'It is harder for young people these days to buy a house than it was for the Baby Boomers. This is not because of greed by older people,' Tony Alexander says

'It is harder for young people these days to buy a house than it was for the Baby Boomers. This is not because of greed by older people,' Tony Alexander says
Cartoon by Jacky Carpenter

BNZ chief economist Tony Alexander has sought to explain himself, further to his boss apologising for the “inflammatory” remarks he made in his weekly newsletter last week.

BNZ CEO Anthony Healy, as well as BNZ's marketing team, took to Twitter last weekend to clarify that Alexander’s “typically provocative” comments around young people being able to get on the property ladder if they made the same sacrifices as the baby boomers, reflected “his personal views rather than the view of BNZ”.

Following a week of heated debate on the issue through the media and over Twitter, Alexander has prefaced his latest Weekly Overview saying: “Many thanks for the messages of support received this past week. But not everyone got the main points of last week’s overview so we go over them again.

- It has become harder to buy a house not because of one generation’s buying but numerous factors we have discussed hundreds of times in this publication since 2009 whilst warning about the upward house price implications.
- Young buyers these days need to make deep sacrifices in spending on other things if they want to purchase a house and if such sacrifices cannot be made home ownership could well remain out of reach.
- Getting credit from banks has become harder and further rationing of an increasingly limited supply of funds is coming.

Alexander then starts off his newsletter (which hasn’t yet been emailed to interest.co.nz as it usually is this week) saying:

“Helping New Zealanders Be Good With Money - This is one of our aims at the BNZ and something strongly emphasised and repeated through discussions within the bank and outside it.”

Alexander proceeds to explain:

The aim exists because there is research which shows that many people are not always good with their money. They borrow too much, they spend too much, they spend on the wrong things, they save too little. In particular, they fail to appreciate that achieving key life goals involves sacrifice. You want to achieve top marks at school and university, you sacrifice some of your social life, sports and immediate income. You want to be top in sports, you sacrifice some of your other learning and time doing other things. You want a mortgage, you cut back on non-interest payment spending.

“One part of maturing as an individual is realising that whenever you take on a new thing like a partner, a car, a child, or a global trip some other thing or things need to be dropped. You have to make choices, otherwise you never grow up.

If you want to buy a house you must sacrifice spending on a great number of other things and you must not aim to buy your dream home in one step. Buy something you can improve using your own labour in your own time. Home ownership is expensive in terms of the deposit size, the purchase price, the stress, then the running costs, especially for young people with little furniture and starting a family. Pursuing home ownership will bankrupt some people. It ends in disappointment for many others as the repair bills come in. Relationship breakups will impose forced sales on some, and some relationships will fail because of the financial stress and the inability to spend on things which non-home owning friends may continue to enjoy.

People need to think very carefully before signing up to a large mortgage which will fluctuate in cost, with future changes almost guaranteed to be upward, by perhaps 2% for floating interest rates over the next two years. Budget for a 3% rise just in case. Home ownership is also dangerous because it reduces your ability to shift location should you need or want to. So think carefully before you try and lock yourself into a particular city and suburb for many years. Get it wrong and you can suffer financially from shifting house and be simple bread and butter for real estate agents.

Such commitment to a place does not make sense for most young people who face a massive range of opportunities here and overseas. Be very, very certain before you look your partner in the eye and say here, in this place, this is where I make my stand, and you are the one I make it with.

The key message of last week’s Overview was that it is harder for young people these days to buy a house than it was for the Baby Boomers. This is not because of greed by older people, as one politician recently claimed, but a long list of factors we have repeatedly emphasised in this publication since 2009.

The list includes planning and building regulations, foreign buying, double income households, New Zealand no longer being a big farm, the concept of Brain Drain going out the window, the technological revolution causing people to want to live and work nearer to other people, a structural decline in interest rates, loss aversion by retirees, widespread forecasts of strong tenant demand, and so on.

These things are not going to radically change. It will remain hard for young people to purchase a property and that has been the key message here encapsulated in predictions of rising house prices since 2009. Anyone who acted on those price rise predictions rather than holding off for a price collapse will currently be sitting reasonably comfortably equity-wise.

If purchasing a house is your goal then there is no shortage of things which those who already have purchased sacrificed as they built up their savings, worked at reducing the principal to improve their position, and adjusted when their interest rates and/or expenses went up. Things people have cut out have included...

· Cafe visits
· Going to restaurants and bars
· Smoking
· The latest telephones, games consoles, cars
· International travel
· Weekend and evening leisure time because they took an extra part-time job.
· Hired help like dog washers, landscape designers, etc.
· Subscription tv, gaming, music
· Privacy – by taking in flatmates, student boarders, or renting out space on Airbnb.

If you want to buy a house these days now that prices compared with incomes have structurally jumped to levels they will never much decline from, then you will need to make sacrifices. If you can’t then think carefully. You could keep renting and accept the uncertainty that brings in terms of rent levels and tenancy length. Either way, putting and keeping a roof over your head has become structurally harder in this country.

Following on from this discussion last week we introduced a new element which is worth going over again this week in case you missed it.

The world has changed. Following deregulation of the financial markets and institutions over 1984/85 the main problem for anyone wanting to get a loan shifted from rationing of a limited credit supply to price. It is now shifting back again. Banks face far greater demand from people wanting to go into debt with our assistance than we can satisfy through raising funds domestically.

Some credit rationing has already occurred via the LVRs. Some has manifested itself through new property developers struggling to find a financier. Next will likely be large corporates having to source funds in their own name from offshore and maybe via bonds. Without increased deposits or access to funding further rationing of credit is on the way, with the next housing cycle almost certain to see it in the form of Reserve Bank imposed debt to income ratios, as sought by the RB and recommended this week by the IMF.

While preference is likely to be given from here on out to home buyers, businesses need financing too, especially SMEs. Hence the market opening up for foreign banks (Chinese almost certainly) to enter NZ to service the larger companies over the next few years.

Therefore the relationship between you and your bank is changing. It is shifting from the bank offering deals and discounts to get your business, toward them raising interest rates, reducing discounts, even introducing fees as a means of rationing demand, and picking and choosing between the many mortgage applicants. Preference will be given to those who show an ability to build savings over an extended period of time through (by definition) sacrificing expenditure.

Baby boomers will understand this need to build savings over many years before seeking a mortgage. But the younger generation used to businesses chasing them continually for their dollar will take some time to cotton on to the implications and figure out how to get to the head of the queue.

Some have already figured it out – the bank of Mum and Dad. But there are bad social stability implications from this development with home ownership decreasingly available for those without generous relatives. What will happen to counter this trend?

We will eventually see some changes in legislation favouring the tenant and penalising the high flexibility which landlords enjoy. Changes in this area will likely move quite slowly.

We will also eventually see the development of proposals for government financing of home purchase by those without family means, well beyond the small grants and savings withdrawals currently available from Kiwisaver. Given the way in which concerns are growing about regional depopulation and the high cost of buying a house in Auckland, these financing proposals will likely focus on regional housing markets. But they won’t amount to much and history shows that in the absence of a township jobs surge it is unrealistic to expect any substantial movement of people out of the main cities to small localities.

But keep an eye on the area covered by the Waikato District Council (WDC). It uniquely straddles the gap between Auckland and Hamilton. Since 2007 population growth per annum has averaged 1.8% in the Waikato District versus 1.2% for all NZ, 1.6% for the Auckland Region and 1.3% for the entire Waikato Region…

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.

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.

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I agree with him on some points and have echoed those same thoughts many times
We will eventually see some changes in legislation favouring the tenant and penalising the high flexibility which landlords enjoy

Therefore the relationship between you and your bank is changing. It is shifting from the bank offering deals and discounts to get your business, toward them raising interest rates, reducing discounts, even introducing fees as a means of rationing demand, and picking and choosing between the many mortgage applicants

while others I disagree with
I think house prices to incomes can decline with the correct policy settings or a GFC2
and I am not in that negative frame of mind to think our future governments will never get there act together and set about giving it a go

As a baby boomer - owning my own home, retired at 63 and collecting national superannuation at 65, having an investment property, and a generous employer superannuation scheme the like which now doesn't exist - I really feel for the younger generation.
Why should I feel for the younger generation? Simply because I have children who are part of generation X and Y who face real issues of housing affordability and an uncertain future in which society is going to undergo considerable technological change, as well also considerable economic and social change.
So why should I care about my children as part of Generation x and Y? Well, you change their nappies, wipe their bum and force feed them as babies, you stand on the side line in the pouring rain and a howling gale encouraging them with positive comments although they may be real gumboots, you deal with all the issues as the hormones and rebellion kick in, you cleaned the carpets after their unsanctioned party when you had a weekend away with the wife, have to accept that they have just dinged your car which is your pride and joy, and you help them to buy their first car as just a minor cost to the $150,000 plus that you have spent raising each of them over 18 years.
Well, that care and concern doesn't stop.
So, as a baby boomer I do care. However, I agree with Tony Alexander that while they face challenges regarding housing and need to make great sacrifices if theywant which until now has been part of Kiwi culture.
We baby boomers faced challenges and sacrifices but maybe we were a lucky generation. I saw my parents' sacrifices they made to buy the first family home, and my grandparents faced two World Wars and the Great Depression in a thirty year period.
While I do care about generation X and Y, when faced with the current issues of house affordability, I agree fully with Tony Alexander there is a need of taking some personal responsibility and accept that in the current conditions, a need to make some sacrifices. If I could, I would wave my magic wand,

23
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I agree to some extent. I'm a millennial, and while it isn't fair, whining isn't going to get me anywhere.

I'll be voting for a new government, and encouraging everyone I know to vote too. And in the meantime, as much as I dislike the guy, I'll be making the sacrifices Tony Alexander mentions. Not because he said it, but because I've been making these sacrifices for years anyway.

At the end of the day, change is slow, and us awesome, hardworking millennials do need to keep our heads up and keep saving.

Maybe when we kick out the current shitty govt there will be some policy reform, but I won't hold my breath.

I'm a boomer and all I can say is well done and good luck! It wasn't easy for me to get into my first home but once there the rest sort of falls into place.

As the the shitty Government. Take a close look - because we boomers have learnt that while their colours might change the core of politicians does not. Changing our Government will not change the current reality for all Kiwis, Labour will be no different to National, the Greens are scary, NZ First - well they've got Winnie? So don't expect a change.

My whole voting life has been National National National (though I've never voted for them). I'm a realist. I don't expect any miracles, but I think a change in government can only be for the best.

Dont save. Spend and rake up as much debt as you can - the financial system (and boomers pension funds!) need you to...
Once it collapses, the sensible will be as broke as the reckless.

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You get my vote for comment of the week - resurrected my interest.co.nz account just to upvote you. 100% spot on in that we need a government change.

Problem is how to convince my boomer parents to get behind this change without and getting the same old "Property always goes up - you'll just have to accept that and be part of it" chat. No surprises they are the ones with most to lose and just won't budge when it comes to the vote

What will it take for public opinion to reach the point that someone with the right voice and right policy can swing the conversation around from boomers much loved "sorry millennials, it sucks to be you, we also had it tough, so just deal with it" commentary which Tony (and BNZ) are obviously feeding into here.

On this note - If someone from Marketing / PR at BNZ reads these comments are you aware how much you have alienated the next generation of bank customers with Tony's dismissive rhetoric (it clearly has your logo all over it - so don't try to apologise). I won't be banking with BNZ for many years based on the clear disrespect he's shown a younger generation here.

Shucks Boomzilla.

It is heartening to know other people out there from different walks agree.

16
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Seems like a key thing Tony is missing is that young people are saving at a greater rate than boomers did at the same age:
transportblog.co.nz/2017/03/07/no-boomers-its-not-like-it-was/

It's misleading for him to keep focusing on young people being profligate when they seem to be saving harder than their parents were.

Policies can be put in place to make housing costs more affordable. It's just the government refuses to because they don't want to see house prices come down (their own words). That's a clear choice to put the burden on young Kiwis for the benefit of older investor-voters.

When it comes to a choice of votes and policy between keeping prices high or making homes more affordable, if investor-voters and the government choose the former, they're definitely culpable of greed.

At least Vancouver's government has started acknowledging the problem of foreign demand and is starting to address it via a foreign purchase stamp duty, for example.

13
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That transport blog article is very,very good..

For a professional economist to seemingly not know such basic facts goes further than "misleading".

He is just really a part of the bank's marketing department. As such intentionally misleading you into using BNZ's financial products even though they are not in your best interest. The CEO's claim that Tony's opinion is somehow independent is a lie.

Not true, tony is 100% independent and you'd know that if you read all his articles...

He has 100% free thought, free of facts.

Come on Dictator, you're being the very thing you're accusing Tony of - misleading.

His independence and freedom of thought is what makes him a sought after speaker and read, and is precisely what got him into hot water on this occasion. If a bank's (very risk averse) external comms or marketing team had any input into that column it would look entirely different.

If you don't think he's a part of the bank's marketing team then what exactly do you think he is there for?

Strange how people forget the mid 1980s & 23% mortgage interest rates ! I never dreamed I'd own a house but later owned a few. There will be GFC2 and a greater financial collapse than previously. I suggest
my kids hold on for this crazy financial ponzu is due for collapse Just depends when

And, ahh, what happened to those 23% interest rates. Oh, they went down, and the current low ones really have only one significant way to go, along with houses being many times the average annual income. The ponzi is being kept going with previously unheard of immigration numbers and the ability of haven seeking capital to purchase houses and land at will. Until both of those two factors don't change, there will not be much change (though the Chinese govt may have attempted to do our dirty work for us by trying to restrict the amount of capital leaving the country).

and what was inflation and housing inflation at the time.
also we had high savings rates and no tax on interest, so you could save for the deposit at a better rate.
on the other side getting a mortgage meant putting on the sunday best suit and making a plea for a loan.

Things have changed in that credit is easier to get and they will allow you to take on more.

Can we have this article updated please

http://www.interest.co.nz/news/44330/opinion-why-golden-oldies-are-wrong...

I'd be interested to see what it looks like now with the changes since 2009 in house prices.

Strange how people forget the mid 1980s & 23% mortgage interest rates ! I never dreamed I'd own a house but later owned a few. There will be GFC2 and a greater financial collapse than previously. I suggest
my kids hold on for this crazy financial ponzu is due for collapse Just depends when

The bit I disagree with is his supposed need for more foreign money. The foreign money is the cause of the house price problem (not the house supply problem), in that it is only because of the free flowing credit available that people have been able to engage in a massive bidding war against each other, with the winner being the bidder able and willing to borrow the most. He is a banker.

Is the "w" on your keyboard not working properly?

22
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Some backpeddling there. Yet no explanation of why he used such an arrogant and insulting tone in his last newsletter. He's ignored the poorest 50% of the population and he hasn't talked about the very real sacrifices that need to be made.

http://www.stuff.co.nz/stuff-nation/17674613/Why-can-t-I-buy-a-home-for-...

The sacrifice isn't a home, the sacrifice that costs the most is not having children. The poor guy in the article has realised he can't afford a home without a $175k deposit while supporting his wife and 3 children. Is Tony going to start telling people they shouldn't have children? Once you have them you can't take them back for a refund.

Saying the world has changed isn't good enough. Realise that we can change our laws and regulations to improve the situation. That includes reversing the current trend of increasing inequality.

I'm writing this off as "ass covering" by Tony Alexander. I think his newsletters really need fact checking as he is claiming to be an economist, not a politician.

The list includes planning and building regulations, foreign buying, double income households, New Zealand no longer being a big farm, the concept of Brain Drain going out the window, the technological revolution causing people to want to live and work nearer to other people, a structural decline in interest rates, loss aversion by retirees, widespread forecasts of strong tenant demand, and so on.

Tony simply overlooks the approximately *8% p.a. compounding growth rate of bank residential mortgage lending since 2000 as a driver of house prices. How convenient!

* RBNZ C6

What parts are the waikato district?

12
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- Young buyers these days need to make deep sacrifices in spending on other things if they want to purchase a house and if such sacrifices cannot be made home ownership could well remain out of reach

Like having children?

Tony doesn't seem to have a grasp on personal finance. When some people get to the point where they decide they need to fix their finances they usually find a series of decisions that they have made that are irreversible. Whether it's children, consumer debt or reckless spending doesn't matter. Children there's nothing that can be done except to choosing to not have any more. Consumer debt tends to saddle people with 5-10 years or repayment strategy. With reckless spending the money is gone.

With all the stupid moaning about millenials phones people ignore the fact that having the right plan and 0% financing spread over 2 years for a useful tool (it's not just a phone). Part of this moaning comes from people thinking FI or FIRE (Financial Independence Retire Early) communities apply to everyone. Those strategies apply to the top 50% of income earners. The lower 50% of incomes struggle with high savings rates.

I think the thing that really gets me with the shitty message in these newsletters is that they do not provide practical real world advice. It's just a bunch of whingers that refuse to see the world from anyone else's perspective. Being helpful is more useful than bad behaviour from a bank economist.

The list looks interesting and while I don't disagree about making sacrifices - just a couple of observations. Firstly if people cut back on their spending - could this cause a recession. Secondly - all work and no play makes Jack a dull boy i.e. you need SOME hobby , leisure time activity - and most cost something.

Like just about everything, including having kids, sad. What he conveniently forgets is all that we have left ourselves for an economy is selling short life-span gee gaws to each other. If people stop buying, people stop selling, no more money go round, no more any money to save. Much more has to change.

Not to worry.

Like labourers and home buyers, National will import more from overseas instead.

This is simply a displacement of the local population with those from overseas who wish to take over certain parts of NZ.

13
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The best thing about this article is the cartoon of Tony Alexander as a dog with a muzzle. Love your work, interest.co.nz.

Well you can muzzle the dog but he'll still take a dump on ya lawn!

I hope that photo got circulated repeatedly at BNZ today on how not to end up represented in the media.

I can just imagine the internal memo now

TO: ALL BNZ STAFF:
SUBJECT: Re: Tony on a leash
MESSAGE:
Dear BNZ Staff,
Please do not circulate an image an image of Tony Alexander on a leash or acknowledge it exists if it appears in your inbox. It is damaging to the BNZ brand with several of our key target markets. We accept that our decision to let Tony 'run loose' for the past few years has potentially backfired with this weeks media coverage, and our comms team who signed off on everything he has written, will unfortunately not be joining us in the office this coming Monday morning.

17
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Decades of people investing in second homes (all for good retirement planning reasons), and more recent years of rampant property speculation, together with expanded immigration and congruent financial inflows, have falsified the economics of home-values, home-buying and thus home-ownership.

Homes in New Zealand were once generally bought by people intending to live in them. Their prices reflected this basic use and transaction. Houses were for raising families, not bought in numbers for the raising of investment or speculation income.

Speculation on price inflation is a crucial driver of price inflation. If it were possible to speculate on the price of a loaf of bread - buying loaves for likely gain in on-sales value - bread would soon be beyond the reach of many. And that's where we are. Every house bought as an investment, in order to speculate on asset inflation, or with substantial introduced money, drives prices upwards - at least until the bottom rungs of the ladder are no longer in intelligent reach.

Fortunately, in New Zealand, we have the banks, immigration policy and council planning to rely on to prolong the giddy game. It is this combination of vested interests that is making home-ownership less and less the normal way of life it was.

14
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Tony overlooks the fact that there are a sizeable number of boomers who have 10, 20, 40 and even over 100 investment properties. I know as I acted for some of them before I retired. Of course this accumulation did not contribute to house prices increasing.

Gordon, surely it is legal to be able to own more than one home in New Zealand?
People that rent their properties out are surely providing a service just like any other business?
There has always been people who have rented for different reasons and this will always be the case.
In Christchurch the Government is looking at selling approx 2500 rental properties that they currently own, so this is telling us that they don't want to be in the business of providing housing to the public.
It never has been a right for everyone to own property in NZ just like overseas where many rent their homes!

Legality is not the issue. Laws can be fixed. It would be better to ask is it moral to hoard housing and manipulate prices upwards. I think you've raised an important point that we do need to legislate against hoarding and house price manipulation. Alternatively we could build an excess of housing like in Ireland and destroy the housing market completely (John Key's idea not mine).

Hoarding is an interesting point.

If the government had not acted in the past to break up land banks via Land Tax and pressure on land bankers, none of today's boomer investor-voters would be in the position they are today.

Exactly. The lack of available sections is criminal. Drip feeding residential bare land by councils guarantees the rort drags on. Stuffing up rational employment, business and family decisions by the ball and chain that is high house prices. High house prices are irrelevant if there is plenty of residential bare land available.

The Child One. Another comment giving insight into the mind of the greedy and morally bankrupt that wonder upon us.

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The Boy do people really need to own say 20 50 or 100 houses? How many do they need to have a comfortable retirement. Boomers have had it easy. Cheap assets to buy , equity to leverage off and cheap interest rates. No wonder a number of them have been greedy in my view. And soft tax treatment to encourage the rort.

Yes, the whole business of a few landlords renting to the sorry many who have been cut out of the market really has to change, bigly, to quote some yellow haired, orange faced American

One can't ignore it could have all been a beat-up staged by BNZ to generate publicity.

If so, Tony could be in for a big bonus following his next performance review.

Whatever, it made for a great headline: "Cocky Bank Economist Gets Stick From Big Boss".

Well done, my lad! Play it out for all it's worth.

And keep up the lending to all those lovely specuvestors!

Ha ha!

16
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As a boomer approaching retirement I want to say it was far easier financially for us to get our first house. 2.5x my income alone....Partners income was all extra money. I am a tradesman, jobs were plentiful and paid decently above minimum wage lol.
Young people today are being taken to the cleaners through privatisation of all that was once included in my taxes. Fees and costs all have risen more than take home pay.
My father had it even easier as productivity rose and wage growth was strong.
My advice to young people today is to stop buying into this sort of a debt train. Don't believe it when you are told it's structural and nothing can be done.
Cheers.

>"My advice to young people today is to stop buying into this sort of a debt train. Don't believe it when you are told it's structural and nothing can be done."

Fully agree.

Today's young people need to start agitating politically like has not been seen in New Zealand for a while. It's time for them to stand up and demand politicians enact policies for the benefit of more than just investor-voters.

Something that could be done in the past was capitalizing the family benefit to allow a family to buy a home. I don't know when it was removed most likely in the 80's but it was one way to get the deposit for a home.

100% agree."It's structural" - good grief! It's a policy choice. Otherwise, we wouldn't see cities around the world (particularly US interior and Germany) with affordable housing and Japan's house prices wouldn't have been declining for 30 years. There are plenty of things that would change the "structure" (not all of which are good ideas, but certainly would bring down prices): govt builds houses, disallowing commercial banks to create money for existing residential real estate (i.e., 100% reserves for such loans), freeing up artificial land constraints, changing taxes around housing, ...

Precisely.

Young people need to know it's because of government policy choices. They have said they don't want to bring prices down, i.e. they don't want housing to be affordable for upcoming Kiwis.

Houses can be made more affordable by policy, just as they have been in the past. It's the lack of will in politicians that is keeping houses about investments and not about homes.

Further rationing.....
ie More rationing to come. This is the main thing that I take from this.
This is big news. House prices will definitely not go up from here on if banks ration credit. I think that this will mean that the prospective ponzi speculators will not get the funding they need to get their foot in the door. That would be frustrating for them. Poor wee souls. After hearing of the easy pickings that their mates have made this will be a blow to their aspirations. They will have to stick to their day jobs. Damn it.

That intrigues me as well. Does that imply the banks have over extended themselves and lent to those they shouldn't.

Wouldn't surprise me. They're as susceptible to bubble hysteria as anyone, and have been treating lending on residential as no-risk. Which gradually makes it very very high risk.

I am surprised that Tony continues to sell the concept that auckland house prices will keep going up. I appreciate the need to keep getting editorial space in real estate magazines. However, it really makes no sense. The logical thing is to buy outside Auckland if you want capital gains and sit back and wait for the forthcoming crash.

So he's no longer peddling meth houses.

No. Tony is telling people to cut back on meth and buy meth houses. Everyone has to make sacrifices.

Where does one apply for a BNZ Meth House Loan?

Do we need to go direct through Tony?

Well, so long as you pay tax as a business.

Better to rent meth houses, really. It's good to have mobility and flexibility for your cooking location.

One of relatives had meth addicts as tenants and they trashed the place...meth is real so best we stop being so PC and pretending this does not exist

No shit, Sherlock.

Meth profits have been inflating real estate prices since about 1997. Whoever would have foreseen that there would also be a downside.

You should contact BNZ and express your dissatisfaction at their lending targeted at increased meth use.

If you're after mobility and flexibility for your meth lab, an RV would be a much better choice.

With the average house in AK 10 times the average wage - and double digit growth - it is not possible to save enough. Even if you can it is financial suicide to buy house now and have a massive mortgage. I have decided to opt out of this con. Far better to save for my retirement.

Ak79 presumably you were born in 1979, which makes you a Gen-X. If this is true and you still don't have a home by now its your own undoing, coz you've missed the boat by about 10-15 years already in my opinion.

My circumstances were a bit uniquewhich meant I was not in a position to but. But, yes I should have bought 10+ years ago. But the fact that there was a "boat to miss" shows that the system is completely broken. It does seem that many, younger than I, are locked out of buying a house and unless there is a massive correction that's not going to chance. But also, my initial point was that having a mortgage so much greater than one's salary is financial suicide.

Yeah exactly, constantly people are telling us you we to get on the 'ladder'.

When taking all the generational and emotive aspects out. People are pretty myopic to the problem that housing speculation is an unproductive and risky part of the economy. Purely based on that aspect we need to reign it in.

Ultimately the problem has been designed to by Labour previously and National now, to create wealth and 'growth' in an economy which mainly exports primary goods. Asset price bubble has been good for some. But terrible for the younger generation. It seems to have gone to far. It's about what we value as a people.

And if what you're saying it's true, the whole following and upcoming generations have missed the boat, because property is now tilted entirely in favour of investors whose genius was being born at the right time.

Actually, when the credit squeeze goes on, those without debt are much better off particularly in NZ where we have no such thing as non-recourse loans. So, compared to the US, where the defaulters lost their equity and that was the end of that - the opposite is true in NZ. The value of all unrecoverable debt stays with you for life.

At least that is my understanding.

Government has ignored the young generation based on self made assumption that they will survive by themselves and do not need help OR may be the attitude is who cares as most do not vote.

Young Kiwis will have problem in future, either will have to go and settle in a remote place where they can afford a house-if they find a job their and pass the drug test (as per government many biz owners comment is that young kiwis fail the test and government believes the data or should we say no data, as it suits them) and overseas young will not have that problem as have rich parents to support and help them to invest/speculate (many overseas rich use other people name - mostly their children or near relatives to park their official and unoffical money).

May be like child poverty we in NZ will have to talk about Young Poverty courtesy National government

I think this sums up what will happen. Young Kiwis will be pushed out of Auckland and Auckland will be ceded to wealthy foreigners instead. It will in essence cease to be a city of locals.

There is no doubt Auckland XYrs getting started in housing, are up against massive hurdles. Their outrage at rampant speculation and surging migration, is understandable.

But it is as though any pain boomers suffered in getting established, the wrenching effects of massive economic restructuring we lived through and the significant financial support we provide to our offspring, is as nothing and XYrs alone know what it is to suffer deprivation.

It's as though Auckland is the centre of the universe. Not featuring in the boomer scapegoating is that affordability elsewhere in NZ is OK and that the strong jobs market for XYrs and funding of their lifestyles is in part due to the same factors that are driving house prices to crazy heights.

The narrative is becoming a bit unbalanced.

Disclaimer - my family is affected, as a parent of XYrs I'm up to my neck in this.

Everyone accepts that it will be next to impossible for young to own a house in New zealand. Question is who is to be blamed, if not the national government.

Not true you can buy a house in Hamilton for 400k but many commentators on this website would prefer the government gave you a house or at least took one from a nasty greedy despicable landlord

Strawman

Fantastic. That's one place in New Zealand where houses are apparently "affordable." Could you name a few more where there are available jobs?

Actually, most commentators on this website advocate for a reduction in house prices and supplying affordable housing for young Kiwis.

Gordon, how many houses an investor wants depends on the amount of positive income that they are deriving from the rentals!
You could live quite comfortably on 5 rentals if you didn't have any debt on them but then most investors do have borrowings.
Yes it has been pretty good over the last few years especially in Christchurch where investors have done particularly well providing they purchased well in the first instance and will be positively geared.
Market has flattened due to the LVR requirement now needing 40 per cent deposit on all lending but with interest rates still less than they were 2 years ago, it is still feasible to be buying with returns still good.

As for shares, I would be a lot more wary going forward as you have no control over the prevailing markets.

Yes we know you have it all under control. No market forces threaten housing! How about Labour winning the election for a start. You use the word flattened . I would use the words gradually and steadily going backwards along with rent levels.

Let's just wait and see Gordon.
Interesting times but mainly in Auckland?
Have a great weekend, always a pleasure!

That's where I am currently for a wedding. Lots on the market. Even houses in Central Auckland attracting no bids.

Like what Tony says, may be this is what the RBNZ and the Finance Minister and the whole government should have told the young people, even adults of NZ a few years ago ?

Have much to say about this, in relation to other economies?
http://www.economist.com/blogs/graphicdetail/2017/03/daily-chart-6?fsrc=...

New headline: Tony Alexander's Balls Trapped in Wringer - Begs Public To Roll Him Out Again.

We just might turn it the wrong way *evil grin*

Sorry, who is Tony Alexander again ? Mr Alexander has only a passing understanding of the daily barrage of economic news, with a poor past track record in predicting the economic future. Time to reassign him to the marketing department at BNZ as I think that is where his talent lies. Humility is the key word here. Nice to see that BNZ stepped in before too much damage was done to the BNZ brand.

Not true, Tony has called it right while Hickey, Equbeel and Morgan have got it so horribly wrong

I'm not convinced at all by his latest rant.
It's more of the same smug, demeaning and arrogant garbage.

For example, how smug is this:

'Anyone who acted on those price rise predictions rather than holding off for a price collapse will currently be sitting reasonably comfortably equity-wise.

One - it's smug. Two - it ignores all the people for age / timing reasons couldn't get in before 2009/2010.

He's continuing to treat a whole spectrum of the population with contempt.

And he's still making the pathetic and frankly wrong claims that people can get into housing if only they sacrifice things. Well some of those things he mentions will make little meaningful difference.

There's too many awful things in this article that I could spend my time ranting about but won't. Suffice to say, I'll never consider any business again with BNZ.......... EVER!

What a smug, arrogant - and frequently wrong - tosser

READ THIS:

http://transportblog.co.nz/2017/03/07/no-boomers-its-not-like-it-was/

My sister in law used to work with TA when he was in charge of the slogans at Big Save Furniture

""If purchasing a house is your goal then .... Things people have cut out have include..."
* living in Auckland!

Rather than legislation "favouring the tenant" we need legislation and tax structures favouring the house owner. IMHO.

Legislation favouring the tenant will, by dint of the fact that it will make landlording less attractive, in turn, favour the home owner-occupier

That seems slightly defeatist IMHO. The root cause of the problem is a tax structure which favours investment property over all else, and the fact that foreign realestate investors are now damaging the financial well-being of a large proportion of generation X & Y Aucklanders.

The manifestations of the problem are numerous; overvaluation, malinvestment, financial fragility, and collapsing home ownership rates. All of which will have dire consequences in years to come. New Zealand is not like Germany and it will never be okay to retire in NZ without a house.

A long term view of really fixing the problem, and making NZ a fairer and more prosperous society needs to address the tax bias towards property speculation. Making owner occupier situations financially lucrative in the same way that investment properties are financially lucrative, and removing the incentives to be a landlord. Success would be measured by increasing home ownership rates.

Are you saying that 100% of retirees in NZ have owned houses because that has never been the case. Social housing has been used to look after older folk in the past and today.

Yes, With the exception of people who've suffered unfortunate circumstances, I would guess that the majority of current retirees own their own homes.

Looks like about 75% of people 60 and over own their own houses:
http://www.stats.govt.nz/Census/2013-census/profile-and-summary-reports/...

yep seems about right. Imagine whats ging to happen in 25 years time. That retiree home ownership percentage could be as low as 50%. Also the retirement age will be higher, a bleak future for many people if nothing is done now to increase home ownership rates.

Absolutely, I certainly do not think it is a one or the other situation, I'm greedy, I seek both parts of the solution.

If NZ First decides the next government (highly probable) you can kiss much of that HAM (Hot Asian Money) and mass immigration goodbye. World interest rates are on the move.

Let's see how "structural" the million dollar townhouse on 300sqm at the outskirts of Huapai really is.

Those of us who have saved hard already are looking forward to credit rationing . It means we are less likely outgunned by kamakazi debt slaves and slumlords. Credit rationing means less rope to hang yourself with.

Good to see smug condescending Tony Alexander being put in his rightful place. I will never bank with BNZ thanks to his weekly browbeating.

WP is NZ's own Black Swan. And he may be the one who brings the much needed correction to the housing boom based on speculation and hot money ?

Well, we can but hope, but in the past, he has compromised quite seriously on the things that people voted for him for. So while I can see that the guy has a handle on what is going on, I sometimes wonder if the only difference between him and the rest, is that he doesn't keep his trap shut about it. Approach with caution, I say.

It is a serious stretch to call someone a 'black swan' who has been in politics for 40+ years. A 'black swan' is a random and unexpected event that no-one sees coming. WP has been 'coming' for a very long time now. Perpetual sideline politicians are known and expected forces, just the opposite of 'black swans'.

Looking at last week's auctions I see this quite good buy for someone in Auckland. Semi-rural, 900sqm, three bedroom. You could have chickens and grow your own vegetables. Sold for 670K. Nice video:
https://www.barfoot.co.nz/589522#Video
Sold at the low end of the homes.co.nz price guide.
If a couple had 140K deposit the interest would be 2200 a month. This could easily be covered by one person's salary with capital repayments too. That's how we did it in the old days. Devote an entire salary to house payments for the first decade of a marriage. Mind you we got married younger.

The keyword (no pun intended) here is "if." Good luck saving $150k from $0 while paying 40% of your income on rent before house prices increase. Oh, and if you're single then you're stuffed.

For a working couple rent should only take up 20% of income. The system is biased toward traditional human relationships. You know where men and women should look for partners with good prospects. Singles wishing to purchase should stay with their parents as long as possible, maybe try and be useful by mowing the lawns and assisting with household chores.A virtuous life will be rewarding. And as always you need money to make money.

*edit - While researching how many old folk own their own homes I found these statistics:

Individual home ownership was strongly related to partnership status. Of people who were partnered, 66.7 percent owned their home compared with 26.3 percent of people who were not partnered. Married people were the most likely to own their home, at 75.1 percent. People who had never been married or in a civil union were the least likely to own their home, at 12.3 percent.

http://www.stats.govt.nz/Census/2013-census/profile-and-summary-reports/...

Vomit

The comments are despicable.

Come on you guys all I am pointing out is that wealth creation in our society is skewed to favour certain lifestyles. People working as a team have a greater advantage than a single person. A married couple with the same goals have an advantage over a single person. Many Chinese immigrants have a further advantage with immense parental support. Some reports from Germany claim that Muslims with multiple wives can also leverage this as an advantage. In a society of many cultures and lifestyles certain ones will have advantages over others financially. This is like basic evolutionary theory. Different groups competing for the same resource.
It is a problem that perhaps a universal wage or basic home allocation as a human right could overcome. It would be interesting to see how such a system would work out. I suspect that certain groups would still prevail in the long run unless there were penalties put in place to keep people equal.
Gambling, drug taking, crime, marriage breakups, solo parenting and so on will have financial repercussions.
Perhaps, also, the current angst is caused by the possibility that even if you do everything right you still cannot get ahead. I would agree that once that point is reached it is a major problem that needs addressing. However things do change and there are far more single people today in a world that was designed by the patriarchy to favour a sort of Victorian mindset.

'Perhaps, also, the current angst is caused by the possibility that even if you do everything right you still cannot get ahead. I would agree that once that point is reached it is a major problem that needs addressing. '

I would argue that the point you mention has been reached. Based on this kind of data http://www.economist.com/blogs/graphicdetail/2017/03/daily-chart-6

And also based on anecdotal evidence of the well-trained and hardworking young New Zealanders that I know. Certainy not everywhere in New Zeland , just the places you can get jobs.....

"Singles wishing to purchase should stay with their parents as long as possible..." Fantastic. Single young Kiwis should stay at home mooching of their parents until they're 40.

Well, obviously. It's harder to save for a deposit if you're by yourself. Unfortunately, this means it effectively locks singles out of the property market.

I think that quaint Kiwi custom of chucking out the kids once they reach 18 and insisting they go it alone is now history. mainly because of increased competition from other cultures. Parents need to help more. By the same token children need to play the game as well and be as helpful as possible. I know many young people that stay at home, lying in bed, don't do anything at all to help. Mum will be out mowing the lawn while they crack open a can and play computer games.
Sounds a bit dull I guess, almost going against nature, but it is not compulsory, just don't demand to be especially successful.
I honestly had no idea that this observation would be so unacceptable.

Staying till 40 - that's called failure to launch.

I actually want my daughters to stay at home and become spinsters.

Someone has got a bargain - super duper cheap! I can see someone falling in love with this neat property, wooden floor, nice big deck and a view to die for, not to mention the huge amount of land for chickens!! #GoodBuy

You'd be joking. Based on the info in homes.co.nz - the purchaser in 2013 obviously paid OTT for it - as its CV the following year came in at $30K under that purchase price. The recent purchaser paid 42% above that 2014 CV in a falling market.

The formula I'd use in this case is 2014 CV + 3% compounding annually since then. Reasonable purchase price in today's market = $515K. The previous seller doesn't lose money - so would likely have taken it had they needed to sell. Seller did well on that one. Good timing - likely to be a different story in 6 months time.

LOL its so far away from Auckland it might as well be Erewhon. From the photograph I can see it doesn't have any drainage, not even soakholes. The CV is 470K. Landuse is described as "bach" which seems fitting. Rates are still 1800 pa though. THe owner will be lucky to make any gains on that one.

homes.co.nz couldn't have launched at a better time. Everyone is now informed to the same detail as the agent (and the vendor) selling the property:

* Present value estimates can be judged as based on values in a seller's market - and that market has now turned.
* Sales history of the property is excellent - as what the previous owner(s) paid and when they paid it is key when setting your purchase price maximum and negotiating it successfully.
* Just as one looks at the number of owners (churn) of a vehicle - one can similarly look at houses this way
* For those properties that have recently been renovated - one can estimate the profit margin expectation of the seller - and again negotiate price in a more informed manner.
* Gone are the days when private valuations have artificially inflated prices to whatever level a desperate purchaser would pay and a bank would be prepared to lend on. The inflationary effect of this past practice cannot be emphasied enough.

homes.co.nz is the tool buyers have needed for years and years. It's a game changer and will have a very positive influence on the market going forward.

As Francis Bacon famously said: knowledge is power.

Yes indeed. For example now I know this house has been flipped every 2 years since 2012 :-)
https://homes.co.nz/app/homes/properties/1993c7ea-31da-4ee9-85bb-b4cfd4d...

Perfect example. I quickly calculated a 3% compounding inflationary factor for that property based on its 2012 sales price - which would take it to $1.43m in 2017. Interestingly enough - roughly its capital value.

Another great feature of homes.co.nz is the fact that they are flagging this situation;

Single freehold property sale, but between two related parties, so the sale price may be very different from a market value. Example reasons could be selling to a family member, or a transfer into a family trust. (S13)

And not revealing the price paid in that related party transaction in the sales history.

Well done! Another aspect of the inflationary ponzi scheme cut off at the knees.

Tony Alexander has displayed all the behavior of a common internet troll: unnecessarily inflammatory comments and smugness.

That is unfair.
Mr Alexander has always called it as he see's it.
That is all you can ask.

Yep, and given that he gets exposure in the media on a regular basis in his vaunted position as a bank economist, he runs the risk of being compared to a common internet troll.

wow just saw this, according to the economist New Zealand now has the highest house price index on the planet. I suppose National would say that's a measure of success.

http://www.economist.com/blogs/graphicdetail/2017/03/daily-chart-6?fsrc=...

I have moved my savings away from bnz. It may not be much. But I am sure others will in the same boat

Ok, so the game has clearly changed from "can't afford buy/own " to simply "not allowed to own"(unable to obtain credit to purchase a house). And looks like the supply is being controlled as well, I can see where this is going. The slave age is slowing coming back...

Foreign capital floodgates are being left wide open though. Slaves should be reassured that the trickle down effect will ensure that one day their wages will catch up with house price inflation.

NBever been a fan of TA... but that doesnt always make him wrong.
This time he called it as he saw it.. with good reasons and hit the nail on the head in most instances and the other damn close.
But this is not a popular stand in the banking market, doesnt go well with a large proportion of customers to tell them that top of the line smart phone in your hand a stupid wasted expense. .. one at 10% nearly $1000 cheaper will do the same job.
So once again , rather than go with the unpopular bones truth, go into a Marketing PC PR propaganda mode
Funny thing is is also rather hypocritical .. on the other hand at the same time banks, recognise the exact same failings of younger generation in saving and handling of their finances, and encourage exactly what TA is saying to be part of school curriculum

Bit of the old catch 22 really for TA, and a bank with no backbone.

No, TA and you are repeating false old myths:-

No, Boomers, it’s not like it was back in the day.

http://transportblog.co.nz/2017/03/07/no-boomers-its-not-like-it-was/

"Eyeballing the chart, it looks like Boomers – ie people born between 1950 and 1959 – had net negative savings rates throughout their 20s and 30s. They were borrowing more than they were spending. By comparison, people born between 1980 and 1989 – the unfairly-derided Millennials – appear to have saved upwards of 10% of their income in their mid-20s, in spite of the fact that many of them had to borrow to pay university fees."

"According to the CPI, the cost to buy housing has risen by an astonishing 350% since 1985."

People need to adapt to changing circumstances. The changes wrought by globalisation are not going to be just cosmetic. They are going to be far reaching, profound and irreversible. There are going to be winners and losers. There will be great opportunities and great dangers. People will win just by being in the right place at the right time.

And first prize for the biggest pile of meaningless platitudes goes to ,,,,,,,,,,,,Zachary.