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House prices have risen more than twice as fast as incomes for typical first home buyers over the last 10 years, leaving them struggling to scrape up a deposit in most parts of the country

House prices have risen more than twice as fast as incomes for typical first home buyers over the last 10 years, leaving them struggling to scrape up a deposit in most parts of the country

By Greg Ninness

Typical first home buyers in most parts of New Zealand would now have trouble scraping together a 20% deposit for a modest home, according to's Home Loan Affordability Reports.

The reports track the median wages of couples aged 25-29 throughout the country, and calculate how much they would have saved for a deposit on a modest home if they set aside 20% of their after tax pay each week for four years.

When first started publishing the Home Loan Affordability Reports in 2004, that rate of saving over four years would have been sufficient to provide a 20% deposit on a home purchased at the Real Estate Institute of New Zealand's lower quartile selling price in all regions of the country.

But by the end of last year that rate of saving for four years would provide a 20% deposit on a lower quartile-priced home in just four regions - Taranaki, Manawatu/Whanganui, Canterbury and Southland.

In Auckland, which is the least affordable region in the country with a lower quartile selling price of $692,000 in December last year, the first home buying couple would only have saved enough over four years for a deposit equivalent to 11.2% of the purchase price.

Other regions where the deposit ratio falls short of 20% of the lower quartile selling price are Northland 18.2%, Waikato 16.3%, Bay of Plenty 14.5%, Hawke's Bay 16.0%, Wellington 14.4%, Nelson/Marlborough 15.2% and Otago 19.3%.

That presents aspiring first home buyers with a difficult dilemma.

Although first home buyers could get a mortgage if they have less than a 20% deposit, they would probably not qualify for the special low interest rates banks commonly promote to attract mortgage customers.

So if the deposit was less than 20%, the buyers would generally have to pay a higher interest rate and the difference can be significant.

For example, a bank may advertise a special mortgage rate of 3.39%.

But buyers with a deposit of less than 20% would not be eligible for that rate and would probably have to pay the bank's standard mortgage rate of say 4.55% for the same term.

So if a couple were wanting to buy a home at the REINZ's national lower quartile price of $450,000 and had a 20% deposit ($90,000), they would probably be eligible for a mortgage at the special rate of 3.39%, which would require mortgage payments of around $734 a fortnight (for a 30 year term).

But if they only had a 15% deposit ($67,500), they would probably have to pay interest of around 4.55%, which would push the fortnightly payments up to about $897, an extra $163 a fortnight.

In areas with very high housing costs such as Auckland, the situation for first home buyers is even worse.

At the end of last year the REINZ's lower quartile selling price in Auckland was $692,000.

If a couple had a 20% deposit ($138,400) for a home at that price they would probably qualify for a mortgage at the special rate of  3.39%, which would require mortgage payments of around $1128 a fortnight (for a 30 year term). But if they only had a 15% deposit ($103,800) and had to pay an interest rate of 4.55%, the mortgage payments would be pushed up to about $1380 a fortnight, an extra $252 a fortnight. On top of that, banks may require buyers with less than a 20% deposit to take out mortgage or income protection insurance, increasing their costs further.

Underlying this problem is the fact that house prices have risen at a much faster rate than incomes. In the 10 years from December 2009 to December 2019, the REINZ's national lower quartile house price increased by 76%, from $255,000 to $450,000. But over the same period, the combined national median take home pay for couples aged 25-29 (where both work full time), increased by just 27.7%, from $1302.65 a week to $1663.32 a week.

In high cost regions like Auckland the difference is even more stark, with Auckland's lower quartile price increasing by 94% over the same period, from $357,000 to $692,000, while the median take home pay for Auckland couples only increased by just 25%, from $1355.95 a week to $1696.000 a week.

So although interest rates may be at record lows, many first home buyers in most parts of the country will still struggle to purchase a home unless they are are on higher than average incomes, because they will find it difficult to scrape together a sufficient deposit for even a relatively modest home.

The comment stream on this story is now closed.

Home Loan Affordability Reports are available for each of the following regions and cities (click to view).
Northland Region
Whangarei District
Auckland Region
Rodney District
North Shore District
Waitakere District
Central Auckland District
Manukau District
Papakura District
Franklin District
Waikato Region
Hamilton District
Bay of Plenty Region
Tauranga District
Rotorua District
Hawke's Bay Region
Napier District
Hastings District
Gisborne District
Taranaki Region
New Plymouth District
Manawatu/Whanganui Region
Palmerston North District
Whanganui District
Wellington Region
Masterton District
Kapiti District
Porirua District
Hutt Valley District
Wellington City
Nelson/Marlborough Region
Nelson City
Canterbury Region
Christchurch District
Timaru District
Otago Region
Dunedin District
Queenstown-Lakes District
Southland Region
Invercargill District
All New Zealand

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The only thing that swings in FHBer's favour is Kiwisaver employer contributions. The return on savings in the bank being the pittance they are, if it weren't for the fact that employers were putting in 3% (effectively topping up contributions by up to 75%) via Kiwisaver then no doubt there would be a lot less FHBers over the past few years.

The general consensus from older generations is that Interest Rates, and not the deposit, are the biggest hurdle to home ownership. "Back in my day we had 29% interest rates and 7 mortgages etc".

If I were a FHB I would save money on rent, by living in a hotel. I own 4 properties but don't rent them out because being a landlord is evil. I just employ people to do the maintenance and keep them tidy.

I have been considering renting out my home to a needy family at cost only (mortgage + rates + insurance), purchasing a 3 room tent and moving my family to the roundabout down the road from the local Pak N Save.

Is the mortgage component both interest and principal? If so I might join you.

Yes it is.

That is disgusting


Skydiv is trolling for fun, but they have described exactly what the founder of TOP, Gareth Morgan, has admitted to doing. He has multiple properties but he keeps them vacant because tenants “just make the carpets dirty”.


Gareth is a hypocritical tax dodger

Gareth Morgan is a classic example of someone that has used our free market capitalist system to become successful, but having done so he now wants to pull the ladder up after himself. Him and TOP want to tax both business and private assets left right and centre. Boats, tractors, factory equipment - all taxed annually. Morgan didn’t have to contend with that when he was starting his businesses, but now he thinks anyone looking to take a risk and be an entrepreneur can just suck it up.

As for FHB, he wants to tax their savings annually, and when they do eventually buy a house he wants the state to charge them “rent” to live in their own property. Sounds great.

"Gareth Morgan is a classic example of someone that has used our free market capitalist system to become successful, but having done so he now wants to pull the ladder up after himself. "

Yes, so he can give the ladder to people who actually need it, such as those on low wages and struggling to buy a first home, and not those who are currently on top of the mountain with a surplus stack of ladders, such as himself.

You're conveniently leaving out both the tax cuts and UBI that his policies would support. The UBI will make it easier to take a risk on a business, not less, because you've got a safety net to fall back on and an income to live off even if your business hits a rough patch.

TOP’s taxes would keep the poor in their place by putting barriers in the way of success.

TOP aren’t actually proposing to reduce tax take - they just want to tax assets (imputed income) instead of actual income. But if the actual income from an asset is higher than the imputed (imaginary) income they will still tax the actual income.

They are no longer pushing universal basic income and are instead talking about “unconditional basic income”. Only applies to families with very young children (instead of paid parental leave), the elderly (but they will then means-test superannuation to pay for it), and people aged 18-23.

They wouldn’t be able pay for full universal basic income without increasing taxes (which they would) or drastically cutting public spending (which they wouldn’t).

Hang think wealth taxes mostly harm the poor? Have you thought this through?

Anyone poor that wants to start a business and make a better life for themselves, yes. Anyone poor that works for a company that goes out of business or heads overseas due to TOP’s insane asset taxes, yes. Anyone poor that buys goods and services at inflated prices due to lower nationwide productivity, yes.

If you're being taxed based on a deemed rate of return, it's a real incentive to make your assets work for their living. Hopefully it would drive down house/land prices too, benefiting those who don't own property yet and making the country more efficient.

No tax is a silver bullet and I'm sure there'll be unintended consequences, but I really think you're fighting an uphill battle here. Asset taxes hurt those with the most assets.

That’s not how it works in reality. By your logic, quadrupling council rates will make houses cheaper. But we know intuitively that this wouldn’t happen - it will simply increase rents.

For a starter it will encourage capital flight. It would also discourage capital investment and entrepreneurship. For example, why risk investing in experimental new factory equipment if you’ll be taxed on its value even if it doesn’t earn you any extra income? What if a new factory takes a few years to earn income but you’re being taxed on all the equipment anyway? Not to mention all the market distortions and the fact that it is exceedingly difficult to enforce.

If the council quadrupled rates they could probably drop consent and infrastructure fees for redeveloping/new development to almost nothing, resulting in a increase of supply... increased supply, lower prices for new builds, more FHB, lower demand for rentals, simple supply and demand..
And at the same time it ncourages those with subdiviable sections to sell off half the section the reduce their rates bill.. Also reduces the carrying cost of the finace to do developments since there won't be $50k of upfront fees to get paperwork to do the development.

So less land-banking, more development, lower house prices and rent..

Yes, I think all else being equal, if rates increase, house prices would fall. The higher the carrying cost on an asset, the less I will pay for it. I am not the only one following this logic - one estimate is a 1% land tax would reduce land prices by 17%.

Agree with some of your other points - it is difficult to administer and could harm productive choices. My preference is a simple land tax - we already value much of our land for council rates and you can weight industrial or farm land in various ways to tweak things.

By that logic we can make cars cheaper by increasing licensing fees. Taxing things doesn’t make them cheaper.

If the Government decided to tax all cars an additional $5k a year, would you be more or less likely to buy a new car? This is simply the inverse of investment yields - if a share increases its dividend, it tends to become more valuable. If a house's rent income increases, the value tends to increase. Costs are the other side of this scale.

And you seriously think this would reduce the cost of a Totyta Corolla? How’s that working out for Singapore? They are taxed into the stratosphere, yet for some strange reason the dealerships aren’t selling them for a pittance over there.

Well it's a bit hard to sell a vehicle for a pittance when the upfront taxes on purchase include an additional registration fee (100% of for first $20k open market value, 150% $20k - $50k and 180% for $50k and above), a 20% excise tax and 7% GST.

You should have a look at some of the depreciation figures on their vehicles.

I don't know a lot about their tax system, but it looks like the vast majority are up-front, which of course increases the price. The equivalent would be stamp duty on houses - not an ongoing land value tax. These are very different types of tax with different results.

They have exceedingly high upfront as well as ongoing vehicle taxes. A Toyota Corolla isn’t any cheaper over there if you remove the up-front tax. You’ll find the main result of their taxes is that less cars are imported and less people own their own cars. One thing is for sure - taxes don’t make cars any cheaper.

This is a good example of why ya don't argue with smarter people about a blatantly incorrect premise on a subject you clearly have no understanding of. BHSL in action again.

First, wealth/asset taxes disproportionately burden the poor (i.e. those with low asset wealth?)?
Second, that the carrying costs of an asset don't determine it value?

But thank you. This thread did make me lol this morning.

In this case high carrying costs decrease value to the user but they don't decrease production costs. The result is fewer transactions, not lower prices.

Higher carrying costs by targeted rating structure lowers initial production cost... Councils aren't allowed to profit, so a higher perpetual cashflow implies a lower initial compliance cost (see Milldale). i.e lowering initial production costs which are a shared burden between developers and buyers.

I was replying to the car example. Should have made that clearer.

There is another important difference between cars and houses - a significant part of house prices is the cost of the land. Perhaps 20-30% of the final price. This can easily be revalued by a higher (or lower) cost of ownership

nymad, you don't understand basic economics.

refactornz, exactly right.

Increasing rates will reduce servicing and cause the average issued home loan to fall, house prices would certainly follow suit. But i dont think thats your point. The total cash flow cost to own a home would rise, which would also screw over FHB.

Define 'poor'. The debate around things like inheritance taxes and capital gains often sees people saying "We don't have one and that makes us weird" but then simultaneously unable to answer why it would apply to everyone when those same countries overseas will often have massive (millions of dollars worth) of threshold before they actually kick in. Here in NZ it seems everyone wants them to kick in at dollar one.

If Governments are so concerned about the poor, they can do what the rest of us are expected to do: reign in our other spending priorities and maybe stop promising things they can't deliver, even if they could afford to. Then they would have more to go around, or they could take less to begin with. Now there's a novel idea.

What you're ignoring is the Gareth is a rampant "free marketeer" who blindly ignores the obvious, that the free market doesn't work. Taxation is not a solution but just another way for the free marketeers to find ways to avoid having their wealth captured. The real answer is for the Government to do it's job - regulate the markets. So far both labour and National are steadfastly avoiding that because they don't want to piss off the money!

what tax has he dodged exactly? I'm sure the IRD would love to hear from you if you have something to back that statement up.

And who exactly is being hypocritical here? I'm sure you think not paying tax on your capital gains is just fine, but somehow he's different?

He BOASTS of paying (almost) zero tax.... what a wan.r
And I pay a great deal of income tax and not thinking up tax avoidance schemes or boasting about it so I have a right to comment

He plays the hand he is dealt, but points it out and wants to change the tax system to remove the bullshit distortions, and your taxable income from rental property seems to vary rather a lot depending on what point you are trying to make that day, sometimes it is high yield and producing lots of taxable income, at other times it is:

by Houseworks | 22nd Feb 19, 10:39pm
The labour party dummies have no idea what it is like being a landlord, the crap you have to handle and the dickheads you have to deal with. At least cap gain was fair recompense at the end of the day, which they want to take a third, get out of here.

apparently not very high at all...

cause I question your supreme leader you have gone to a lot of effort to try to discredit. And you're not much different to retired-poppy who always made out about negatively geared specuvestors and made claims of being desperate which we are not. We are hardworking at what we do. I used to think you had the smarts pragmatist but see you very differently now.

Well, thats a true to form answer if ever there was one.

Well, you do go on :) isn't it time you got a house so you can cut off rose heads instead

Extremely happy where we are thanks..

As a child I once made terrible scrambled eggs. Bits of shell mixed in, way too much salt, very dry. I told my mum it was delicious and ate it all to save face.

Nothing has changed, then.
You are meant to learn from these lessons as a kid, not repeat the mistakes.

To err is human... it is a mistake to not learn from our mistakes

Cool story bro.

It's tragic.

But the situation is likely to get worse. Heaps of people (not just NZers) want their own little slice of NZ.


So considering that you're a FTB and can't afford a home TTP, why do you keep promoting the housing market so much to push prices higher?


I don't understand the problem. The wise people at the RBNZ have decided that even higher house prices are exactly what is needed to "stimulate the economy".

These FHB should be grateful the economy is so stimulated.

After all what is important is having a job for the shear joy of increasing GDP, not for actually affording a decent life with your remuneration.

. .. if ours is the " rockstar " economy ... all the others must be in a piss poor state ...

Our economy is based on flipping house to each that respect it's a rockstar.

It is a rock star economy - if the rock star is Ozzy Osbourne.

Ever seen the rockstar the day after the party at the end of the tour... thats the rockstar we are..

The problem with rockstars is the managers run off with all the money.

I think NZ is the Billy Idol economy

With a rebel yell, the banks cried "More! More! More!"?

Washed up and cashing in while it can

Well, I'd do anything, for my sweet 16th (rental)


Inflation by stealth. Erode the value of labour so businesses can be more competitive, i.e. make more profit.
All done through wealth gains which avoid tax. It's fake growth really, as is always the case when you're just printing money.

... heaven help us if we hit a severe recession , a GFC2 ... 'cos , after the wealth gains are eroded , or even completely lost . .. the debt remains ... every dollar of it ....

They would rather let inflation rip than ever hold debtors accountable.

Very true.
One answer to this conundrum is of course 'helicopter money'.
I can't see the banks' PR machines / tame politicians allowing that to happen though.

No, the debt gets written off as people/companies declare bankruptcy and fold, and the fake prices on all these assets (eg: share prices of the companies that issued the debt) get rewritten to something approaching reality due to it.

Great comment. Ironically, certain voters believe they will be helped by voting a certain way but both major parties are screwing them without them realising.


Excellent article.
Affordable my arse

Ok so your arse is not affordable :)
Saving 20 percent is simply not enough. Over 20 years ago the wife and I saved 50 percent of net income to get the deposit on first home.

Revealing: my wife and I v “the wife and I”

I don't own her so what's THE prob

How much was the purchase price?

And how much was your combined household income?

Not a lot of the comments posted make much sense. Me? I think the bigger issue is around how you go about assembling your war chest (deposit) NZdan has an inkling and I say that FHBs need to be aware of the potential of investing in equities as a great way to multiply your warchest as you save. Its actually how I saved my deposit for my first home years ago. The returns blew any interest rate on offer into the weeds then and still does now.


I'm sorry but if you bought a home pre-2016 when things really started getting hot, please don't lecture FHBs about 'what they should do' - it's a completely different ballgame now.

Actually the markets started going stupid in 2004.


So 20% rises in house prices in some areas is a smaller issue? Ok boomer

It's generally not recommended to invest in equities if you need the money in the next few years - some say 5, some say 10. The last decade has been a tremendous bull run but equities do not always look like that, and there is a risk of losing a chunk of the deposit and having to wait for it to recover (which could take several years). I still have money in the market, but that is with a longer time horizon.

What's the next a2 milk, probably too late to buy now as competition from Nestle etc. I can name companies that have lost half their value over last year or two whilst advisers and "experts" have still recommended them... easy to rapidly lose hard earned capital through sharemarket

Easiest thing is to buy the index - NZX50 is up about 30% in the last year, more than doubled in the last 5 years. Less fun that way, but significantly less work and statistically likely to have a better result.

Even if you do want to buy individual companies, if you're not crazy you have a portfolio of shares and capital loss on one is hopefully weighed up by gains on the others.

I wouldn't use the word hopefully when giving investment advice

What word would you use instead? No investment has guaranteed returns.

Govt bonds.. although saying they have "returns" is a bit of a joke at 1.6% IIRC.

Safer than most, for sure, but there is a rich history of Nations defaulting on their debts.

Fair enough, pretty slim odds of that if you are talking about a developed open economy, but slightly more than zero.

I'd use words that express confidence in what you are investing in. Hopefully makes it sound like a gamble

OK, you do you. I'm quite happy accepting the randomness of the world around me and my limited ability to predict it. Ignoring the role of chance doesn't make it go away.

Fair enough. Hopefully it pays off for you

Well if you are in an area experiencing growth at the the extra $80 odd dollars per week and fix for 1 year. You will probably find that in a fairly short time with a little growth and a little bit of principle paid off you will be in a position to re negotiate a better interest rate. To imply that you will be stuck paying a much higher interest rate for years and years is a little misleading.


Unaffordable despite using figures assuming two income streams. Ridiculous.

... houses have long since ceased to be a necessity for workers , for families ... for regular folk on Struggle Street . .. easily affordable ... that was 20 years ago ...

They're now a speculative plaything , a tax dodge , status symbols , power assets to enrich the haves , at the expense of the havenots ... makes lite of a high median multiple being a sign of a dysfunctional housing market, yet points out the fact a higher deposit is a problem, without stating the obvious, ie if the property price was not so over inflated, then your deposit would go a lot further, or for the same % on a lower valued property, you would need a lot lower deposit.

Excellent point

Exactly, seems a bit ironic. last week - 'median multiples aren't important, the serviceability of mortgage payments are'. this week - 'high median multiple prices may worsen serviceability of mortgage payments'.


Actually I think interest do a good job (as usual) with their affordability report which has both a mortgage repayment calculation and a deposit calculation. Just looking at median multiples is way too basic; interest rates are definitely a factor that can’t be ignored.

Agree on it's own it's too basic, but the point is it's one of several indicators

There is too much emphasis given to low interest rates by themselves contributing to house price increases. They only contribute to the point that they increase demand (through making repayments cheaper) relative to supply. But so do lots of other factors like first home buyer subsidies, builders making savings on build costs etc.

And worse because interest is based on borrowings that can be leveraged, and small saving on the interest side can leverage into a large capital increase on the value side. Net result is properties become less affordable .

But none of these things make a difference to increasing prices if there is non restrictive land zoning and building policies in place which allow supply to equal demand.

And one of the central indicators of good policy is a low median multiple, ie a high median multiple indicates a dysfunctional housing market.

I used to think that way but I’ve since changed my mind. I now think that the main issue is excessive demand due to low interest rates and preferential tax treatment. Without those we would not really have a problem (granted there aren’t quite enough houses in Auckland and maybe elsewhere but not a huge deficit).
Yes we could build a matching excessive supply through endless low density sprawl, but that just creates more problems like transportation. Did anyone read that article recently saying it is now more expensive to live in Houston than New York because of the cost of transport? And I imagine that is after a ton of transport subsidies in the US.

If you have a link to that New York article I would be interested in reading it..

But the point is not to build excessive supply (or create over demand through poor immigration policies), but to build supply to equal demand both up and out. A system that can do this has a low median multiple.

The problem we have in Auckland, and the rest of NZ to a lesser degree, is not enough affordable supply is being built, we have plenty of overpriced stuff, and almost all of it poor quality.

And yes there are a ton of transport subsidies, most of it for PT.

Public transport in NZ no more subsidised than roads. Councils spend more money on road maintenance than public transport. Governments, especially the last National government with its RoNS policy used the consolidated fund to pay for motorways. Fuel taxes and road user charges was insufficient to fund expanding the state highway network (which is only small proportion of the road network in any case).

Roads are even more subsidised when you consider hidden subsidies like what the road toll causes in the form of death and injuries. Congestion costs of roads. Small particle pollution causing health problems. And of course the biggie - CO2 climate change pollution.

"last National government with its RoNS policy used the consolidated fund to pay for motorways. Fuel taxes and road user charges was insufficient to fund expanding the state highway network"

So are you suggesting that instead of paying upfront, the RoNS were built much MORE slowly. Or not at all? A better choice would be neither of the above

I do not know what you are trying to say Mr Houseworks. The point I was making is that the reason NZ is so car centric is because successive ministers of transport since the 1950s with only a few exceptions have chosen to fund motorways and roads not mass transit systems which would have cost about the same.

Politicians from any party dont have a solution. Key started this with mass immigration, he lied about the numbers and lied about the effect on house trading. this set in motion the crazy house inflation as houses were used in trading to make profits and bought up as rentals to generate incomes. Once the public realised this problem it was too late. Banks supported this house business with massive increases in debt. Now 1/2 house sales are into the housing business, meaning investors have deposits and can borrow. So hard for FHB! Neither party will make too much noise about this in election year as neither has a solution so they dont want to talk about it. Incomes are way off matching house inflation in NZ, and the economy is not going to make this up. the general comment amongst middle class home owners is that if you dont have a house you're stuffed.

Even if one manage to raise 20% deposit on Ackland median of $900000 than also a moratge on $720000 will be approx $740 per week plus $100 for rates and insurance =$840 based on 30 years and if twenty five years will be approx $920 per week.

It means that FHB cannot dream to buy house anywhere but in lowest quartile in Auckland. Welcome to NZ . Plan to stay and raise your childern only in the lowest .........

New NZ for future generations : 2020 -Gift for the new decades presented by NZ politicians for average kiwis as their (politicians) family / childerns are personally safe as will be supported by their money and who cares for the rest of Kiwis (Result of policy being framed by politicians with vested interested).

Yes what a gift for current and future generations.
Well done NZ!!!!

Or you can give the money to landlord who will pay off the mortgage and own the asset. You have used median Auckland price why not aim for first quartile if that is too high. And if Auckland is too high there are many other good nice cities. Tenant life is not fun being restricted to landlord whims or waiting to be given notice to vacate. We just gave notice to one family but now they are all contrite and trying to stay.

All the other previously good nice cities are suffering from the good nice aucklanders who took their good nice money from their great house sale to the provinces and drove the previously good nice prices through the roof.

Except most of the South Island.

That is true prices have risen around the country in varying amounts and IMO it looks like that will continue this year. Anyone working for a govt dept earns the same wherever they are.

They should have just been FHBs 10 years ago. Instead they obviously listened to DGMs, and now have FOMO. ABBH: Always be buying houses.


Exactly. All those young people should have just been born earlier. If you were 15 years old 10 years ago, you should have been 25 and buying houses. Stupid people.


Some of the stories in the press are getting even more stupid.
Saw one yesterday about some 19 year old, started working little jobs aged 12 because he wanted to buy a house.
Really fucked up (not him, the system and Oneroof's unlimited desire to talk up the possibilities for FHBs)


These stories generally have an underlying theme that 'anyone' could do this, which in theory, everything being equal, is true.

But of course there are two problems with that approach 1) all things are not equal, and for many, don't even come close, and 2) if everyone could do this and did, then there would be no value to it, ie it only works for that small % because others didn't, and in growing cases, can't.

When it comes to houses, the system should make it as easy (by individual effort, not counter subsidy) to put shelter over one's head (owning or renting) as this is one of the basics needed for human existence, as Maslow clearly pointed out.

Perfectly put

Did you see the story about the 15 year old school kid who does lawn mowing round and has employees. It's TRUE story... very amazing. I have a brother who was similar and he did well for himself but then made dumb decisions and lost all.

The more interesting question is how the imbalance can be reversed, if it can be?

The govt builds lots more housing and sells at no profit to first home buyers.
With decent investment in some prefabrication plants they can get out down and speed of delivery up.

And the funds for doing this should come from wealth taxes, not where they currently are being pulled from - the productive economy.

Introduction of a small land tax would pull section prices down by 10 to 20 % .... apparently ...

.... there's a big saving right there .... easy peasy ...

The funds don't even realistically need to come from taxation (that's not to say wealth shouldn't be taxed anyway).
If the govt can create money to keep banks liquid, it can certainly create money to deliver a massive house building project.

The issue more one of capacity - the state would need to recreate the Ministry of Works and/or provide certainty to large private sector developers that, for a fair rate of return, they'll be getting 10-15 years of govt business to build housing.
Then there is the RMA and local councils to deal with.

All very achievable but neither major party seems to have the nads for structural change.

Interestingly, the Nats haven't seemed to cotton on to the fact that decimating/immiserating the middle class kills their opportunities with the next cohort of voters. The boomers will only last as a force for another 3 election cycles or so.....

Yes, and the boomers' influence will start to wane within 2 electoral cycles.
Fertile ground for a party in young middle income NZ... but neither party seems to get that

by Fritz | 27th Jan 20, 11:00am
The govt builds lots more housing and sells at no profit to first home buyers.

They could call it KiwiBuild, maybe?

They dont need to sell them. They need to call them public housing and rent at fixed rates based on income. This would take the heat out of the property market, return some normality.

Simple tax Empty Homes and use the revenue to build new homes aimed at FTB's only. Even in Auckland we currently have 15 times more empty homes than Vancouver did when they first introduced their very successful revenue generating Empty Homes Tax, where they found that the we mostly taxing Overseas Investors who wanted to maintain they bolt hole, so much so, Vancouver city council has increased the empty homes tax from one per cent to 1.25 per cent for the 2020 tax year. All revenue collected, after costs, is directed towards affordable housing initiatives.

The latest Vancouver city statistics revealed there were 22 per cent fewer vacant homes in 2018 compared to 2017, a 21 per cent drop in exempt properties and a seven per cent increase in tenanted properties. The city has collected $39.7 million in net revenue for affordable housing initiatives since the EHT was implemented.

If the govt built homes for sale at no profit to FHBs they could be selling 3 bedroom townhouses for circa 500k, and two bedroom townhouses for circa 400k (in Auckland).
The only thing stopping them is lack of imagination, dogmatism and incompetence....

Yes and to get the incredibly easy revenue win by taxing empty homes in main cities such as Auckland, you could quite realistically have affordable none profit homes for FTB's. Just take a look at even the basic stats for Auckland for example; Currently we have officially 39,393 empty homes with a median house price of $1,030,000 in December according to the Central Auckland figures in this article. So lets round it off at a value of $1,000,000 for the 39,393 vacant homes, taxed @ 1% Empty Homes Tax (EHT) = Revenue of around $393,930,000.
Remember most of the empty homes are owned by Overseas Investors so they can't even vote and as test cases such as Vancouver have already pointed out Overseas Investors are happy to pay extra for their bolt hole, lets use that to our advantage NZ!
Link to NZ Empty Homes stats:

That 15x figure was debunked about 6 months ago in an article on this site. It's mainly the way the figures are collected.

But the real point is that it is councils in restricted land zoning jurisdictions that need to use the red herring of vacancy rates, and rather than free up land restrictions, they do as you highlight 'All revenue collected, after costs', the cost of course is really revenue to the council.

Notice with the drop in property numbers the council put up the tax, so as to keep their revenue stream up for their latest policy initiative. They will be aiming for the sweet spot of minimum numbers and maximum tax, ie they won't want the exempt property numbers to fall too low.

And the Vancouver median multiple is still 11.9 making it the 2nd most unaffordable city in the world after Hong Kong

Dale Smith are obviously lying and you need to go back to school to improve your math skills, go look at the evidence in the attached link. And also we know you have very vest interest in keeping is empty home tax free. Fact is that if you can afford an empty home in a major city area you can afford to pay tax on it!
Here you go Dale quote from article: "The City triumphantly announced that it expected to rake in $38 million from those who have declared their homes empty and are set to pay, or have paid, the tax. It’s interesting to note that out of the total 186,043 homes that issued a declaration (99 per cent of all Vancouver homes), 178,120 were occupied (owner-occupied or tenanted), 5,385 were exempt and 2,538 were vacant. So all that money comes from just 2,538 properties". We have 39,393 empty homes in Auckland city alone and the reason why the number of Vancouver empty homes is reducing (As you pointed out) is because their Empty Homes Tax is working and there's no doubt about that. :)
Article link:

You forgot the 'pants on fire.' And I don't own an empty house anywhere.

We have had this debate previously here: over a number of comments but my final post and maths was this:

The Gross vacancy rate (which is what the NZ figures are) of Vancouver is 4.2%. The Gross Auckland figure is 7.3% and NZ lowest figure is Nelson at 5.8% which is still 28% higher than Vancouver so for starters a higher Gross vacancy rate would seem to be a NZ thing.

But of course what is included in the Gross figure. According to the census Gross vacancy rates include dwellings like: baches, holiday homes, ordinary homes from which the usual residents are away, investment properties in which nobody lives at all, and homes that are being renovated where nobody is living.

Does a high Gross rate indicate high foreign ownership where they are being left vacant, which you would also show up as a higher net vacancy rate?

The West Coast has a Gross vacancy rate of 18.69% which has been put down to high unemployment and people leaving the area. ie house is being sold as vacant possession, or owners looking to return at some stage and don't want to rent it in the meantime. It would be hard to imagine this high rate was caused by foreign investors.

Thus to estimate the net vacancy rate is not easy because no hard data is collected (but it doesn't stop them implementing policy because of it).

However my estimate below is far better than you comparing Gross Auckland with Net Vancouver.

To quote the Vancouver article:

'It’s interesting to note that out of the total 186,043 homes that issued a declaration (99 per cent of all Vancouver homes), 178,120 were occupied (owner-occupied or tenanted), 5,385 were exempt and 2,538 were vacant. So all that money comes from just 2,538 properties.'

This means after taking in exemptions to give a net vacancy figure approx 1 in 73 houses in Vancouver is vacant.

Auckland has 540,000 dwellings and the 39,000 vacancy rate figure is Gross. If you assume that its exemption rate would be similar to Vancouver this would leave a net figure of 12,480 vacant houses, ie a net vacancy rate figure of 1 in 43 houses in Auckland is vacant.

At best it could be said that Auckland has twice the vacancy rate as Vancouver, not 39x. And it would seem we have nearly twice the vacancy rate as Vancouver, both at an Auckland and then at a national level as a 'NZ thing,' and given that this extra nationally won't be due to there being more foreign owners, it could be argued that we are far closer in parity with the number of foreign investors than the numbers indicate.

But it still does not tell us why these houses are empty long term and who owns them.

And if I am not reading the article correctly it could that bit where you say the owners are happy to pay the extra tax. I missed that bit.

The quickest way to see off all non value-added rentier speculators, foreign or domestic, is to enable policies that make housing more affordable, and take away speculative capital growth gains. But there would be no money in this for council.

As GBH said, this is just a revenue grab, - against those that can't vote, or their small number of votes don't matter.

Dale you can ramble on incoherently as much as you like and I really don't believe you about not owning an empty home because why else would you fight with such paper thin arguments, like not wanting to tax Overseas Investors?? And I did proved you wrong last time, so you haven't debunked anything have you. Look the EHT (Empty Homes Tax) has been proven to work on a large scale in other Western countries. It also shows that Overseas Investors are willing to pay the extra tax. And YES it is a revenue grab for revenue for new homes for First Time Buyers, what is wrong with that Dale, most people here fully approve of taxing Overseas Investors and it would certainly will win votes in our election. A very clear Win Win for NZ citizens and residents! :)

It red flags the weakness of your argument to say I lie and am incoherent, rather than counter with where the figures I quoted above are wrong.

But I leave that to others more qualified than yourself to point out where my maths is wrong, if they can be bothered.

And the revenue grab is a low Gross (before council deducted revenue) of $38 million, hardly making up for the billions of over inflated land value due to restrictions.

An empty home tax is a very blunt instrument and a poor financial substitute for fixing the underlying cause.

Dale don't waste your time with CJ, it's pointless

I have already countered your paper thin arguments Dale, the figures in the articles speak the truth of the 38 million that Vancouver managed to reap in it's Empty Homes Tax. Considering that we have 15 times more empty homes in Auckland than Vancouver did we can make a huge amount of revenue for new homes for FTB's. So what plan have you put forward to help First Time Buyers? You have contributed absolutely nothing, all in the effort to protect your own very selfish money driven interests along with the likes of other money grubbers like Yvil who also doesn't care about FTB's.

Make it 10% p/a, non payment resulting in forfeiture.
I'd be quite happy to see all capital gains / bolthole investors shaken out of the market.

Of course it can be done, look at the new towns created in England after the second world war. The point is there is still a lower downside to sitting on your hands than doing it in political terms. People don't yet perceive a lack of action as failure when it comes to housing.

There is still hope for the FHBs. Assuming the new plague on the horizon takes hold and Labour's inaction so far will ensure it will, then the more vulnerable oldies like grandparents and old babyboomers will be dropping like flies. Afterwards, there will be all sorts of new economic possibilities open up for the younger and more healthy FHBs as per the great Black Death aftermath cited below:

Economic Consequences of the Black Death in the 14th century cited from Wiki: e.g.
"With such a large population decline from the Plague, wages soared in response to a labor shortage.[74] Landowners were also pushed to substitute monetary rents for labour services in an effort to keep tenants [75]".

As a young and healthy FHB and you do catch the plague you will probably survive but you could cough over any babyboomer property investor known to you and before long he will turn belly up. It should be noted from past plagues (pandemics) that the plague is no respecter of wealth.

Very darkly humorous.

Fritz, I am DEADLY serious.

From "Time":

China better ban these 'wet markets'

Estimates of about 3% death rate, mostly affecting people with pre-existing medical conditions, and it's spreading very rapidly. That's 100,000 if everyone in NZ is infected (unrealistic, but still will be a lot of dead even if much less prevalent). Something like 20% of those infected get viral pneumonia requiring hospital treatment that will quickly overwhelm hospitals - with death much more likely if you can't get hospital treatment. If starts to spread significantly in NZ may have to close schools, workplaces, public transport and other places where communication of disease is likely to at least slow it and place less strain on hospitals.

Boomers will go on voting for their own demise, in fairness. Tax cuts, and reduced services...just at the time their own private medical insurance becomes unaffordable.

(Although some will then be asking for young people to pay more for private insurance so they can have it cheaper.)

In other news: the pope is catholic, and bears sh*t in the woods.

Yes this is an issue, however... We now have overseas ban, depreciation change for investors, greater equity requirement for investors, the lowest in rates ever, tax loss fiddle removed, ability for fhb to pull kiwisaver, rent control changes, indulation and min health standards. legislation under way to bypass council rma bs to speed up large developments. A lot of these changes will only be felt after time but the immediate impact is higher rent and less properties available.

The only lever left is an empty house tax. Let's do it and make it a harsh one.

That said with the current state of affairs hard to see why anyone would want to be a landlord. Easy to see why air bnb type renting is on the up as well, as it a way to bypass the rta legislation.

What about a tax on people that own more than five rental properties !
I talk to a lot of builders and other people in the known and report people with 20-30 houses stock.
We just started looking at open houses, and there is quite a good number of mom and pops doing the round.
We have a good deposit unfortunately we cannot compete with them and they will likely make more substantial offers than ours. Especially when 90% of houses going on the market at the moment is an Auction

What you need to do is leverage the equity out of your existing home for a deposit, then take out an interest only mortgage because that's what mom and pop investors do (it enables you to borrow 30% more versus P & I on the same outgoings).

Wait, are you a prospective FHBer? Well, sorry you'll have to go Principal and Interest and you'll have to save your deposit.

Yes agreed an Empty Homes Tax in our large cities would get my vote! And the beauty of it is you're mainly taxing Overseas Investors who can't vote! We still have lots of Oversea investors buying through the backdoor so lets tax them for that privilege!
"Barfoot & Thompson director Peter Thompson said his firm had seen Chinese buyer numbers fall since the restrictions, although they still made up 25 per cent of its sales".
Article: Real estate agents target Chinese New Year buyer boom.

1-2% land/property tax does the job, and cheap to administer (just 5-10x rates)

Yes! Yes tax someone! Someone who is not me! They can pay!

It's been great for me, ultimately the lack of housing supply and affordability is pushing up the rental return and quality of tenants applying. Holding property is an arbitrage in effect because if a government where elected that had an effective housing policy the music would stop, however as people seem drawn to continue to vote for the happy, smiley people instead of the people who might get things done...

'instead of the people who might get things done"

Who are these 'people who might get things done'?

Good post (as always) from Michael Reddell. It's a comment I have often made about the Christchurch earthquake re residential housing: not one fatality from non-exogenous causes. Houses bent, tilted, their chimneys fell, and their foundations cracked. But they saved the lives of their occupants. And perhaps half the residential housing stock was pre-NZS3604, pre-consents, and not a few were owner-built, like Norman Kirk's. Food for thought....perhaps the plethora of regulation has been largely all-cost, no-benefit, when the practical experience of Christchurch is considered.

I think the logical answer is HNZ building fhb style homes and either leasholding them out or selling them on at marginal rates much like earlier govts did with statehomes in the 90s and 2000s. The trick being to replace them with new stock instead of having no new homes in the pipeline...

We have a huge waiting list for HNZ housing as it is, perhaps once they've solved that one you can put what sounds very much like the failed kiwibuild disaster in their area of responsibility. They already have enough work to do to address the existing issues that are in their remit.

20K subsidy is what Kainga Ora allow for tenants to purchase the home they are living in. Wow wow wow. Cant imagine that will entice any to buy, compared to paying income related rent. Plus they dont allow sales in the main centres, who are they kidding. My aunty bought her Mt Roskill state house years ago when other state tenants also did that. I guess there was a realistic opportunity and worthwhile reason to buy.

It is a shame that houses are becoming more and more expensive. And sure, it does not have to be this expensive for a country the size of NZ.
Nevertheless, a country that has one of the highest minimum wages anywhere on the planet, highly regulated professions (creating monopoly on supply of services), extensive health and safety requirements (necessary off course but off course it comes at a cost), expensive building material (again monopoly on supply), very expensive infrastructure (at least 50% of land price is simply the cost of the needed infrastructure) will struggle to produce anything affordable.
Even if undeveloped land becomes free somehow by magic, the costs to develop it and build a house on it will be unaffordable to most people. Crazy stuff

Don't worry, due to the pending nutrient run off restrictions very soon there will be an enormous pile of idled agricultural land waiting to be built on and not before time, cabbages, cows and run off or places to live in....

I think there will be solutions to both issues at some point before any major blowup.. if not then people will revolt until politicians either relax the rules or get solutions. That's why the gummint is spending up large on motels and the like as a temporary solution to homelessness until they get a permanent solution. If its what the electorate expects and demands then the gummint will do it. Sorry to burst your bubble.

Very good article Interest, which shows clearly the increasing difficulties FHB face. I suppose for many the question is do you focus on the moral/ethical issue "is this right or fair?" (it is not) or do you focus on doing whatever needs to be done to be on the privileged side of the ledger?

Yvil you make it sound like the only way is to jump into the property ponzu silliness.
That is patently wrong.
There is plenty the government could do to sort this mess out.
Mind you I kind of get your point. Waiting for the government might be forlorn.

Yes Fritz that is my point, waiting for the government (left or right) to help is futile, so one has to take charge of his/her own life and is left with the two choices I described above

One can do both.

It's reasonable to manage one's own life while also pushing politically for the conditions that benefit many other Kiwis. As has been done in New Zealand's history, as was a big part of why home ownership became accessible for previous generations.

Doing anything that drops house prices is electoral poison. Govt's trying to bring house prices down have to rely upon inflation and long periods of no price rise if they want to be re-elected. Nat's did OK on that 2008-2012, 2016-2017 (and coalition since 2017). A slowly ramping up land tax over 10 years to replace income tax or something else would be my favored approach to rebalancing things - try and keep house prices stable through transition with people slowly adapting and making economically sensible decisions with that change in mind.

Hi Fritz, what would you recommend FHBs do?

Buy if you can, especially if you have a 20-25% deposit.
There's some quite good Kiwibuild options on the horizon I understand, 3 bed townhouses for circa 630K next to Manukau City Centre (good train station and service)

Thank you for your reply.

You are welcome.
I held off and held off but jumped in late 2019. I got to a 25% deposit, and felt it was time to buy with low interest rates and prices seeming like they have bottomed out and are starting to rise again in Auckland. There are some quite good new build options, and that appealed to me - minimal if any maintenance over the next ten years (versus buying an 'old dunger' where you might have to spend a lot on maintenance)
I think it's possible there might be a price correction in the next 2 years, but I don't think it will be massive and if you are buying for the longer term I think it's a good time. Also, house price predictions are a fool's game really.
I would hesitate to go in with less than a 15% deposit, though.

I second Fritz' advice


Stay out of Auckland for a start. You will have higher disposable income and much lower house prices in most other parts of the country.

Ahuh ahuh and what do you suggest for people who have the best earning potential in Auckland, or family here? Maybe the solution shouldn't involve Aucklanders having to leave the city they were born and raised in.

This is not a problem in wellington - we don't build enough houses for those average or below folks to even have a house there waiting to be bought.

Because for an average-income couple, you are competing for a very low number of livable houses, and have to compete with
- high income couples (when they aren't tempted to max out their borrowing capacity at the higher price levels)
- OE returners with regular incomes, but a real deposit to give them power
- buyers with a frugal nature, and matching high savings rate

My opinion follows that such average income people should support, aggressively if necessary, policies towards smaller denser housing being built with good access to transport and services.

There needs to be a discussion about Kiwis coming back from OEs. It mattered less when houses were plentiful. We need to think about the right of return for people who haven't paid taxes here in some time and whether part of that needs to change.

I disagree entirely. You should always have a right to live in your country of citizenship.

We could always discuss...And yes we really should, at least to give background and some level of agreement before you get to a harder statement such as "new immigrants are usually a net negative for the economy".

I expect that the returning OE numbers are much smaller than that of new immigrants. And returning kiwis would be more typically high earning good-for-the-economy professionals, destined to contribute to the tax take. If they were overseas for more than the basic 1-2 years, then it seems even more so that they have valuable experience.

Given those assumptions (entirely based on feeling and my own story), its easy to imagine that other discussions seem more pressing.

Firstly, what gave people the God Given right to buy a house with only four years of savings? Back in the 70's it took me well over a decade to get my foot in the door (in the UK). I know someone will post a comment saying how wonderfully easy it was to buy a house back in the 70's in NZ, but that was because nobody wanted to invest here and kiwis were leaving in droves.
Secondly, all this mess - the cost of housing and rents is essentially a result of the RMA restricting supply while the government keeps the door open for high immigration. If we wish to begin to fix the problem we have to address the supply or the demand.

Firstly, what gave people the God Given right to buy a house with only four years of savings? Back in the 70's it took me well over a decade to get my foot in the door (in the UK).

Obviously far too many smashed avo on toast and flat whites, probably had sky too I bet. You need to sacrifice to buy a house dunchaknow..

RE NZ today in Papakura you can get a townhouse with 2 beds and 87 m squared land for $539k
That is $6927 per square metre

Compared to Red Beach, Hibiscus Coast where you can get a 254m square house near the beach for $945k, or $3720 per square metre

That is context in which we say that FHB are now charging into the affordable market.

It is old marketing trick: you get less land for same price which translates as: you get less land for more per m square. So, whilst we are told that "house prices" are rising 3.5% in Auckland in 2019, LAND price is totally different matter and FHB are getting right royally screwed over for their foothold on housing market.

Square m lad price should be the comparator for all remarks in this context.

Yup that’s me I’m one of them! Nearly 28 and still at home with the parents.
Life could be worse though, just saving away, something will pop up one day, cards that was dealt but I’m sure there will be a house out there and if not then the parents will just have to put up with me in my 30’s haha