So, 1970. Properties overall - commercial, residential - in the provinces in 1969 appear to be valued at $10,450 (2.9m/277; New Zealand Official Yearbook, 1970), and my parents paid $4000 for their house. While the houses we bought in 1970 are not the same as the ones we want to buy today - the house I grew up in had only one bathroom, three bedrooms and insulation was non-existent - in 1970 you could buy a house on one income. My Father worked, and my Mother was the at-home full-time parent. State Advances - effectively the Government - loaned low to middle income families like my parents the money to get on the property ladder... effectively giving those who needed it a hand up and into their own asset.
My parents worked very hard to pay down their mortgage. Over time they made improvements to create more living space, and another bedroom. We kids got the excellent job of crawling into the roof space to fill the ceiling cavity with fibreglass insulation. My brother ended up buying their house, and still lives there. The rateable value of the house is now listed as NZD$670,000 (from local council valuations). Adjusting for CPI, the original price becomes 71.6k (670,000/716000; Webster, 2023), so it is now 9 times more expensive... but certainly not 65 times more expensive.
Granted, this is n=1. Not scientific, but could be considered as a rough guide. It has been proposed that the New Zealand house market doubles in price every twelve years or so (Kendall, 2016). Prior to the early 1990s, "house price inflation averaged 12[%/year]; afterwards it was about 7[%]" (p. 5).
While house prices inflate regularly, it feels a bit thin as a reason to rent: particularly in New Zealand. Both renting AND mortgages cost a significant amount in Aotearoa: "House prices have disproportionately inflated relative to the income of most of the population, with approximately 25% of households spending over 40% on housing costs, either in the form of a mortgage or rent" (Mayer & Boston, 2022, p. 9). The high cost of renting here does not allow people to save for their own home, and there is insufficient community housing to allow them the rental security to save. Community housing long-term waiting lists in the thousands are common in all regions across New Zealand (Mayer & Boston, 2022; Slade, 2017), so much so that the Government repurposed motels and hotels during Covid-19 as 'emergency' housing, which people have now been in for years (Ika, 2022).
If "renting and buying a property end up costing about the same amount" (The Economist, 2020, 10.32), what about the realisable asset which those who buy their own home end up with once the mortgage is discharged? Renters end up with nothing to show for their efforts.
I think it is always worth working hard to buy our own home. Even if we don't live in it because we have had to move away to get work and so have to rent it out: buying is a compulsory savings scheme that is really hard at the beginning, but gets easier over time.
We should not expect to get rich from our house: we should expect to live in it. And when we need others to look after us at the end of our lives, our family can sell it to pay for our care.
Sam
References:
Ika, A. (2022). Tales from the Trenches: The realities of housing in New Zealand. Policy. Advance online publication. https://www.salvationarmy.org.nz/sites/default/files/files/%5Bfile_field%3Atype%5D/sppu_talesfromthetrenches_nov2022.pdf
Kendall, E. (2016). New Zealand house prices: a historical perspective. Reserve Bank of New Zealand Bulletin, 79(1), 1-14. https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/publications/bulletins/2016/2016jan79-1.pdf
Mayer, B., & Boston, M. (2022). Residential built environment and working from home: A New Zealand perspective during COVID-19. Cities, 129, 103844, 1-13. https://doi.org/10.1016/j.cities.2022.103844
New Zealand Yearbook. (1970). https://www3.stats.govt.nz/New_Zealand_Official_Yearbooks/1970/NZOYB_1970.html#idsect1_1_78280
Slade, M. (2017, October 26). Kiwi house prices are 65 times their 1970 levels – but is it really a bubble?. The Spinoff. https://thespinoff.co.nz/business/26-10-2017/kiwi-house-prices-are-65-times-their-1970-levels-but-is-it-really-a-bubble
The Economist. (2020, January 23). How an obsession with home ownership can ruin the economy [video]. https://youtu.be/kkVEt5tC2xU
Webster, I. (2023). New Zealand Inflation Calculator. https://www.in2013dollars.com/new-zealand/inflation/1970?amount=4000
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