NZ 1st homebuyers are ScReWeD...

[cantab]

Last year I spoke to someone who was convinced it was all the foreigners fault. She was evicted because a foreigner purchased her rental to live in and she ended up paying a lot more rent.

The internet must have had an impact - local NZ properties are listed globally and would appear cheap as chips to some expat living in a shoebox in London. So much easier to buy now - look through the photos, buy subject to the usual reports, do it all over the net.

NZ incomes might be low however construction materials are based on international prices - timber, copper, pvc pipe, stainless steel.

There is only a finite amount of land where most people desire to live - close in, therefore land prices just keep going up.

Look at the chargeout rates of plumbers, builders, electricians compared to what they were.

Local body fees keep increasing.

Look at the prices of basic new houses even in areas such as Wainoni in Christchurch. It costs a lot more to build a house now than it did 5 years ago.

From reading this topic I've come to the conclusion that the real problem for first home buyers is not that houses are unaffordable rather their expectations for a first home are too high.

[Steve]

As in "wanting the best, right now"?

[Crypto Crude]

quote:Cooper
Advanced Member
Posted - 05/02/2007 : 1:29:28 PM
He's talking about NZ house prices not being tied to affordability, Macdunk. Which means traditional methods of measuring affordability would be pretty redundant... they can just keep going, driven by foreign demand.
SC, that's a good point. I really don't know.

hey cooper, yeah yourve got my point... for example in australia they earn something like 40% more income on average than us Kiwis do (taking into account exchange rates)
35,000 * 1.4=49,000 .... is in NZ dollar terms they earn something like 49k on average per year...
300,000/49,000 = 6.1
so 6/1 for them 7/1 for us....
anyway, incomparison to western property, im sure that NZ housing is considered cheap...
foreigners see NZ as a safe haven, they see our beauty, they see our cheap housing compared to what they are used to...
This example has characteristics of Purchasing power parity...(not perfect PPP).... but still, if their domestic housing is more expensive to foreign prices... then foreigners will invest in a cheaper market... drive up prices to a point where there is no difference between domestic or foreign investment....
[8D]
.^sc

[Crypto Crude]

quote:cantab
Advanced Member
Posted - 05/02/2007 : 2:43:32 PM
From reading this topic I've come to the conclusion that the real problem for first home buyers is not that houses are unaffordable rather their expectations for a first home are too high.

Cantab....What makes our expectations for a first home too high?
with a 300k home, and 8% interest rates... then expectations of a rising house value by over 24k should be expected should they not? (24k breakeven point)
[8D]
.^sc

[Cooper]

quote:Originally posted by Shrewd Crude

quote:Cooper
Advanced Member
Posted - 05/02/2007 : 1:29:28 PM
He's talking about NZ house prices not being tied to affordability, Macdunk. Which means traditional methods of measuring affordability would be pretty redundant... they can just keep going, driven by foreign demand.
SC, that's a good point. I really don't know.

hey cooper, yeah yourve got my point... for example in australia they earn something like 40% more income on average than us Kiwis do (taking into account exchange rates)
35,000 * 1.4=49,000 .... is in NZ dollar terms they earn something like 49k on average per year...
300,000/49,000 = 6.1
so 6/1 for them 7/1 for us....
anyway, incomparison to western property, im sure that NZ housing is considered cheap...
foreigners see NZ as a safe haven, they see our beauty, they see our cheap housing compared to what they are used to...
This example has characteristics of Purchasing power parity...(not perfect PPP).... but still, if their domestic housing is more expensive to foreign prices... then foreigners will invest in a cheaper market... drive up prices to a point where there is no difference between domestic or foreign investment....
[8D]
.^sc

If you were looking at, say, housing affordability from an Aussie perspective in both NZ and Australia, and comparing the two, then it wouldn't be a straight 1:1 ratio... you'd have to factor in a few other things... for instance if the aim is to buy and live in NZ, you'd have to factor quality of life and potential earnings differentials.

If you're looking at NZ as a rental investment from overseas you would be tied to affordability in some respects as you'd be tied to what the rental market able/willing to pay (for any given level of elasticity). Also you'd have management/upkeep costs that you wouldn't necessarily incur if you lived in NZ. If you weren't interested in renting the place out there would be no such constraints, but you'd obviously want capital gain, an income stream or to eventually live there.

Also with PPP you're usually comparing a fixed basket of goods... arguably Real Estate in one country is different to Real Estate in another, so while you're still comparing apples with apples you're actually comparing Granny Smiths with Pacific Rose. But you've already acknowledged that yourself...

There's also possible regulation to factor in... imagine the furore if foreign ownership of NZ land passed a certain level.

So I guess the question is whether that is the case, and if not, why not?

[Steve]

quote:Originally posted by Cooper

If you were looking at, say, housing affordability from an Aussie perspective in both NZ and Australia, and comparing the two, then it wouldn't be a straight 1:1 ratio... you'd have to factor in a few other things... for instance if the aim is to buy and live in NZ, you'd have to factor quality of life and potential earnings differentials.

If you're looking at NZ as a rental investment from overseas you would be tied to affordability in some respects as you'd be tied to what the rental market able/willing to pay (for any given level of elasticity). Also you'd have management/upkeep costs that you wouldn't necessarily incur if you lived in NZ. If you weren't interested in renting the place out there would be no such constraints, but you'd obviously want capital gain, an income stream or to eventually live there.

Also with PPP you're usually comparing a fixed basket of goods... arguably Real Estate in one country is different to Real Estate in another, so while you're still comparing apples with apples you're actually comparing Granny Smiths with Pacific Rose. But you've already acknowledged that yourself...

There's also possible regulation to factor in... imagine the furore if foreign ownership of NZ land passed a certain level.

So I guess the question is whether that is the case, and if not, why not?

Cooper, have you been studying 'Open Economy Macroeconomics'?

[Cooper]

quote:Originally posted by Steve

Cooper, have you been studying 'Open Economy Macroeconomics'?

About a year and a half ago

Are you involved with Otago or studying Steve?

Edit; actually if you're talking about Econ 316 then I haven't... that's one I'm going to take to finish my Comm.

[cantab]

quote:Originally posted by Steve

As in "wanting the best, right now"?

Yes along those lines Steve, although I wouldn't say "best" - take our friend Shrewdie - he wants a $350,000 home first off, anything less would not be "decent" enough to live in.

[cantab]

quote:Originally posted by Shrewd Crude

quote:cantab
Advanced Member
Posted - 05/02/2007 : 2:43:32 PM
From reading this topic I've come to the conclusion that the real problem for first home buyers is not that houses are unaffordable rather their expectations for a first home are too high.

Cantab....What makes our expectations for a first home too high?
with a 300k home, and 8% interest rates... then expectations of a rising house value by over 24k should be expected should they not? (24k breakeven point)
[8D]
.^sc

Shrewdie, what I was trying to say, if $350,000 ( your definition of the amount required to buy a "decent" home in Christchurch) is unaffordable why not buy something less expensive so as to get on the property ladder. The Aranui cheapie at $175,000 or the Hornby special at $250,000 then come into play.

This desirable Fendalton property would make a great second home but perhaps it would be more realistic to aim for this one to be your third home.

Just a thought.


http://www.open2view.com/Property/141526#

[Crypto Crude]

cantab... in my opening argument on this thread I used 330k.... the average house price in NZ is 350k....
I use that round figure, because it is the average.... and most people on this thread can relate to that figure....

I dont want the best... but I dont want a squallor like, drug dealing, rat infested, cave like that one in Aranui....
The best returns in property that I will get are a four betroom house, with land base to sub divide... cant imagine that I can get that for 200k....
you are quite right... around the 250k mark is where I sould be looking at...
[8D]
.^sc