House ownership has never been easy

The Herald has a story on MP’s buying their first houses.

Two points stand out – prices were lower but interest rates were much higher than they are now; the first step on the housing ladder often has to be modest.

Housing Minister Nick Smith:

. . .  bought his first home, a former state house in Riccarton, Christchurch, in 1985 while he was a 22-year-old at Canterbury University. He paid $24,000 for it, just before interest rates “went through the roof”, hitting 24 per cent.

“As a consequence, I spent the holiday building a new room on to it so I could get a new flatmate to pay the mortgage.

“I confess I was capitalist and I thought the economics worked in getting into the property market early, getting a heavy mortgage and trying to service it with four flatmates,” the minister said. . .

Auckland mayor Len Brown:

. . . recalls the difficulty of securing finance, and the cost of it, with interest rates of up to 23 per cent. “It was terrible. I don’t know how anyone ever owned any homes at all in those days,” the mayor said.

He believed the challenges in getting finance meant it was as difficult 34 years ago as it is now for first-home buyers. Back in the late seventies, “there was probably more housing available at relatively better prices”.

“Now it’s difficult because of the way prices are generally and because you’ve got to put together a 10, 15 or 20 per cent deposit.

“But the one thing I will say is if you’re prepared to start at a practical and realistic level in a community that you can afford, then you can still get a house, whether it’s an apartment at $200,000 or a standalone house at $350,000 to $400,000. That’s still available for you but you can’t afford to be too choosy.”

Justice Minister Judith Collins makes the same point:

. . . With interest rates around 20 per cent, it was “a huge struggle” to make payments.

She accepts it is difficult now, and says first-home buyers should be prepared “to buy a place that needs to be done up and to have a first home that may not be your last home”.

“I moved into a two-bedroom flat, I didn’t move into a five-bedroom mansion.

“What you have with your mum and dad is probably not what you’re going to get for your first home.”

It has never been easy to buy a house – high interest rates on lower mortgages were as least as difficult to service when these people were paying off their first homes as lower interest rates on higher-priced houses now.

Then we have Green co-leader Metiria Turei:

. . . She and her family left Auckland in 2002, partly because of the cost of housing on an MP’s salary.

She says there were good homes available in Dunedin for $140,000 to $180,000 when she was house hunting.

But her bank wouldn’t lend her less than $200,000 as she had no deposit and had to take out a 100 per cent mortgage.

She couldn’t cope with the cost of housing on an MPs salary and had no deposit saved?

That is a very sorry reflection on her financial management and a chilling reminder of how dangerous she could be in government.

People who can’t manage their own money shouldn’t be taking and spending other people’s.

One Response to House ownership has never been easy

  1. Armchair Critic says:

    Wait for it. Wait for it. Wait for it, here is comes…

    She couldn’t cope with the cost of housing on an MPs salary and had no deposit saved?

    That is a very sorry reflection on her financial management and a chilling reminder of how dangerous she could be in government..

    There we have it – jumping to conclusions, and that was a massive leap.

    There are plenty of good and perfectly legitimate reasons why people went for 100% finance. You’ve apparently not bothered to consider any of them.

    People who can’t manage their own money shouldn’t be taking and spending other people’s.

    The old chestnut that an economy is just like a household. It’s not..

    Is this the new approach from the right – contempt for first home buyers? Standing by idly while the Reserve Bank tips the market in favour of investors who can get around the new lending requirements. It doesn’t seem like an election winner; Bill English’s contempt for 8,000 potential first home buyers is clear, and will translate to votes.

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