Obsessed with property? Not us
New Zealanders are not as property mad — or as mortgage mad — as we’ve been led to believe, recent research shows.
Among the findings:
- We are no more heavily into property than people in many other countries.
- Almost half of home-owning households have no mortgage.
- The average mortgage is less than $80,000.
- Less than 8 per cent of households own rental property.
- Less than 3 per cent of households own holiday homes.
- Despite some baches being worth millions, their median value is less than $170,000.
This doesn’t mean that New Zealanders wouldn’t benefit from spreading their savings across other types of assets, such as shares, share funds and bonds. Many people are scarily undiversified, and would be hit hard if property values were to slump.
The research does suggest, though, that interest rate rises are good news — not bad news — for the huge number of mortgage-free home owners who hold term deposits or bonds. That number is even bigger if we add renters.
The research also suggests — dare I say it? — that if the government enforced the current laws more strictly, and taxed the gains of landlords who clearly bought their properties with the purpose of making gains, the change might not anger all that many people.
Non-landlords — the vast majority — might well applaud such a change if they realised it could mean lower taxes elsewhere.
The research, by Treasury officials, found that our home ownership rates across age groups tended to be slightly lower than in Australia, Canada, Finland, Italy, Sweden and the US. The exception was people 75 and older. In that age group, we have amongst the highest home ownership.
Turning to investment property — which includes rentals, holiday homes, timeshares and other non-residential property — our ownership rate is similar to Australia’s, except that Aussies under 25 are much more likely to own investment property than Kiwis.
Americans, on the other hand, are much less likely — except in the 75-plus age group. Generally, Americans are more heavily into shares, bonds and other financial assets — giving them good diversification.
On mortgages, not many of us are heavy borrowers.
Of those New Zealanders who do have the loans, less than 21 per cent have a mortgage more than half the value of their property, and less than 6 per cent have a mortgage of more than three quarters of the value.
Predictably, there’s a strong tendency for younger people to have big mortgages. Only 8 per cent of property owners over 65 have a mortgage, and their loans average less than $30,000.
Rental property ownership is highest among those aged 45 to 64, but even then only about 12 per cent own rentals.
Not many hold their rental properties on into retirement. Of 65–74-year-olds, only 5 per cent are landlords, and from 75 on, only 2 per cent are landlords. “Apparently, investment in rental property is liquidated once the household head reaches 65,” says the report.
While in many ways it’s good to learn that New Zealanders are not as obsessed with property as we are sometimes told, it’s comforting to know that:
- Almost half of households in the bottom 20 per cent by income own their own homes — not hugely different from about two thirds of those in the top 20 per cent by income.
- Around three quarters of households headed by someone over 65 own their homes, and that rises to nearly 80 per cent when the household is headed by someone over 75.
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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.