, the fear being if you went to slow that your hubcaps would be stolen.

I went to a school in an area with a pocket of the suburb that was dominated by Maori and Polynesians. The school role was 30%. While I did not experience racial disharmony, my older brother and his friends used to carry weapons in the form of clubs in their school bags.

Ponsonby then became the territory of speculators, and I recall stories of housing doubling in 2-3 years in the pre 87 exuberance.

Interesting. Thanks Scarfie. I am aware of Ponsonby's history, but must admit I didn't take this into consideration in my description of 'Ponsonby problems'.

Great article Jenée!

Thanks for trying to ram some numbers into some of the boomers on the site. It makes for a great read for anyone unfortunate enough to be born in the wrong couple of decades.

Unbelievable from Waikato Times.
''Residents of a Hamilton home that went up in flames Wednesday,were back at the property later drinking.''
Now thats the type of tennants you need.

Interesting but I should point out that a university degree is not a must have. There are plenty of Tradies now earning more than people with degrees and with no student loan to pay off. I would suggest that many degrees are a waste of time.

Agreed, degrees nowadays are not as important as they were a generation ago. See my post above

It does depend on the degree, but my employer takes on people with degrees and pays them handsomely for their knowledge and input into major projects. A diploma isn't worth much, but a degree at one of our top 100 universities worldwide is worth a big salary and they get that in spades. Sometimes it is also a numbers game. Bigger cities have more competition, smaller regions need to employ the same skilled people for a bit less, but their cost of living is dramatically lower than if they were living in Auckland.

Interesting but I should point out that a university degree is not a must have. There are plenty of Tradies now earning more than people with degrees and with no student loan to pay off. I would suggest that many degrees are a waste of time.

Back in the old days a degree's primary role was to teach you to think (so they say and having done an engineering one in mid-life I actually now agree). Today however we are in an era of ever increasing specialisation and increasing population. This means while again I agree a trade is and should be the way to go for a decent % of people in reality a trade is in-adequate to meet the growing specialisation needs we seem to require for an ever more complex world.

I do think a degree in the right subject is really important but simply doing a "media studies" , sociology, fine arts, art history or similar degree just to get an easy degree is a bad idea both for the individual and society/economy. IMHO.

So are many degrees a waste of time? there is a % I am sure that are and there are some that clearly are vital and need more public support. ie Labour's blanket 1st year for everyone is a mistake, it should instead be selective aka how the UK at one stage did it.

Good article...

I am so pleased there will be no Kiwi Build houses in Nelson / Tasman. Despite being the third least affordable area of NZ after Central Otago and Auckland no KB homes are planned for this area. The last thing residents of these areas need is more lies and false promises from a government out of touch with our society.

Interesting view, one party lost the election because they denied, obfuscated and even at times celebrated a housing crisis, a nice problem to have, a symptom of our success... Almost as if they're out of touch with society in a way.

Not almost

It’s easy to see that the Coalition of Cultural Marxists are out of touch with reality, but how can a party with 45% support be out of touch with Society?

They only have that as they have no mates