house prices versus salaries

[ralf-nz]

"NZ property 'unaffordable':
The Demographia International Housing Affordability survey of 325 cities and regions rates us as one of the world's worst housing markets."
So according to http://nz.news.yahoo.com/a/-/top-sto...-unaffordable/

What an exaggeration!!

Just 7 (SEVEN) countries have been taken into account!

The actual report here: http://www.demographia.com/dhi.pdf

Many people in Central Europe would be happy with the given ratio of 5.3 for NZ!

[Super_BQ]

I'm not surprised and welcome to dual household incomes to live in a house.

I always say, it's not how much you earn but how much you can save. When the mortgage is high, who can save? Household income doesn't rise nearly as fast as housing prices which brings the question, who is pushing these house prices up around the world???

[Johnnie Walker]

I think you are pushing up the prices Super_BQ, and me, and all of us who pay the current market price for land or homes. Prices will fall if we refuse to pay what is being asked. Interest rates so are this century have been very low compared with the previous few decades, so people have been able to afford to borrow more money and this has pushed up prices.

[ykkee]

to curb property speculation, some countries restrict the maximum loan amount up to 70% only for the 3rd house.

NZ has any rules similar?

[ralf-nz]

Here http://www.odt.co.nz/news/business/1...y-unaffordable an article that covers this topic much more adequate.

[ralf-nz]

...dual household incomes to live in a house.

Yep that is the standard in Central Europe. And even doing this, most families just cannot afford their own house!

[Super_BQ]

Prices will fall if we refuse to pay what is being asked.

That doesn't work for long as inflation kicks in.

Interest rates so are this century have been very low compared with the previous few decades, so people have been able to afford to borrow more money and this has pushed up prices.

Agree but you have to look at the principal compounding factor. I remember my dad back (my guess - between 1973- 77) mortgage rates were over 20%. The thought of 20% is damaging to a loan of $50,000. But today, there is no way a $500,000 mortgage can be serviced at 20%. Why? because the average home loan should be paid off no more than 30 years.

to curb property speculation, some countries restrict the maximum loan amount up to 70% only for the 3rd house.

3rd house? Most people have trouble getting their 1st home paid for.

Consider Canada's case:

http://www.cbc.ca/money/story/2011/0...#ixzz1BPN3d0QL

Minimum 15% down for mortgage.. Back in the 70s, I think 20% down was the minimum.

NZ has no restrictions. They leave it up to the banks to decide. No capital gains tax so property speculators party all they want.

[iondiode]

NZ has no restrictions. They leave it up to the banks to decide. No capital gains tax so property speculators party all they want.

I think this speculation is the biggest problem with home prices in NZ.

Well, if you are looking to buy (as we will be in the next year) , there is some good news

http://www.radionz.co.nz/news/busine...n-house-prices

[Stelmate]

Coming from the US, home prices do seem quite high comparative to salary (even compared to some of the larger metro areas). A nice 2000+ square foot home in the mid-west (outside if Chicago) cost around $300k. Even lower is the southwestern US. I remember when I lived in the southwestern US home prices were very cheap until the Californians moved over and jacked up all the home price two fold since they sold their shacks for millions of dollars. I wonder if NZ if suffering partially from the same thing? How many foreigners come over with a large checkbooks from selling their houses from overseas?

[Super_BQ]

How many foreigners come over with a large checkbooks from selling their houses from overseas?

NZ saw a huge influx of wealthy asian migrants in the 90s and early 2000s. But a fair % of them recently have fled to Australia. Actually there was a cut off date where kiwis could just migrate to Aus to take up permanent residency and this sparked a huge # of asians (around 1998 I recall). But then the decision was reversed so anyone in NZ could run to Australia.

The reason why property prices are falling down is there's fewer wealth migrants coming to NZ. Coupled with the leaky house syndrome. Just look overseas and wonder how housing prices are doing abroad? UK, USA, etc hasn't seen ANY rise in property value (in average) so it's no mystery why NZ would be any different.

The playing field of land ownership will never change in NZ for as long as politicians have a vested interest in owning land. This is by far a big difference to overseas where retirement for all (including politicians) are rooted from the stock market (pension funds).