I believe we have a housing affordability issue in New Zealand. I fear for friends of mine who are having to load up on debt to get on to the property ladder and at the other end of the spectrum, I can’t stand the sight of families living in cars as was so well illustrated in the recent documentary who owns New Zealand.

It’s fair to say that right now, it’s harder than ever to buy your first home.

At the same time, if you gave me the option of going back to live in the 60’s when houses were a whole lot cheaper I simply wouldn’t even remotely consider taking you up on the offer.


Let me explain

We are constantly told that buying a home is now more expensive than ever before. This quote is taken from a stuff article on the issue:

“This is no longer just a housing crisis. It is an unaffordability disaster, especially for anyone on a moderate or low income and for the younger generation.”

Wow, pretty doomsday-ish, right? But is it true? Are we really that much worse off than our parents were?

Firstly it’s worth noting that the ‘affordability question’ is generally always based on the average price of a house in a given area compared to incomes. Eg. The benchmark for affordability used to be for an average house to cost about three times an average household’s income. No longer. In Auckland, it is now 10 times income, in Sydney 12 times and in Hong Kong 18 times.

This is a simplified (and flawed) way to look at it and there are a number of factors which are affecting house prices for our generation…

1. Interest Rates:

As you can see from the graph below, interest rates are at levels that haven’t been seen since the 1960’s. Families can now afford to borrow more for housing, a lot more than they could in 1985 that’s for sure. But that’s only 1 part of the puzzle.

Image source: Kiwiblog

2. The typical first home buyer has changed.

Where it was once a young married couple with 2 kids (and 1 income), your typical first home buyer is now a young professional couple, who are both working, with no kids. Think about what that does to home affordability.

If you are a single income family, with dependants, trying to catch a break in the first home market right now – your competition has so much more spending money that it did 30-40 years ago, when our parents were growing up. Also, young couples can afford to spend a much higher proportion of their household income on housing as consumer goods like electronics and clothing have become so much cheaper.

3. People used to die earlier and inheritances were published in the newspaper.

Obviously, medical breakthroughs which allow us to live longer are a wonderful thing and we are lucky our parents are around to guide us and drive us crazy for that much longer. But think about how much easier it would be to buy houses right now if all our parents were still dying in their 60’s. Not only that, inheritances used to be published in the paper, and well-to-do citizens didn’t want to be embarrassed in the after-life, so they used to take pride in passing on a decent pile of dosh.

Nowadays ‘ski-ing’ (spending-kids-inheritance) is the norm. On cruises, world travel, a bach by the beach, whatever floats their boat. As well it should be too. They earned that money, they should spend it.

4. Houses should be less affordable than they were 50 years ago.

Land is a finite resource. World population is growing but they aren’t making any more land. In fact, some of it is disappearing as we speak with slowly rising sea levels. On top of this, everyone wants to move to New Zealand…

We can’t really blame them. I would want to move to NZ too. Wouldn’t you?


Despite all this, deep down our parents still envy us…

Housing is just one part of the life puzzle and while I don’t envy anyone trying to buy a home in Auckland right now, the affordability crisis needs to be kept in perspective.

We have more freedom.

We can travel. Easily. Don’t you think our parent’s generation are jealous of our frequent overseas jaunts? We can fly to London for less than $1k. Not that long ago it would have taken months on a boat to get there. This is going back a while, but one of my ancestors, Alfred Duncan, settled in Lake Wakatipu in the 1860’s and a full 1/3rd of the people sailing on his boat from London didn’t survive the trip!

Source: The Wakatipians

We can go anywhere we want, relatively safely. We are not bound by the kinds of expectations earlier generations had. 30 years old and not married? That’s pretty normal now. 40 years ago it would have seemed very strange.

We have more choice of jobs.

I spoke to a friend who works in recruitment recently and she remarked that 2 – 2.5 years in a job is now considered a reasonable period of time to spend in 1 role. What do our parents think when they see us jumping in and out of different jobs just for the fun of it? Or for an extra few dollars a week?

We get to travel the world, work in London, make a lot of money, come back buy a home and get married, have 1-3 kids, get the snip and lead a relatively sweet life if we can try and stay away from excessive rat-race related stress.

Many of our parent’s generation were married with children, washing cloth nappies by hand before they were 21. They were often down to 1 income, working extremely hard to pay the bills and buy that little block of bricks in the sun we all dream of. Many of them even bought a home on leasehold land just to get a foothold in the market, before scrimping together the cash to buy the section they lived on years later.

Freedom cont.

We have freedom of sexual expression, freedom to have babies out of wedlock. Same-sex couples can hold hands in the street and it isn’t considered strange. Only 70 years ago, the guy who it could be argued single-handedly won the second world war (Alan Turing) was horrendously persecuted by his own Country for being homosexual.

It is no longer socially unacceptable to be an atheist.

Anyone can start a business, anyone can become an entrepreneur. You can start your own clothing line tomorrow if you want to.

The biggest test of all is how you answer this question:

Would you swap places with your parents and give up all the freedoms we have today, in exchange for a more affordable first home?

Isn’t it reasonable that some of us might have to buy our first home outside of Auckland, or commute a bit further, in return for all these freedoms? Or is buying a home such an important part of defining our self-worth that reasonable access to property ownership is more important than anything else?

Do you think our generation has it easier? Or harder? Do I just sound like a spoilt kid who already owns a house?

Let me know your thoughts in the comments below…