This article was published on 12 May 2007. Some information may be out of date.

Q&As

  • Three readers defend baby boomers and suggest how today’s young could afford to buy homes.
  • A Generation Xer speaks up for her generation.
  • A reader worries that apartments may lose value.

QBaby boomers did not have it easy in housing either.

I bought my house in 1981, when I was 31. Banks did not lend to single women, and, even though I was earning good money, and had been independent for years, my father still had to countersign the loan. I sold my car to part finance the deposit.

I bought a run-down house in an area none of my contemporaries would be seen dead in. The place had holes in the floor and rats in the basement.

At one stage I was paying over 50 per cent of my income in mortgages and loans needed to make the place habitable. I had flatmates and a boarder, and all the furniture was second hand, including the carpet.

When I had paid off the second mortgage, I borrowed some more to put a flat in the basement and some proper carpet upstairs. Then I did my OE at 40 with two lots of tenants in the property. I paid off the last of the mortgage when I was 45.

Now, I have a home and income, which hopefully will assist in my retirement.

Where did I buy that none of my friends would visit? Kingsland, now one of the suburbs that buyers of today say they cannot afford.

AFew people in the early 80s would have foreseen the revival in the inner suburbs.

Who knows what neighbourhoods will become fashionable next? Take note those who are turning up their noses at cheaper locations.

And while you’re at it, you might consider taking in flatmates or boarders, and using second-hand furniture.

Baby boomers’ difficulty in getting mortgages is one theme that has come up in several readers’ letters. That’s hardly a problem these days.

Mind you, we could argue that borrowers today may end up being hurt by getting money too easily, and struggling to repay it.

QYou asked last week: Have we baby boomers had it so good?

Here’s my wife’s story: Saved for 10 years, then received a small inheritance. With that and three mortgages (between 12 and 18.5 per cent) bought small unit in unfashionable suburb.

Drove a Mini to and from work and nowhere else because the budget couldn’t cope. Worked all overtime possible. Eventually mortgages whittled away to insignificance.

My story: Sold car to buy quarter-acre bush section. Hand-cleared house site and built in my spare time, holidays and weekends to the shell stage a small cottage. Lived in caravan for three years to achieve this.

I learned my building skills through asking around, research, and trial and error. Old motor bike for transport. Sold the place and bought a do-up in town. This got me into the market properly.

Neither of us did OE till our thirties. At one stage we had had no holidays for five years. Current situation: three kids and mortgage-free. City house and bach, total value $1.8 million.

I would like to have lived a life of luxury but the delayed-gratification genes we inherited seem to have been stronger. The lifestyle at times has been very modest if not to say ridiculously frugal.

I don’t envy anyone trying the same thing today. I believe it’s achievable but does depend on wise choices.

ADelayed gratification in the genes is an interesting issue. Another reader wrote:

“Perhaps what baby boomers should be blamed for is producing children whose expectations appear to be instant gratification of their every want — not need.

“Have we failed to pass on the pleasure of saving and then fronting up with cash to take delivery of a coveted item?”

If she’s right, delayed versus instant gratification isn’t genetic but something we learn.

Perhaps the trouble is that many boomers struggled at first but — by the time the kids were growing up — they were enjoying some of the finer things in life. Is it the fault of the young that that is what they watched?

Another issue: you mentioned mortgages being whittled away. Through the 1970s until the late 80s, mortgage interest rates were horribly high, but so was inflation.

Borrowers were winners. Our incomes rose fast with inflation, so our debts relative to our incomes dwindled quickly.

Nowadays, low inflation has drastically slowed that process. Boomers should acknowledge that.

QI am 40 years old. When I was 24, I bought my first unit. I lived at home with my parents and rented it out. I did not have a flash car, plasma tv, overseas trips and coffees out.

When the equity grew in that unit I bought a second unit and still lived with my parents. The rent did not cover the mortgage and I paid towards it.

I am so sick of everyone complaining on how they cannot afford a house. Last week someone complained about how the baby boomers have had all the good times and young New Zealanders are paying for their pensions.

Well, hello, those baby boomers also paid taxes and helped with pensions. It is the way the cycle goes.

Last week a couple in the paper earned $90,000 and could not afford a house. They had a $14,000 deposit. They cannot have been saving long. They still went to the gym and ballet classes. It is all choices on what we want to spend our money on and how.

A friend’s daughter of 21 has two young children. She is not working, and her husband is a builder. They have just bought a very basic house in Whangaparoa, which no doubt they will improve. They have home stays.

They have managed to do it. Maybe people should stop whinging and change their expectations, think of alternate ways to achieve their goals.

AWe’re accumulating quite a list of alternatives: live in undesirable neighbourhoods or caravans, take in tenants or boarders, use second-hand furniture, build your own house, drive minimally, and work overtime. Now we can add: live with parents or offer home stays. It’s great what readers come up with.

I think, though, that several readers’ lists of luxuries they did without — like your “flash car, plasma tv” and so on — aren’t particularly helpful to the debate.

Leaving aside the fact that some of these items didn’t exist when we boomers were young, many of us expected to have a record player, TV set, washing machine and our own phone line — as opposed to a party line — in our first homes. Our parents wouldn’t have dreamt of such luxuries when they started out. That, too, is “the way the cycle goes”.

Sure, some young want too much, but let’s not get carried away with that.

Speaking of living with parents, two weeks ago I commented to a reader with $700,000, who lives with his folks, “I do hope you pay your parents some board!”

In a thank you note this week, he said, “Just to let you know, I have always paid my parents board.” Good to know.

QYour correspondent from Japan wrote about baby boomers having it all and I do unreservedly agree with (him?).

As a Generation Xer I am resentful that baby boomers were all educated for free, only to turn around and use the wisdom of that education to tell us we would have to pay for ours. Student loans are an economic setback that baby boomers never had to cope with.

Also, many people in my age group (early thirties) left school when unemployment was very high. Although that is in the past, I think many of us started on a back foot financially. The experience of being long-term unemployed or under-employed with very little hope for the future does affect your outlook.

However, it is time to get over it. Although not homeowners yet, my partner and I fully intend to be in our first home next year, although it’s more likely to be a townhouse in Onehunga than a mansion in Remuera.

While it seems traditional to end up living in a house comparable to what you grew up in, I am optimistic.

Baby boomers have to die or go to a rest home at some stage, and there will probably be a glut of properties on the market as they cash up their investments.

Guess who’ll be waiting to snap up their properties? Generation Xers who can use the equity in their less desirable houses to buy more comfortable homes.

My advice for my generation? Stay positive! Appreciate what you have. We have had it a darn sight easier than our grandparents’ generation, and people in the third world live on the street.

AWell put.

QI think what you said last week about the relative affordability of apartments is on the money. However, there are some pitfalls that I think need to be considered.

Honestly speaking, the quality of the apartments (construction and fittings) I’ve seen in Auckland is pretty shabby. I can see a lot of similarities with Japan, which has put up with the same problem until quite recently.

I think that many apartment owners will be stuck with a depreciating asset. The rate of depreciation cannot easily be determined as Auckland and New Zealand have probably little relevant data except over the short term (or perhaps for dwellings built before the current construction boom).

Funnily enough, an acquaintance has just picked up a commercial ski lodge in one of Japan’s best-known ski resorts for less than the median price of a house in South Auckland. How times have changed.

AJapan has seen house prices fall for about the last 16 years. In many regions, prices have worse than halved, and in parts of Tokyo they have dropped by 90 per cent. Scary stuff.

As you say, prices of apartments here could certainly fall. But I don’t see why they are more likely to fall than houses.

The apartment market has already suffered — presumably partly reflecting the quality of some units. It could, perhaps, be argued that it has done its plunge, whereas the house plunge is still to come.

A would-be apartment buyer would certainly be advised to have the place checked for quality by an expert. But the same goes for home buyers.

Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.