This article was published on 5 May 2007. Some information may be out of date.


  • Auckland houses may be unaffordable, but apartments aren’t.
  • One man is happy with is inexpensive home.
  • Homeowner feels anything but smug about being in the housing market.
  • War is declared between the baby boomers and the younger generation.
  • Last time New Zealand tried to control rents, it was disastrous.

QI think your first correspondent last week, who said first home buyers are too fussy, should sit down with a first home buyer and a calculator before passing judgment. Housing unaffordability is worse than it has ever been.

Let’s be extra generous and say the average household in Auckland earns $60,000 per year. What can that buy with a $30,000 deposit?

If the buyer is prepared to put themselves into severe housing stress and commit half of post tax income ($400 a week) on interest alone then they can borrow about $230,000 at current rates of 8.5 per cent.

Then they can look at putting another $150 per week on rates, insurance and maintenance and somehow survive on the remaining $250 per week (feasible if you are single, but if you have a wife and two kids forget it).

The problem is, even if you are prepared to sacrifice this much, what house can you get in Auckland for $260,000? Maybe your correspondent could help me out here, cause I think we live on different planets.

Also, it’s interesting you quote the BNZ economist Tony Alexander. Only two years ago he said housing would fall 10 per cent, and the further it rose the more it would fall. (

It’s gone up 20 per cent since then, so by his calculations it is due for a 30 per cent dip. I wonder if he’ll change tack again when the housing market goes into free fall, as it most surely will.

AThe people in your scenario can actually borrow $245,000, bringing the total to $275,000. Still, you’re right that there aren’t many houses in Auckland for less than that.

There are, however, quite a few apartments. Families all over the world live their whole lives in apartments. It wouldn’t do huge harm for New Zealand families to do so for a while. There are always parks not far away.

Another alternative, as was pointed out last week, is to move out of Auckland. In this tight job market, most people could find work in other cities.

I’m not saying these options are ideal. And I do have sympathy for families struggling to get into their first home. But the options are possible, and not too terrible.

On Tony Alexander, that 2005 article said he is “still only expecting house prices to drop between 5 per cent and 10 per cent over a two to three year period once the inevitable downturn finally arrives.”

That’s not inconsistent with his now saying that it’s very unlikely that house prices will fall sharply.

It does seem, though, that Alexander is more confident about house price strength now than then — presumably because various factors have changed. It’s probably a good example of how tricky economic forecasting is.

Another example: In that 2005 article, Alexander notes “the Reserve Bank is forecasting average house prices will fall 4.8 per cent in 2006 and a further 1.9 per cent in 2007.”

Perhaps we should just settle for: Who knows what house prices will do?

QJust for fun, in response to the ignorant, here’s a pic of my place. I’ve lived in Avondale for nine years and have no inclination to move anywhere.

Ten minutes to the CBD (outside rush times of course). Every facility I need (eg. Lynmall) less than ten minutes away. And what an environment to live and work in!

Registered valuation $350,000. Sure only two bedrooms, but hey, I’ve found my brick and tile castle!

ALooks pretty pleasant to me. And the valuation is not all that much more than $275,000.

Sadly, though, not every home owner is as happy as you. Read on.

QAs an owner of my own home I suppose I should feel smug, unlike those desperate and wanting to get in. Unfortunately I feel just the opposite, as our home is our only investment and we have no savings for retirement or otherwise.

My partner and I are 42 and 45. Our combined income is $100,000 and our fortnightly mortgage repayments are $800. We have spent most of our working lives freelancing in the creative industries, which can be very up and down in terms of income.

Our weatherboard house is a three-bedroom do-up in the Grey Lynn area and cost us $597,000 two years ago. It had no shower, no insulation, rotting windows, and exposed aged wiring which was a fire hazard. We searched for three months and bid on a number in similar condition that sold for more. We have $380,000 in equity in the house.

To get to this stage we have owned two previous houses in Avondale. We renovated them over eight years, spending most weekends and our spare time and money. This became near impossible once we had children because of the toxic and dangerous things you have around when you DIY.

We have spent $40,000 on our current house over the past two years. It would still be classed as a do-up.

We have looked at three-bedroom townhouses and apartments in this schooling area where my son is settled, and there is nothing for cheaper than $600,000.

We are not keen on moving further out. Our experience with young children is that it is much better if we can be closer to where we work so we can bus or train without it taking hours.

The cost of additional childcare and stress needs to be factored in to a decision to move further away. All childcare goes until 5.30pm. After that you need a nanny, and these services charge a three-hour minimum of around $16–20 per hour plus agency fee of $15–20. So an additional half an hour at the end of the day can end up costing a lot.

Plus, on a wider economic level, advising people to go further out to find affordable housing does seem to fly in the face of calls for fewer cars to be clogging the motorways.

What would you suggest about our situation?

AHang in there, putting any spare money into either further improvements on your house — to get it beyond the do-up level — or repaying the mortgage faster.

Money is often tight at your stage in life. But things usually ease when, for example, the children no longer need childcare or your incomes increase.

And, once the kids are off your hands, you will probably be able to save considerably more.

Meantime, you’re in the housing market. There’s no need for smugness, but nor is there any need for worry.

One more point: Surely, by asking neighbours or using local advertising, you could come up with cheaper nannying by, say, a responsible teenager.

QAs a Kiwi overseas I feel a lot of what you say is garbage.

I am living in Japan with my young family. We are saving as much as we can, and yet with the exchange rate and booming house prices our efforts are in vain. The longer I am away from NZ the more I think maybe I will never return even though I really want to.

Many things are the same price or cheaper here in Japan. When I compare house prices too, the gap is closing. I think something has to be done to cool the market because when I look on internet sites and see a s**tbox house (excuse my French!) that costs $300,000 in Christchurch I am amazed and frustrated.

I can hear you say that I should be happy and buy one! Frankly, I don’t think the houses are worth that, and I will not buy.

I agree with you that maybe people’s attitudes have changed and people want more these days, and I guess my email proves that. But I think many reports have proven house affordability is at its lowest when compared to incomes etc.

I think perhaps your generation (baby boomers) have had the best of it, and this will continue as young New Zealanders pay for pensions, health care etc. that probably will not be around when I retire.

P.S. Sorry for the lack of capitals and punctuation.

P.P.S. If this rant is difficult to understand, it’s because I wrote it very early in the morning and I’m still half asleep.

AIf there are two things I can’t stand about the younger generation, they are their lack of capitals and punctuation and their tendency to send emails written while half asleep. Not really, but an inter-generational battle sounds like fun, so I thought I would stir things up a little more.

Have we baby boomers had unfair advantages? I’d be interested to hear other readers’ views.

P.S. If this column is full of garbage, what are you doing reading it, when you could be getting more sleep?

QTwo weeks ago you drew on a number of sources far and wide to back up your dissertation on the evils of fair rents but overlooked mentioning the N.Z. Fair Rents Act, brought in by the Savage government in 1936.

The act, with subsequent amendments, created a dearth of rental accommodation in N.Z. which citizens had to endure up till it’s repeal by National, in the sixties, I think.

Quite apart from this, a lot of Mum and Dad investors who had simply bought a rental house to augment their retirement income found they had bought into a disaster. The returns were ridiculously low, and the properties couldn’t be sold because no buyer would buy a house that he in turn could not sell because the tenants were there for life, and he would be stuck with the unbelievably low returns. It was verboten to raise the rent.

I see in the Herald that the fictitious joys of that law are being espoused by the usual ill-informed, vocal socialists as a way to set the housing situation right.

It frankly amazes me how many people seem to have forgotten the errors of the past, apart from old farts like me.

ALet’s not get carried away. I don’t think fair rents are evil.

They’re rather good, actually. I don’t even think rent controls — which is what I was criticising — are evil. It’s just that they not only don’t work, but often do harm — as do all price controls I’ve ever heard about.

Your interesting information about the Fair Rents Act supports that. Thanks for your letter.

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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.