How times have got tougher for wannabe first home buyers

Property / analysis

Fewer aspiring first home buyers are getting into a home of their own and those who do are taking on a lot more debt than pre-pandemic

28th Oct 22, 11:50am by Greg Ninness

The housing market has been through some massive upheavals over the last three years and that has seen fewer first home buyers getting into a home of their own. Those who do manage to are taking on much more debt.

Three years ago in September 2019, the Real Estate Institute of New Zealand recorded 5896 residential sales. In the same month, the Reserve Bank recorded 2247 mortgage approvals to first home buyers.

That suggests first home buyers accounted for about 38% of housing sales at the time.

Three years on in September 2022 and the market has experienced considerable turmoil.

Interest rates were slashed to record lows and house prices soared, followed by an even steeper rise in mortgage rates which has seen house prices start to decline.

Against those gyrations housing sales volumes have also declined, with the REINZ recording just 4943 sales in September this year, down 16% compared to three years ago.

Over the same period loan approvals to first home buyers have declined 18%, giving them an estimated 37% share of housing sales in September this year, barely changed from 38% share in September 2019.

The monthly figures can be volatile. However even allowing for that, what the numbers suggest is while fewer first home buyers are moving into a home of their own compared to pre-pandemic levels, the level of first home buyer activity has declined in line with the overall market and their share of the housing market has remained about the same.

What has changed significantly over that time is the debt profile of first home buyers.

In September 2019 the REINZ's national lower quartile selling price was $420,000. In September 2022 that had increased to $611,000, up 45%. Interest.co.nz estimates over the same period the average amount paid for a home by first home buyers increased from $512,000 to $696,000, up 36%.

Of course the amount being borrowed by first home buyers has also increased and the average mortgage approved for first home buyers has increased from $430,000 in September 2019 to $578,000 in September this year.

So on average first home buyers are taking on an additional $148,000 in debt to get into a home of their own than they were pre-pandemic.

With interest rates on the rise that is likely to restrict the number of people able to afford a home of their home even further, and those that can are more likely to be highly paid.

Some pundits may argue that the Reserve Bank's interest rate policies and mortgage lending regulations of the last few years were necessary, but for first home buyers they certainly haven't been kind.

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195 Comments

by tothepoint | 28th Oct 22, 11:54am 1666911255

Not easy for any house buyers - but owning the roof over one’s head is always a worthy goal.

TTP

by chebbo | 28th Oct 22, 12:03pm 1666911790

And if house prices keep falling at the current rate, people might be able to afford the rest of the house too.

by Spiceeh | 28th Oct 22, 10:51pm 1666950692

Well played.

by Small Kev | 28th Oct 22, 1:12pm 1666915954

Cant get a mortgage while at the same time watching their KiwiSaver drop…

by HouseMouse | 28th Oct 22, 3:48pm 1666925312

Savvy FHBs would be in a cash fund if they were looking to buy a house in the short term.

by kwbrn | 28th Oct 22, 4:05pm 1666926357

They have missed the boat on that one. They should have changed funds a year ago.

by Nzdan | 28th Oct 22, 4:25pm 1666927545

Who said they didn't change funds a year ago?

by HouseMouse | 28th Oct 22, 4:26pm 1666927566

That’s why I said ‘would’ be.

by Fitzgerald | 28th Oct 22, 12:00pm 1666911637

Patience.

Times may be tougher for first home buyers but they are getting MUCH tougher for house hoarders and vampire squid wannabe "lords of the land" as well.

There are thousands upon thousands of landlords who are negatively geared, bleeding money, and about to experience much higher interest rates.

There will be forced sales. Many, many forced sales. First home buyers can just wait and watch the collapse. Swim out past the breakers, and watch the world burn. The whole ponzi is about to burn to the ground 🔥.

by Pa1nter | 28th Oct 22, 12:06pm 1666911960

You have it here folks, unqualified claims that life's about to get easier.

Oh hey what do you reckon interest rates will be at Fitzys big sale? At the moment you're slashing prices but gouging us on the repayments.

by Fitzgerald | 28th Oct 22, 12:11pm 1666912311

Putting words into my mouth there Painter.

I never said that life would get easier.

I said that houses would get cheaper. Much much cheaper. Briscoes sales cheaper. Bubble burst cheaper. Screw a bargain out of a wannabe landlord cheaper.

Winter is coming.

by Pa1nter | 28th Oct 22, 12:25pm 1666913126

So far they're getting "cheaper", but sadly not more "affordable".

But true, you never said life would get easier, most of your thrust seems to be wanting a car crash to happen and hoping all the victims are bad drunk drivers.

by Independent_Observer | 28th Oct 22, 1:12pm 1666915958

The affordability calculation (like what you see on interest.co.nz) assume that FHB's deposits are being eroded at the same rate house prices fall in order to maintain a 20% LVR.

This is very misleading thinking.

Of course if FHB have their house deposit invested in shares/bonds then this might be the case and fair argument.

But if the FHBs (like those I know) are cycling their deposit in cash investments/TD's, then in the last year they have gone from having a 20% deposit to a 30 or even 40% deposit now as house prices fall and their savings continue. They no longer need an 80% LVR that the affordability calculations are based upon. For them their incomes are increasing, and the size of the debt required to buy the house they want have dropped substantially. For them, the NZ housing market is becoming much more affordable.

by ACB | 28th Oct 22, 1:40pm 1666917620

Not sure if their real, disposable incomes are increasing which is what the banks' (should) assess in terms of debt capacity.

by Independent_Observer | 28th Oct 22, 2:10pm 1666919402

Yes mostly agree with this - but if it is true over a long period (say the whole 30 years of a mortgage term) then we have far bigger issues at hand. And it impacts people who purchased previously, with much high debt levels, just as much (perhaps more).

by Kate | 28th Oct 22, 4:55pm 1666929308

Yes, great point.

by kiwimm | 28th Oct 22, 1:20pm 1666916420

I would rather buy a cheap house at high rates than an expensive one at low rates.

by Independent_Observer | 28th Oct 22, 1:31pm 1666917080

Absolutely - this is what allowed the boomer generation to buy their first home in the 1970's - 1970's for $40,000 and then 40 years later, find that the same house is now worth 20x the price they purchased it for. (house prices going from 3x incomes to 10x incomes, while prices have gone up 20x from original purchase price - playing silly games with the cost of capital (mortgage rates) is the only thing that can allow this magic trick to happen).

If the same occurs for todays millennials, and they buy the lower quartile house for $600,000, they should expect it to be worth $12,000,000 by the time they retire. That is a 20x increase in price to have the same experience that the boomer generation have had.

That won't happen, because the cost of capital for the asset over the time they own it, won't go from 15-20% (mortgages in 1970's-1980's) down to near 0%. But the reverse could be true.

by HW2 | 28th Oct 22, 4:27pm 1666927633

Indie. When are you going to get yourself on the property ladder. You've been procrastinating a few years

by Kate | 28th Oct 22, 5:04pm 1666929849

Yes, the sort of thing that a reporter ought to ask the RBG about.

by Flying high | 28th Oct 22, 8:36pm 1666942571

RBG ?

Its either the reserve bank governor

Or the rhema broadcasting group

Neither seems to fit with the context

by Yvil | 28th Oct 22, 9:17pm 1666945059

No she's referring to the Red Blue and Green cables behind your TV !

by lekkerbydiesee | 28th Oct 22, 4:17pm 1666927078

succinct and true

by Nzdan | 28th Oct 22, 4:27pm 1666927623

Especially when it comes to lump sump and extra payments.

E.g. you get a $10k work bonus. That's a huge chunk against the principle amount on a $100k mortgage vs $500k mortgage.

by Slapheid | 29th Oct 22, 9:37am 1666989459

... a $10k work bonus!!!! Honestly that is so far from most people's reality

by HW2 | 29th Oct 22, 9:44am 1666989880

Lump sump 🤣👍

by Nzdan | 29th Oct 22, 6:08pm 1667020115

Oh that'll teach me for posting at 4:27 on a Friday afternoon. These short weeks man, trying to cramb 5 days of work into 4 days. See what I did there? I put in an extra letter again, LOL.

by J.C. | 28th Oct 22, 12:33pm 1666913583

You have it here folks, unqualified claims that life's about to get easier.

No it won't be getting easier in the case of lower house prices. Why? because the nation's "savings" will be diminished. When people feel less "wealthy", even if it's only less so on paper, this affects how they allocate their disposable income. Sales of 'nice to have' food products on supermarket shelves go down and people may even forgo spending. Businesses lose revenue and profits, therefore the potential for wages and incomes to increase is also diminished.

Burst bubbles do not make life eaiser, even if prices for houses are lower. It's a fallacy. The idea is not to promote multi-decade, credit-driven bubbles in the first place. It's much better for credit creation to be directed to production of products and services.

by tothepoint | 28th Oct 22, 12:21pm 1666912872

Who cares about vendors? They’ve been making money hand over fist for a very long time……

It’s time first-home buyers were given a decent bite at the cherry. 🍒 😋

TTP

by Retired-Poppy | 28th Oct 22, 1:00pm 1666915233

"It’s time first-home buyers were given a decent bite at the cherry"

Tim, are you finally doing the right thing and closing up shop?👍😊

BTW, I think you're somehow confusing cherries 🍒with falling knives 🔪🩸

by Chairman Moa | 28th Oct 22, 1:17pm 1666916230

Chances are those cherries are the plastic ones used for decoration, especially coming from Tim, your trusty properties broker!

by Foxglove. | 28th Oct 22, 1:25pm 1666916728

Reaching for the fruit? The Greeks with their both imaginative & telling fable of Tantalus, aptly sum up the dilemma first home buyers face. Mortgage costs go down & house prices go up. Then they take turnabout.

by dbbr | 28th Oct 22, 12:47pm 1666914468

Well said, I'm guessing that will be triggering for the spruiker brigade.

The housing market should never have been allowed to increase so dramatically over such a short period of time. It was and is obscene and simply terrible for homeowners or investors.

Honestly I'm not sure if they could have done a better job if they actually deliberately attempted to hyper inflate and explode this bubble.

by interesting1234 | 28th Oct 22, 1:14pm 1666916056

As the bubble explodes, so will the specu-vestors ego's. Watching the slow shift from cocky overconfident optimism to full blown reality check is highly amusing, especially on some of the reddit threads they have.

by BadRobot | 28th Oct 22, 3:10pm 1666923015

I'm not so sure, I just don't think that they have the ability to understand that things can go pear shaped.

by interesting1234 | 31st Oct 22, 8:46am 1667159202

Give it 12-18months and the poor fellows sitting outside your local TAB wont' be unemployed beneficiaries, they'll all be ex-property investors still clinging to that last shred of hope as they stare wide eyed in disbelief at the pavement. Perhaps they'll still be squabbling and speculating on some other form of more affordable asset they can take a punt at, maybe pokemon cards?

by Engineer 11 | 28th Oct 22, 2:05pm 1666919159

Fitzgerald, why do you apparently take so much pleasure in the misfortune of private landlords financial demise. Surely it is not good for people to suffer financial distress and be forced into selling their asset at possibly a loss. If this happens it will effect the people renting and also the economy as well as the individual.

by Independent_Observer | 28th Oct 22, 2:04pm 1666919080

"Why do you apparently take so much pleasure in the misfortune of private landlords financial demise. Surely it is not good for people to suffer financial distress and be forced into selling their asset at possibly a loss. If this happens it will effect the people renting and also the economy as well as the individual."

The counter question/view to this is...why have landlords been so arrogant and boastful at creating wealth from a massive property bubble that has created severe financial and social instability?

If you want to beomce wealthy at the expense of others (those who have struggled to buy and who now have and may be in negative equity), they too have experienced years of misfortune and financial demise - and yet there are been no care at all from the landlord property investor class. Why should they now care when the shoe is on the other foot?

by Engineer 11 | 28th Oct 22, 2:12pm 1666919571

That is a big generalisation, to say that landlords are arrogant. They have just bought by the rules in a free market, rules set by the government of the day. Surely the government should be providing houses to rent rather than relying on the private sector and then demonizing and punishing them with putative legislation.

by Independent_Observer | 28th Oct 22, 2:20pm 1666920048

"That is a big generalisation, to say that landlords are arrogant. They have just bought by the rules in a free market, rules set by the government of the day. Surely the government should be providing houses to rent rather than relying on the private sector and then demonizing and punishing them with putative legislation"

Not all laws are ethical, nor morally sound. Nor is all decision making within a legal framework.

If you want to get rich at the expense of others (as a property investor during a housing affordability crisis), and it all comes crashing down around you, don't look to the people who you were getting rich at the expense of (those who could afford to buy) to take any pity towards you. That would be a very hypocritical way to view the world.

"Look those nasty tenants across NZ, who I was hoping to profit from during a housing crisis by buying rental properties and pricing FHB out of the market, think it is funny that I'm losing money"

by Pa1nter | 28th Oct 22, 2:29pm 1666920552

The problem with most of your philosophy is it supposes the majority of renters are otherwise buyers.

And in theory anyone generating a surplus is doing it at the "expense" of someone else.

by Independent_Observer | 28th Oct 22, 2:44pm 1666921469

"The problem with most of your philosophy is it supposes the majority of renters are otherwise buyers"

That is your assumption/perception of my view, and not my view.

Obviously there needs to be a rental market, but it is pretty clear that the last 20-30 odd years policy has favoured asset owners over non-asset owners in a significant way. That is why inequality is as bad as it has been since just prior to the 1930's depression (and 1929 stock market crash).

"And in theory anyone generating a surplus is doing it at the "expense" of someone else"

The pie hasn't been divided evenly, hence why we have deteriorating inequality. So yes asset owners having been getting wealthier at the expense of non-asset owners. And I'm not a socialist, far from it. But we're creating the conditions for social instability by not distributing the wealth within society in a more equitable way.

by Pa1nter | 28th Oct 22, 2:46pm 1666921578

So you want capitalism, but you want it to act more like socialism.

by Independent_Observer | 28th Oct 22, 2:51pm 1666921870

We've already got socialism - its called QE, budget deficits and accommodation supplements (propping up capital markets that are overpriced). And its been going into the pockets of property investors who think they are capitalists, but have been getting rich from state socialism.

If we had real capitalism, with free markets and price discovery, we wouldn't be in this mess.

Its so funny that landlords say they hate socialism (and those they perceive to be socialists), and yet they are the biggest beneficiaries of the state in the country - with their investments continuously being propped up by the government and central bank!

by Pa1nter | 28th Oct 22, 3:34pm 1666924491

I guess they are if you just rephrase everything.

If we give a homeless person money for food, is that helping the poor, or lining the pockets of unscrupulous overpriced food vendors?

by Independent_Observer | 28th Oct 22, 4:15pm 1666926938

"If we give a homeless person money for food, is that helping the poor, or lining the pockets of unscrupulous overpriced food vendors?"

Do you hear these 'overpriced food vendors' complaining about socialism that is helping consumers buy their products?

No...

Do I hear property investors regularly bash beneficiaries (recipients of a socialist benefit who are also their business customers) as lazy and entitled.

Yes...all the time.

by Pa1nter | 28th Oct 22, 4:21pm 1666927287

You didn't answer the question.

Because on the basis of your definition, any dollar handed to someone without, becomes socialism for the rich when the poor person spends it.

by Independent_Observer | 28th Oct 22, 4:31pm 1666927885

"You didn't answer the question"

Yes I did - you just didn't like the answer.

Those other parts of the economy that benefit from socialism, don't also complain about it because they don't want to have their cake and eat it too.

by Pa1nter | 28th Oct 22, 5:06pm 1666930009

In case of grey statements, make up a fictitious third party to talk to.

Might as well not discuss anything then.

by Independent_Observer | 28th Oct 22, 5:32pm 1666931526

Bit like trying to discuss the cost and harm of a toxic property investment culture in a country like NZ with a group of property investors....they only want to see one side of the argument - the bit where they get wealthy. They don't want to talk about the financial and social harm it is doing to society.

As you say "might as well not discuss anything then" if they only want to see one side of the situation - it is better to just dismiss them as a doom gloom merchant than to see both sides of the argument.

by Pa1nter | 28th Oct 22, 8:03pm 1666940635

When you cross the threshold to toxic, is when there becomes a problem.

If we're talking about a wider issue of housing affordability, then trying to vilify people is a great way to start destroying your objectivity. It moves you from the realm of someone actually trying to accomplish something, to someone wanting to have a cry.

by Independent_Observer | 29th Oct 22, 11:01am 1666994512

"When you cross the threshold to toxic, is when there becomes a problem"

I'd argue the whole western financial system has become toxic - and the benefactors do not wish to acknowledge this, nor consider the solutions to the problem (because it would require sacrifice and they are still consumed by greed).

"Destroying your objectivity"

Lol - a bit like calling people doom gloom merchants because they want to bring about housing affordability....'how dare you take away my capital gains from the housing market'.

Hard to argue objectivity with people whose minds are deluded by greed and self interest.

by agnostium | 28th Oct 22, 8:44pm 1666943044

Great work IO.

by swapacrate | 29th Oct 22, 4:20am 1666970412

So true, can't believe these guys think 20 X is a good thing from 3 X, and try and manipulate the conversation. I can now see how propaganda worked in countries like Germany and other countries. It's the entitled few that try to hold on and can't see the mess they create.

by HW2 | 29th Oct 22, 6:52am 1666979534

Price is simply an outcome of other inputs. A bit like obesity. We can't complain about price itself and do nothing about the causes.

by Independent_Observer | 29th Oct 22, 11:03am 1666994605

Have you picked up "Irrational Exuberance" by Robert Shiller yet there HW? He's got a nobel prize for asset pricing and discusses all of these inputs in detail in his book/s.

by HW2 | 29th Oct 22, 11:17am 1666995473

When are you buying a home IO

Once you are a homeowner then you cannot be evicted by a landlord or pay higher rents. It will remove half of your complaints

by Independent_Observer | 29th Oct 22, 5:35pm 1667018102

If I buy a home I'd then complain about owning and overpriced asset that is falling in price with rising interest rate costs.

Wouldn't be very smart.

When the property investor page on FB is full of despair, and investors saying how the world is ending, I might think about buying (again) depending upon my circumstances at the time.

by Retired-Poppy | 29th Oct 22, 6:19pm 1667020786

A debt slave to a Landlord Bank, it will ensure happiness while the biggest asset plummets!

A penniless strategy.

by HW2 | 30th Oct 22, 7:42am 1667068959

Prices have already reduced in most areas but not enough yet then obviously. Hopefully you have a plan and target date in mind. Are you still investing in gold... just another declining asset

by Independent_Observer | 30th Oct 22, 11:29am 1667082548

Per above, if the property investor FB page is full of people in despair and complaining that the world is ending, then that might be a good time to buy a house.

Investors like yourself are still in the anger/denial phase as you slowly realise property may not be a one way bet.

If you could let all the FHBs out there know when you reach the despair phase, then they will know its a good time to buy. You wont of course - but if you become silent on this forum then I will know it is worth starting to look at.

The disappearance of guys like P8 and CWBC spruiking, mean that it could be in the next 12 months or so.

You appear to be the last man standing.

by Nzdan | 28th Oct 22, 4:30pm 1666927814

Do we have a shortage of food? Are "unscrupulous" food vendors going into supermarkets when they first open for the day and buying everything up on their credit card, to on sell for a profit to those who arrived later?

by HW2 | 29th Oct 22, 7:46am 1666982818

Yes they are... it happens when there is a breakdown in the system. Essentials such as toilet paper, flour, gib. Some people resold at a hefty margin and others excessively stockpiled for their own use. Also concert tickets and rugby tickets resellers who are known as scalpers.

by Nzdan | 31st Oct 22, 8:41am 1667158875

It's happening, but the supermarkets also bring in buyer limits in those scenarios. And temporary disruptions to supply chain bringing out the unscrupulous is not the same as a sustained distortions and transfer of wealth in our housing market.

My analogy was more along the lines of these unscrupulous food vendors setting up a "NZ Food Investors Federation" and collectively/strategically going around all the supermarkets and buy up all the staple foods to on sell for a profit. Rather than starting up their own supermarket.

by interesting1234 | 31st Oct 22, 8:49am 1667159349

Buyer limits, I remember seeing families sending their kids to get a couple of bags of flour each at different checkouts at the local Pak n' Save. We humans really are something aren't we.

by HouseMouse | 28th Oct 22, 3:51pm 1666925490

It’s a bit like Yvil, who goes on about his business nous, and his centre-right credentials, disses beneficiaries and then is happy to take from the state to keep his motel business afloat care of emergency housing.

So much hypocrisy.

by Yvil | 28th Oct 22, 9:21pm 1666945315

So you don't understand the difference between getting paid for a service rendered (work done) and getting paid for doing nothing (a handout) ? A bit disappointing you don't make the difference.

by Independent_Observer | 29th Oct 22, 5:25pm 1667017545

Not all services are turned into ponzi schemes and are forced upon the population to participate in them.

by HW2 | 28th Oct 22, 4:13pm 1666926826

If an existing tenant later applies for the accom supplement and starts receiving money from government, how exactly does the landlord benefit ?

by Independent_Observer | 28th Oct 22, 4:18pm 1666927130

"If an existing tenant later applies for the accom supplement and starts receiving money from government, how exactly does the landlord benefit ?"

If you can't answer this yourself, you perhaps aren't such a savvy property investor.

by HW2 | 28th Oct 22, 4:48pm 1666928931

Mr smarty pants

The answer is that landlords do not. My tenants bought themselves a brand new Haval soon after getting approved the AS. They did not say to me " here landlord I believe this money is yours"

by Independent_Observer | 28th Oct 22, 5:34pm 1666931641

"Mr smarty pants

The answer is that landlords do not. My tenants bought themselves a brand new Haval soon after getting approved the AS. They did not say to me " here landlord I believe this money is yours"

Sounds like you've suddenly become Mr smarty pants as you suddenly figured out the answer to the question that you couldn't figure out by yourself just before. You might frighten yourself with your intelligence if you're not careful there HW!

by HW2 | 29th Oct 22, 6:57am 1666979876

Did you just not only accept my point of view about AS but strongly back it. Thats cool

by Independent_Observer | 29th Oct 22, 11:07am 1666994841

"Did you just not only accept my point of view about AS but strongly back it. Thats cool"

If that is the conclusion you draw from this thread then that is cool - but still blind to understanding how externalities impact markets and asset pricing.

by HW2 | 29th Oct 22, 11:19am 1666995566

No sometimes you are just pompous. Deep down you are probably a nice person, except conceited.

by Independent_Observer | 29th Oct 22, 5:23pm 1667017413

I'm only these things (pompous/conceited) in your perception - and perceptions are limited by your own state of consciousness (as a result of their knowledge and experience).

One day you might look back 10 or 20 years from now and recall the interactions you've had with me and go 'you know what, the guy was actually right'. And likewise, I may think the same about you.

For now, I could say nasty things about you as well because we disagree - but there is nothing to be gained from that.

by HW2 | 30th Oct 22, 7:38am 1667068723

One day you might look back 10 or 20 years from now ....And likewise, I may

Well if that is true, that you may look back with regret then in 1 year from now. That will mark 10 years from your initial foray into the NZ housing market in 2013

Until now, you have not expressed regret, when you had the chance to have bought much earlier. In fact you have doubled down with your distrust and malignant dislike of property owners. Lets see whether the next 12 months brings any wave of regrets.

If you can't admit you failed you thereby fail to learn from it.

by Independent_Observer | 30th Oct 22, 11:22am 1667082158

"Well if that is true, that you may look back with regret then in 1 year from now. That will mark 10 years from your initial foray into the NZ housing market in 2013

If you can't admit you failed you thereby fail to learn from it"

If your children find themselves in negative equity now/soon, after taking your advice to buy at the peak of a massive property bubble, then lose their jobs and default on their mortgages next year - will you also admit you failed them and learn from it? (you can't have it both ways)

I have no problem with property owners - I do have an issue with parasitic property investment/speculation during a housing affordability crisis.

And not sure what you are going on about 2013 as being an initial foray into the NZ housing market. This was perhaps about the point that my belief that we were entering into an unsustainable housing bubble started that would one day cause widespread financial and social chaos in this country. And on that point - I still feel that I'm going to be correct, if not correct already based upon what is unfolding around us.

My initial foray into the NZ property market could well have been a long time before that :-)

by HW2 | 30th Oct 22, 12:20pm 1667085635

You worry far too much... worried that everything will crash and my sons losing their jobs. Make your own luck IO

Your foray, meaning that you were scouting properties and attending auctions. Finding that prices were rising which you interpreted as a bubble thus making a decision to delay.

Now you have me wondering if you are actually much older like 60 or 70 and you came back to nz after the GFC to retire.

If based on fundamentals, it is not a bubble. I heard today that a bespoke home costs 10000 per sqm to build

by Chaosinflesh | 30th Oct 22, 2:34pm 1667093648

"My tenants bought themselves a brand new Haval soon after getting approved the as"

OMG, the outrage! How dare my tenants have other things to spend their money on than paying me rent! It's almost like I'm taking so much of their income they couldn't afford to buy a bottom-of-the-range warrantied vehicle without government assistance.

Reminds me of my 2014 landlord's sense of entitlement - minimum wage went up by 50c, here's your $20/week rental increase.

by Spiceeh | 28th Oct 22, 11:08pm 1666951693

I would beg to differ on QE etc being classified socialism...more like communism. It's can feel like a subtle difference, but a difference does exist.

by Fitzgerald | 28th Oct 22, 2:35pm 1666920958

We have the highest rent-to-income ratios in the developed world.

Landlords are charging too much.

Greed, stupidity, and piling into a bubble has exacerbated the rental affordability problem.

We all laughed at the toilet paper hoarders during covid. They were selfish to hoard toilet paper, and a bit silly (in hindsight).

Anyone who tried to take advantage of the housing shortage by buying up houses to then rent them to other Kiwis at unaffordable prices was SELFISH and FOOLISH and will learn a big nasty lesson about leverage, soon enough.

Hoarding houses during a housing shortage is antisocial, selfish behavior. And yes I will cheer on the crash from the sidelines. I will buy a house when the price starts with a 3 or a 4, and when I can make the landlord vendor cry.

This may come as a shock to you, but if you own a rental, then it is pretty much guaranteed that your tenants will hate you. And think that you overcharge them. And they will be gleefully watching if you lose money. Most tenants despise their landlords. I am just one of the few that verbalize it.

This is what a divided, unequal, hierarchical society looks like. Get used to it.

by Pa1nter | 28th Oct 22, 2:27pm 1666920423

What happens when the depressed asset is an owner occupied forced sale? More or less glee?

by Spiceeh | 28th Oct 22, 11:18pm 1666952286

Less glee for the OO and more hatred for the landlord class whose rentier greed forced the prices up for those same OO's.

by Engineer 11 | 28th Oct 22, 2:41pm 1666921311

More generalisations that the tenant hates the landlord (also a very strong word) Why would you hate the person that is providing your accommodation? Have you ever taken the time to work out all of the costs and risks of running a house? There is not much if any profit (if any) in it from a cash flow point of view only potential capital gain, this is not guaranteed and may even be a capital loss. Still no pleasure should be taken from other people's misfortune, it is not good for anyone.

by Pa1nter | 28th Oct 22, 2:44pm 1666921452

They're getting rich off my back, clearly the acquisition and upkeep of the house is free.

by Cheetahlegs66 | 28th Oct 22, 5:15pm 1666930510

“They are getting rich off my back”

Stop whinging. Move out. Go buy a caravan and live in a designated caravan park. Save some money.

Who forced you to live in that particular house? Be grateful you’ve got a place.

Disclaimer/ I lived in a tiny 4x3m room in a motel for 5 years saving money to put into my first 2 houses ‘99-2001. People laughed.

by Fitzgerald | 28th Oct 22, 6:05pm 1666933530

Are your tenants "grateful" that they have a place?

Or do they see you as a parasitic ticket clipper?

The peasants are not as grateful as you may think ...

by Cheetahlegs66 | 28th Oct 22, 6:50pm 1666936253

Biggest mistake was selling my rentals but got me freehold at 40. So currently no tenants. Never saw myself as parasitic though. Racist, myopic, defensive, bald and a hint of misogyny. But never parasitic.

Played the game by the rules and transitioning to an early retirement (before my 58th). Yourself?

by Independent_Observer | 28th Oct 22, 7:00pm 1666936859

"Played the game by the rules and transitioning to an early retirement (before my 58th). Yourself?"

Unfortuantely it's the 'I've got mine, screw everyone else' mentality is the problem, not the solution. (not taking away from your success - well done and good for you and all of that).

Perhaps we would be better off if collectively we could try and fix the problem, where the aim is social and financial stability - as well as ensuring prosperity for generations/people other than oneself. As opposed to try and walk/trample all over one another with the 'get ahead' and 'I've got mine so screw everyone else' mentality.

If we work together, as opposed to against one another, we're far more likely to have a successful, happy and healthy society. Continuing what we've done the last 20 years is the recipe for social and financial anarchy (with a lot of hate, division, anxiety, depression, suicide etc).

by Cheetahlegs66 | 28th Oct 22, 8:01pm 1666940463

Too late. The country is irretrievably screwed. Labour has slammed in the last few nails but it’s been sliding backwards for 20+ years.

I work in healthcare. It is rooted. The fixes are not financially feasible and the lag for any remediation is 10+ yrs. No wonder our medical graduates leave.

Crime and welfare dependency will only worsen. I’m currently getting a gun licence, not for today but for 2030 and beyond. Gated communities will become more common. Good bye NZ as we knew it.

by Carlos67 | 28th Oct 22, 8:15pm 1666941315

Pretty hard getting a license these days mate, allow at least a year even for an A CAT. I would say some of the CAT's are now almost unobtainable, very hard work way back in the day even before this government got in.

by Independent_Observer | 28th Oct 22, 2:47pm 1666921631

"There is not much if any profit (if any) in it from a cash flow point of view only potential capital gain, this is not guaranteed and may even be a capital loss"

Sounds like a terrible investment - perhaps you should sell your rentals then? Problem solved!

by GV 27 | 28th Oct 22, 2:56pm 1666922201

So what I'm hearing is property investors aren't in the business of providing accommodation, they're in the business of generating tax-free capital gains? And that once those disappear, they're not interested?

Huh. Almost seems like they're not even bothering to say the quiet part quietly anymore.

by Independent_Observer | 28th Oct 22, 7:07pm 1666937262

Of course they were - and up to now loading up with enough debt to offset income so that there never any tax to pay at all.

by Engineer 11 | 28th Oct 22, 3:24pm 1666923898

It is a risky investment, and I do not own 'rentals' to sell. But if you look at property investing in NZ the costs do not stack up with the rental income, so the only gain is capital. I would have thought tax initiatives should be here rather than on cash flow (interest deductability) which causes rent increases. In any case there is a lot of negativity directed at landlords that is probably why many do not comment on this site.

by Kate | 28th Oct 22, 5:12pm 1666930335

TOP are proposing to restore interest deductability but at the same time requiring a 100% deposit on any investment property purchases. I find that a very interesting proposal. All for it - win to renters and win to FHB/owner-occupiers.

by HW2 | 28th Oct 22, 5:13pm 1666930434

Do you or TOP really know what you are saying? Maybe it is a policy just to get laughs

by the Joneses | 28th Oct 22, 3:28pm 1666924083

Imagine seeing a ticket scalper at the gates of a concert who hasn't been able to sell a big stack of tickets he bought, and is now furiously trying to sell them at a discount to anyone who will take them because the concert didn't sell out this time.

Do you feel sorry for him and wish them good luck with their endeavor, or chuckle quietly to yourself as you walk past into the concert?

by Idoubtit | 29th Oct 22, 11:32am 1666996372

What I take from this post is that you will never own a house.

by dbbr | 28th Oct 22, 3:26pm 1666924005

That is a fair point, and my view is that smaller landlords are not the problem with the housing market. I view the sheer quantity of landlords as more of a symptom of a disfunctional housing market.

Housing is normally a solid investment vehicle, with leverage, that has historically done well, and with previously generous tax rules. Then we add mind numbingly stupid monetary and governmental policy and surprise you have a zombie-hoard level amount of landlords, house hoarders, etc.

It is easy to vilify landlords, and while many actually deserve this criticism, many don't. I may be wrong but I think many of us are less looking forward to the grief of actual people, individual or mum and dad investors, but more to a long overdue rebalancing of the property market. Maybe if a few arrogant specuvestors or arrogant landlords burn along the way, well let's just say the violins will be tiny.

Yeah, unfortunately there will be a lot more individual or mum and dad investors and landlords that are casualties to this, and I don't blame them and have sympathy for them myself.

Not sure what what type of putative legislation you are talking about, but it would be far better to adjust policy to encourage other investing, any putative legislation is just another knee jerk reaction by the current set of clowns that have no idea what they are doing.

by Nzdan | 28th Oct 22, 4:32pm 1666927961

"I'm not the problem, I'm a "mom and pop" investor with 1 rental property" x 100,000.

by dbbr | 28th Oct 22, 5:08pm 1666930106

Hahah yea true. My previous comment was probably way too generous on balance, but my main point is that this should be dealt with by policy.

I also think that hypothetical mum (or mom depending on who yo momma is) or dad are going to make decisions based on where they think it makes sense financially, and not ethically, especially if the difficulties that fhbs and renters etc is easy to fob off. Sad but true, and we can’t expect anything differently when it is so normalised.

This is the bust that we had to have.

by Nzdan | 28th Oct 22, 6:32pm 1666935139

We could also start by not referring to them as "mom and pop" investors, it's just a folksy name with only one purpose and that's to take the heat off the social harm the collectively cause.

That and the term Landlord. I think the title gets to people's heads. Although we do have a good way of balancing it out by interchanging land with slum.

by Kate | 28th Oct 22, 5:06pm 1666930019

Another poignant post :-) - so on the money IO.

by huttman | 28th Oct 22, 2:07pm 1666919235

Let's say, you always wish those tall and ugly buildings, which blocks your sunlight, collapse one day, so that you can enjoy the sunlight as you desire. Then one day earthquake came, and those tall and ugly buildings do fall.

How likely would you survive all this to enjoy your new found sunlight when all those builds would fall on you? You have nowhere else to run because you are in the hypothetical jungle too.

I hope this metaphor makes sense to you.

by Independent_Observer | 28th Oct 22, 2:08pm 1666919330

We are already in the hypothetical jungle, with hyenas and various vulture birds (property investors), looking at who else's income stream they can have for a meal of their own after doing none of the hunting (productive work).

Perhaps the vultures should just catch their own meal - as opposed to eating the meals caught by others?

We've been living in a period of out of control vulture tax (both from governments running deficit spending and people farmers living off the productivity of others).

by Whome | 28th Oct 22, 2:28pm 1666920493

Chicken little… the sky is falling down! the sky is falling down and will crush us all forever 🤣

Have seen property market ups and downs since buying my first home in the 1980’s and guess what?

This one is mild… as it’s off the back of such a huge government induced rise of 40% since 2019 and these adjustment times never last…

by Independent_Observer | 28th Oct 22, 3:05pm 1666922726

So you've experienced 40 years of falling discount rates for the asset you purchased?

Are you familiar with the basic asset pricing formula P = CF / r

P = Price

CF = Cash flow

r = discount rate

You've spent 40 years where r has gone from 20% to 0%. What this means is that you don't know anything other than rising asset prices as the result of falling discount rates. The entire view could be the most extreme confirmation and recency bias one could have - which is extremely dangerous.

Have a look at what has just happened to the ishares 20+ year bond market exchange traded fund on the US stock market. It is down close to 50% this past year as a result of the value of an increased value for 'r' in the above equation. Property is similar to bonds, so its possible that unless the value of r drops once more, then property markets around the world (not just NZ) could be in for a similar fate.

More QE might save the day once more, but if it does, it means we are even closer to the western world losing its place as global leaders - as you can't print your way to prosperity. Each round of QE is giving more drugs to a patient on life support that is clinging to life by a thread.

by Jesse1 | 28th Oct 22, 3:32pm 1666924351

Great post. This is why I sold out of my tech stocks in January as they had been priced for very low discount rates lasting forever and that rate was quickly changing.

An interesting thing about that formula is at low discount rates the shift in price is amplified. Price is doubled when going from 4% to 2% and this explains how we were able to have such a huge increase in property prices through covid. Now we've reversed this rate and more, it's easy to see that the gains can easily be reversed too, that's before considering we have less of a housing deficit now.

by ACB | 28th Oct 22, 4:00pm 1666926026

It would be interesting, if you had the data, to demonstrate real house prices against real bond yields. Lots of other factors, many of which are irrational, drive house prices far from a pure discounted cash flow valuation , but I think we'd have some evidence, even over the past 40 years, that this relationship holds.

by unaha-closp | 28th Oct 22, 5:25pm 1666931118

Think the big macro in play is the transitioning of China away from 35 years industrial expansion. From the end of the cold war to now the expanding production of a billion Chinese suppressed tradeable inflation. This period has ended due to demographic change in China and won't be coming back. Higher inflation and interest rates are likely to be the new norm.

by Yvil | 28th Oct 22, 8:11pm 1666941116

vampire squid wannabe

Oh poor Fitz, oozing with bitterness and jealousy

by Fitzgerald | 28th Oct 22, 9:14pm 1666944894

The word "wannabe" was taken from the title of the article.

"How times have got tougher for wannabe first home buyers."

by Yvil | 28th Oct 22, 9:15pm 1666944940

Yes, and the words vampire squid are yours

by Caughtinthemiddle | 28th Oct 22, 12:03pm 1666911795

Life is getting more expensive for all of us.

Wealth is being eroded as assets across the board are caught up in the actions of central banks now the QE is being reversed. I feel for those trying to buy their first property. It has never been easy but I doubt if it has been this hard either.

As Fitzy suggests, the tide has a way yet to go out. Enjoy the view from the sidelines and time your dip!

by Flying high | 28th Oct 22, 12:04pm 1666911893

September 2019 the price was $420,000

September 2022 increased to $611,000, up 45%

The numbers dont lie, unlike the commenters in 2019 telling people to "have patience, dont buy"

by Pa1nter | 28th Oct 22, 12:08pm 1666912080

At the moment the best time to buy was mid 2020. Deposit requirements almost abolished and cheap interest to lock in for 5 years.

I wasn't here then, did all the "wait" crew do some big spruicking then?

by Retired-Poppy | 28th Oct 22, 1:21pm 1666916513

Past performance is not indicative of future performance.

by Pa1nter | 28th Oct 22, 2:17pm 1666919826

Sure, but it's usually all you have to go on other than making totally random guesses.

If I throw a ball into the air enough times, surely gravity will reverse eventually.

by Retired-Poppy | 28th Oct 22, 2:49pm 1666921792

Yeah, gravity is certainly taking hold isn't it. The bubble you refer to as a "ball" has now popped and has been purged of its "bank fueled" helium. Many of us knew what was inside the ailing ball to start with but still kicked the living sh-t out of it. For many, its no longer a source of entertainment.

by Pa1nter | 28th Oct 22, 2:49pm 1666921742

Well, get back to me when houses get cheaper to build, there's more land, councils aren't coming along for the ride, and central banks and governments stop juicing economies with money printing.

by Retired-Poppy | 28th Oct 22, 2:57pm 1666922223

I think a good start is a collective belief that houses aren't a one way bet. If history is any guide, it usually takes an epic price crash to do that.

by Pa1nter | 28th Oct 22, 3:19pm 1666923597

Well, people can take that and $5.50 down to the dairy and pick themselves up a nice mince and cheese.

In the meantime, "weeeeeeeeee".

by Retired-Poppy | 28th Oct 22, 3:49pm 1666925375

HW2 is that you?

by HW2 | 28th Oct 22, 4:23pm 1666927382

Yes I know that you have multi accounts poppy. Lets see ... Fitzgerald?

Nevertheless I am flattered by your suggestion

Edit: oops I just committed the ultimate sin, reposting after someone replied. It's a heinous crime

by Retired-Poppy | 28th Oct 22, 4:24pm 1666927496

Nope. Your thought process seems simplistic. Only those who share common beliefs that you don't agree with have multiple accounts. In this instance I thought it might be you as it was a weird response.

by HW2 | 28th Oct 22, 4:52pm 1666929152

Retired Stroppy

I cant imagine working 40 years then retiring. Only to spend hours each day passionately arguing with online personas... like you do

by Future | 28th Oct 22, 5:08pm 1666930124

You may refer to him as The Reverend !

by Retired-Poppy | 28th Oct 22, 5:13pm 1666930413

👀👉

by lucenera | 28th Oct 22, 9:33pm 1666946011

by GV 27 | 28th Oct 22, 12:16pm 1666912614

New Zealand is principally an exercise in:

1) Wealth transfer from young to old; and secondly,

2) A wealth and quality of life transfer from the rest of the country to Wellington.

The only way the actions of the past decade can be explained is by these two over-riding dual purposes. It it certainly no longer a country where it is intended that young people might be able to get ahead or start a life of their own. Now watch young Kiwis bear the brunt of the job losses that RBNZ are signaling we need to get this mess back under control.

by Pa1nter | 28th Oct 22, 12:22pm 1666912935

Here I was thinking it was a producer and exporter of largely primary and agricultural goods.

by ShoreThing | 28th Oct 22, 1:34pm 1666917277

You'd be wrong, primary sector only makes up 6.5% of our GDP.

by waymad | 28th Oct 22, 1:39pm 1666917557

But Ag (and related support industries, which aren't classed as Ag for statistical purposes, go figger) gets us 80-some percent of export revenue........

by interesting1234 | 28th Oct 22, 1:28pm 1666916917

GV 27

What impact do you see in all of this with the boomer generation all coming to retirement age now for the coming few years? Although the average house is still out of reach for a large number of FHB, we will see more exiting the workforce over the coming 2-5years and a further shortage in workers if the immigration taps don't get turned on further after the election. This will also lead to further business opportunities targeted at that generation who have a good share of disposable income on average.

by GV 27 | 28th Oct 22, 3:28pm 1666924125

Will it? Quite a few millennials will now have big debts owing over assets that are declining in value. I don't think there's going to be the free cash to throw at business opportunities that others have had previously unless there's a huge amount of wage inflation to help get rid of that debt. If that doesn't happen, the millennials become a generation that go without and the only hope we have is the Zs and Alphas manage to get out of the punitive living costs cycle we're seeing.

We're already seeing a forerunner to this where senior white collar roles are filled from migration pools instead of locals, so opportunities for advancement for Kiwis who studied and trained here are harder to crack. There's no reason to think this will change, so more middle class earning power debasement is likely.

by Pa1nter | 28th Oct 22, 3:39pm 1666924798

It'll be mixed. Quite frankly there's a crazy amount of opportunity to be had for milennials from retiring boomers.

People waiting for things to get better will be sad.

by Chris-M | 28th Oct 22, 1:35pm 1666917324

I don't know I agree with all of that but certainly NZ is no place for young people to ever get ahead.

The only hope that they have of ever owning their own home is to leave NZ. Labor are cranking up the immigration fueled low wage low productivity economy again, and this will have the natural consequence of returning us to the ever increasing property price ponzie scheme, increasing public services and infrastructure deficit. The National party will do the same but at a far greater pace. There really is no option or sense remaining here.

by Happy_Medium | 28th Oct 22, 12:35pm 1666913701

I know a guy whose landlord just asked him if he wanted to buy the house that he's currently renting (Wellington), and he has over 1 year left on his lease. I think that's very telling as to where the landlord thinks the market will be 1 year from now...

Background: the house was listed for sale after the 2021 peak, and no one bought it so they rented it to my friend for a 1.5 year lease. They probably regret that decision now.

by Thats All Folks | 28th Oct 22, 12:35pm 1666913727

If you are trying to buy a house right now, you need to seriously consider if you have any business taking on leverage in the first place.

Future FHB's, think about tomorrow, not today. 6 - 12 months min.

Just stay out of the way and let reverse leverage work it's way through the system.

by tomjones_04 | 28th Oct 22, 12:39pm 1666913959

If I were a FHB looking for a house at the moment, I’d be furious. Furious that the government has allowed housing speculation and let the whole shit show get this bad. I’d be furious at the greed driven property investment culture. Id be furious that no one in NZ has the bollox to solve affordability. Id harness that anger and go somewhere that does care about me and my future… and I hate to say it.. NZ is looking pretty crappy right now.

by Caughtinthemiddle | 28th Oct 22, 12:56pm 1666915013

TJ4, agreed. I'd volunteer that central banks have made housing in most other countries more expensive through the pandemic - that said we've sadly secured a podium finish in NZ and that is making life very tough for high school leavers and graduates.

I'm originally from the UK and keep an eye on news back there - perhaps you are from across the Severn Bridge? It's a crap shoot at the moment and I'm glad I am in NZ for sure.

by Independent_Observer | 28th Oct 22, 1:05pm 1666915530

Lol - but if you argued against spruiking the housing market automatically made you a 'doom gloom merchant' who lacked credibility.....

"everyone pile into the debt ponzi in order 'get ahead' " - that is how you had a credible view in NZ and to hell with the financial and social instability consequences of such actions.

by RickStrauss | 28th Oct 22, 1:10pm 1666915815

Entitlement Mentality manifested in NZ's policy support for speculation on property has done massive damage to the country. We'll continue to face dire shortages of teachers, nurses, doctors, emergency workers etc because other countries where speculators' greed hasn't done damage to the same extent simply provide more viable wages vs housing costs.

We need politicians who are prepared to go against the entitlement mentality that's infested the market for the last decades.

by Independent_Observer | 28th Oct 22, 1:36pm 1666917364

If you've read 'the 4th turning' there Rick, their prediction is that by the end of this decade the entitled generation will have lost demographic power and control over society. This will be the end of the 4th turning, and a start where other generations take control and at which point the mess they have created the last 30 years (while they had power) will be undone and a new period of relative stability can occur.

But the next 5 or so years could be pretty crazy as we go through the height of that 4th turning - even Putin commented on this overnight. Saying that this decade is the most dangerous since WW2 - which is exactly what the Straus/Howe theory predicted when they wrote the book a few decades ago. One last desperate attempt for the boomer generation (and those closely around them) to leave a mark on society and history before they become irrelevant/ignored by society as their childrens generation take control.

by J.C. | 28th Oct 22, 1:35pm 1666917339

We need politicians who are prepared to go against the entitlement mentality that's infested the market for the last decades.

Good luck with that. And let's be honest, for the ruling elite, letting property bubbles run is the easy option. And assume that the bubble breaks. Watch the sheeple turn on the politicians in particular.

by Independent_Observer | 28th Oct 22, 1:38pm 1666917530

I'm re-reading bits of Dalio's 'Changing World Order' there J.C. Note sure if you dig him or not - but his description on these issues are quite accurate. Things really could get nasty the next few years depending upon what politicians and central bankers do to get us out of the next financial crisis that is inbound.

If they take the side of the 'haves' once more, it could be the final straw the pushes the relative stability we have know in the west for decades, over the edge, and into anarchy.

Why would the 'have nots' want to continue to commit and be compliant to a system that is designed to oppress them, while they produce the labour, while those holding capital get even richer?

by J.C. | 28th Oct 22, 1:51pm 1666918265

I'm definitely a fan of Dalio but haven't read CWO, which I know is related to the 4th Turning and for which Dalio's cycle work is consistent with. I think that the ruling elite has not judged this well at all and they haven't expected the pushback to be as strong as it has been. The problem is that the diversions they've created--climate change, decolonization, etc--are not working as they would like as well. Personally, I think we're already in "nasty" and it's only going to ramp up further.

by pacifica | 31st Oct 22, 2:26am 1667136411

What makes you think we have not already gone too far already? Those who have housing stability, who had access to decent education and healthcare are now depending on a care workforce that does not have those things and increasing causing whole businesses and health system to collapse in this regard. With our next workforce generation suffering such dismal education experiments; so that only 1/3 of those in high school barely have competent writing skills at primary school level and near half failing basic numeracy. We already cannot even guarantee that most of those leaving school have basic literacy and mathematics to understand basic concepts (even excluding those streamed and denied education due to their disabilities).

Add to that the long covid tail which will knock 10% of those infected out of the workforce and that they will require substantial medical & financial support that is not currently provided by any existing policies (nor the future suggested income insurance) and NZ is already over the cliff and just hanging on by a thread that cannot carry the weight of the ageing population. Better move to Aus or the UK because even in their complete mess they are still leagues (and decades in regards to medical provision and societal inclusivity) ahead of us.

by Nzdan | 28th Oct 22, 4:51pm 1666929063

When compulsory superannuation was abolished, the Government of the day promised people a fully funded benefit when they retire. They were lied to. Yet, rather than take one on the chin and accept that maybe it was a lie and that it the old age benefit should be means tested, they'd rather stick with their entitlement mentality and deprive core services of billions of dollars of much needed funding.

by Zachary Smith | 28th Oct 22, 7:27pm 1666938461

It's not considered to be a benefit because its is a Universal Superannuation making it an entitlement under current law. One can apply for a benefit on top of it however.

by al123 | 28th Oct 22, 7:36pm 1666938962

The retirement commission says it is: "Super is a ‘tier 1’ benefit as it aims to protect from poverty in old age. "

https://retirement.govt.nz/policy-and-research/nz-super/

It's not clear why being 'universal' would make it an 'entitlement' rather than a 'benefit' - it's not that universal, either, as you have to meet age and residency criteria. It is money you get from the State if you meet a certain set of criteria, just like jobseeker, the Accommodation supplement, Best Start payments, etc. The only differences between these things are the amounts and the criteria.

by Zachary Smith | 28th Oct 22, 8:14pm 1666941271

Please quote the whole thing:

The OECD refers to retirement income schemes as either tier 1, 2, or 3 schemes based on the objectives they aim to achieve. NZ Super is a ‘tier 1’ benefit

It is the OECD referring to it as that not the "retirement commission" and not Muldoon's government that introduced it.

It occurs to me that it is not a benefit because it is not income tested like all the others are.

Of course it is all just semantics however Rick Straus and Nzdan are trying, in their bitter and twisted and sad way, to make people think it is a handout. No retiring person says they are going to receive a benefit. It's more like a well deserved annuity after a life of hard work.

Getting mine in a couple of years. Rick and Nzdan will change their tune when they get a bit older.

by Nzdan | 28th Oct 22, 8:00pm 1666940423

It's not a benefit because you don't like the stigma the label attaches to it, because deep down you have something against people on benefits.

by Zachary Smith | 28th Oct 22, 8:19pm 1666941542

Muldoon didn't conceive of it as a benefit. It was designed to replace a benefit, the asset tested Aged Benefit that not everyone got, with something that was universal and not exclusive

Universal superannuation is more akin to a UBI which wouldn't really be classed as a benefit either.

However, you are right, we should stop using the word benefit because of its negative connotations.

by agnostium | 28th Oct 22, 9:00pm 1666944028

Universal superannuation is nothing like UBI! It's a benefit that you can only qualify for by being old.

by Zachary Smith | 28th Oct 22, 9:15pm 1666944910

Well they both have the word universal. One would start at 20 or something and the other 65 and neither would be means tested.

by RickStrauss | 29th Oct 22, 9:01am 1666987290

Exactly. It's not handed out only to net contributors, but rather is functionally a benefit. The only reason it was ever decided to not use the term is because folk didn't want to be associated with those horrible beneficiaries.

But beneficiaries they are.

What's missing from the earlier times when it was brought in is the reciprocal funding for the young in their turn.

by al123 | 29th Oct 22, 8:30am 1666985435

It's more like a well deserved annuity after a life of hard work.

It really isn't. We could have a system in which the amount of super you get was tied to how much you have worked, but we don't. You still get it even if you've done nothing but sit on a couch and watch TV your whole adult life.

by agnostium | 29th Oct 22, 11:08am 1666994893

Or sat on the board of Grandaddy's company.

by interesting1234 | 28th Oct 22, 1:33pm 1666917206

I have at least 5 friends in Wellington who are heading overseas in the next 6-8weeks. Destinations: Sweden, UK, Australia, Hong Kong, and a couple of friends in England and the USA who can now work remotely full time so they are heading to Mexico and Australia respectively. Another friend who is a FHB, furious at the governments ineptitude as you say, who is travelling all of next year then going to look to buy a house end of next year or early 2024 and they both have jobs held to come back to. It is real, it is happening.

by Nifty1 | 28th Oct 22, 1:44pm 1666917889

FHBs for years have been told to wait but it just keeps getting harder...

by Independent_Observer | 28th Oct 22, 1:42pm 1666917722

The affordability calculation (like what you see on interest.co.nz) assume that FHB's deposits are being eroded at the same rate house prices fall in order to maintain a 20% LVR.

This is very misleading thinking.

Of course if FHB have their house deposit invested in shares/bonds then this might be the case and fair argument.

by Retired-Poppy | 28th Oct 22, 1:55pm 1666918528

Nifty, who are the buyers for this ailing house market? If they fail to appear in the required numbers and the required confidence to commit, prices will just keep falling till they do.

by TonyBarnett | 28th Oct 22, 1:45pm 1666917943

“The average mortgage approved for first home buyers has increased from $430,000 in September 2019 to $578,000 in September this year. So on average first home buyers are taking on an additional $148,000 in debt to get into a home of their own”

I thought the goal of the interest deductibility changes for property investors was to support more sustainable house prices and to improve affordability for first-home buyers. That’s what the government told us.

Looks like a total failure to me.

Robertson needs to resign as Finance Minister.

by Independent_Observer | 28th Oct 22, 2:13pm 1666919637

Lol - jumping to conclusions there Tony. Those deductibility changes won't have made a material change to the market yet, they will take a few years to have effect. Same goes with regulating interest rates.

Perhaps you could revisit this view in a few years time.

And I'm not a Labour fan/Robertson fan either....

But I don't think this view is an accurate assessment of cause/effect - not yet at least.

by TonyBarnett | 31st Oct 22, 8:51am 1667159512

Yes agree that so far interest deductibility changes have not improved the situation for First Home Buyers. Exactly what I was saying. ie So far the policy has not helped First Home buyers. The situation is now a lot worse for them as the article highlighted.

When/why do you think this material improvement will occur & how would you quantify it?

The interest deductibility changes have negatively impacted rental property investment particularly for lower quartile properties - rents & house prices for lower quartile properties have dramatically increased particularly outside the main centres.

In my opinion First Home Buyers are dreaming if they think Labour’s flagship interest deductibility changes are going to make a material difference to them.

For renters the interest deductibility changes have seriously negatively impacted them & will continue to do so as government will not be able to replace the loss in what the private rental market would have supplied if the interest deductibility changes had not been made.

by WestieAJ | 28th Oct 22, 1:57pm 1666918635

In order to unload properties. Landlords may need to leave some of their own equity in the deal as vendor finance. Assuming they have equity and there exists some way for a bank and a vendor to share risk.

Banks are testing serviceability at 8%. Even for 600k loan that is $923 per week IO. $1032 P&I (30years)

Someone earning 80k takes home 59k net a year. The P&I amount takes 53.5k per year to service.

That last time fixed rates were at 8% the Auckland median price was 465K

by chebbo | 28th Oct 22, 2:13pm 1666919595

Fewer aspiring first home buyers are getting into a home

I think this title tries a bit too hard to assign intent.

What we know is that the number of first homes being sold is shrinking, in line with sales in general. What we don't know is whether that's because "aspiring" FHBs are trying but failing to secure their first home, or because they've decided to sit on the sidelines for a while and wait.

by Independent_Observer | 28th Oct 22, 2:15pm 1666919734

Yes was my thinking reading the article as well. If you know prices are falling, why would you buy now when you know you can buy cheaper in the future.

Its like deflation in consumer prices. Same deal with something like houses - but just leveraged on a massive scale.

by rastus1 | 28th Oct 22, 2:43pm 1666921415

I call BS on this statement -

With interest rates on the rise that is likely to restrict the number of people able to afford a home of their home even further.

Timing differences. Those that purchase in the last three years or will soon be shown to be the ones that actually couldn't afford to buy - they were just suckered in by the banskters and believed they could.

The smart ones are waiting...and as each week passes will be closer to purchasing their affordable home.

by Pa1nter | 28th Oct 22, 2:51pm 1666921873

So the people that could afford to buy a house didn't, and those that couldn't did?

Does anyone have any history on FHB uptake during and after economic and house price falls?

by Independent_Observer | 28th Oct 22, 2:55pm 1666922116

Exactly - and this needs to be considered over the 30 year term of a loan as well.

If a person purchased last year and only fixed for 2 years, the value of their property might be down 25% next year and will need to refix onto a higher rate.

A person that waited (who had the same deposit last year) purchases a similar home next year, but pays 25% less and had 10% more saved, will fix into the same interest rate environment, but just with far less debt over the next 30 years so will come out the other end significantly better off. They might be mortgage free 10 years earlier - such is the risk when making one off, leveraged financial decisions. Small changes make big differences.

by kwbrn | 28th Oct 22, 3:22pm 1666923748

I know the solution. Lets reduce the tax rate for top earners so they can have more money to invest in rental properties and while we are at it get rid of the bright-line rule and allow tax deduction for interest payments. Better still lets not implement GST on Airbnb and bring lots of migrants, tourists and students in to ramp up demand.

Then there will be no hope for FHB's and they can resign themselves to a life as tenants.

by Rob Reid | 28th Oct 22, 4:19pm 1666927157

I also hope to live to see negative interest rates, just to really pump up this thing to comical dimensions.

Give me popcorn.

by HW2 | 28th Oct 22, 3:26pm 1666923993

I blame sir Michael Fay and sir Peter Jackson for putting the spotlight on NZ and making it the envy of the world. The 80s outflow turned into positive net migration as everyone including movie moguls wanted a slice of kiwi pavlova paradise.

by J.C. | 28th Oct 22, 5:06pm 1666929980

I blame sir Michael Fay and sir Peter Jackson for putting the spotlight on NZ and making it the envy of the world.

The exceptionalism narrative needs to die.

by agnostium | 28th Oct 22, 9:13pm 1666944809

Jacinda made it the envy of the world. People abroad love her and the way she has dealt with the different crises the country has faced in a compassionate, firm and decisive way.

Many people here will be surprised but read the Wikipedia entry on Jacinda, especially the section on public image and global soft power. This is how she is generally perceived abroad.

Some might even say best PM in living memory.

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

by stefanblaise | 28th Oct 22, 5:29pm 1666931357

Way, way better things for FHBs to do with their money for now.

by J.C. | 28th Oct 22, 6:07pm 1666933645

Dogecoin was a no brainer this week.

by stefanblaise | 29th Oct 22, 1:53pm 1667004784

Speculating in the latest tulip auctions? The power of frequent compounding is much more powerful than the occasional home run followed by regular losses. I'd advise people to invest long term into income producing assets that they build themselves, like a business they own outright and grow. There are amost unlimited options other than speculation and real estate, and you don't have to be a 'markets' junkie, better for your stress levels and those dear to you.

by Yvil | 28th Oct 22, 8:09pm 1666940966

Fewer aspiring first home buyers are getting into a home of their own and those who do are taking on a lot more debt than pre-pandemic

I wonder how this reality sits with the many commenters on this site, who advised FHB's not to but a few years back?

by Rob Reid | 28th Oct 22, 11:04pm 1666951460

I'd like to take this opportunity to thank the many sources that lead me to realise interest rates were about to break to the upside and that this shitshow was about to start. Instead of sitting on a heap of debt, and an asset losing value, and needing to pay rates, insurance and maintenance, I can afford all the popcorn in the world. This is awesome! Bring on more QE - lets give it one more push!

by Yvil | 29th Oct 22, 1:33pm 1667003581

It is of course your choice to never pay interest, rates, insurance and maintenance but you are instead paying rent of course. The main difference is that you will never own your own house, you will be forced have to move when you don't want to, you won't have the freedom to change or renovate your house as you wish or as your family circumstances (kids?) require. The difference is that in 25 years you will have nothing at all for 25 years of rent paid or you will have a freehold house that you can call home.

Your choice!

by Fitzgerald | 29th Oct 22, 1:28pm 1667003302

You describe quite a dark future there, for the people that do not have a choice.

It is a wonder that you, and your ilk, never spend any time regretting your part in shaping that dark future. No prickling of the old conscience at all.

by Yvil | 29th Oct 22, 3:46pm 1667011573

What I describe above is simply the truth. "your ilk shape a dark future". So you believe I have the power to shape your future? What rubbish, instead of playing the victim and blaming others for your circumstances why don't you take charge of your own life.

by Independent_Observer | 29th Oct 22, 5:40pm 1667018449

"What I describe above is simply the truth. "your ilk shape a dark future". So you believe I have the power to shape your future? What rubbish, instead of playing the victim and blaming others for your circumstances why don't you take charge of your own life"

Everyone buy motels and take government funding to home the victims of a housing affordability crisis and take charge of your own life.

by Nzdan | 29th Oct 22, 6:17pm 1667020640

Yes, everyone should do it. If there's not enough hotels motels to buy, then build them. If everyone took charge of their own life and bought motels, we'd have 5 million motels in this country.

by whakahokia mai | 28th Oct 22, 8:12pm 1666941122

How do the banks view a borrowers situation where the current value of a house is less than the outstanding mortgage? Also at what point would they forclose on the deal and sell the house to recover as much of their investment as possible?

by Cur8or | 29th Oct 22, 7:43am 1666982635

I think they view them as under water. As long as you're making the payments, the bank will do nothing.

by Independent_Observer | 29th Oct 22, 11:10am 1666995003

As long as the rising unemployment, that the RBNZ wants to see to reduce demand/inflation, doesn't impact you then you should be ok.

The biggest stress, from talking with negative equity home owners in the US during the GFC, was the fear of unemployment - it was a terrifying time for them.

by Doggog | 30th Oct 22, 11:17am 1667081849

Bucking the trend

22 Inverary Avenue, Epsom - Capital value $3,900,000 - Sold $4,500,000

29 Dell Avenue, Remuera - Capital value $2,625,000 - Sold $2,760,000

by Zachary Smith | 30th Oct 22, 4:34pm 1667100841

The old rules remain: Location, location, location!

by interesting1234 | 31st Oct 22, 8:50am 1667159447

549 Waimea Road, Annesbrook Nelson. RV 2021 $1,200,000 Sold September 2022 for $1,300,000.