The root of Auckland’s housing affordability problem is an imbalance between supply and demand.
Increasing supply takes time, reducing demand can happen faster, as fast as people move somewhere else where the living is easier as Liam Hehir has:
I am 30 years old, married and the father of two. Our family lives in a big villa on a large section in a quiet street.
Crime is low and the neighbours are nice. We are close enough to my office that the daily commute is rarely more than 20 minutes.
We’ve managed this despite not having wealthy parents, never winning Lotto and having sizeable student loans. And because I am the sole breadwinner, we actually earn less than the average household income.
With a mortgage less than three times my annual salary, however, we are confident we can manage things on one income for a while.
If you’ve read the papers lately, you might think this is quite the feat for a pair of millennials. As you will have heard (often and loudly), our cohort likes to think of itself as the hardest done by generation this side of the Black Death. Some would go so far as to argue that the peasants of that era had a better shot at home ownership than we do.
What’s our secret? Well, it all comes down to one weird old tip: We choose not to live in Auckland.
Instead, we have set up home in a small country village just outside of Palmerston North.
Don’t let too many people know about this, but there’s no law that says everyone has to live in Auckland.
You may be surprised to learn that Kiwis are pretty much free to live wherever they want. There’s actually nothing stopping young New Zealanders from buying houses in places like Palmerston North – or Invercargill, Whanganui, Timaru or Whangarei. . .
People choose to live in or move to Auckland for many reasons, cheaper housing isn’t one of them. If they want a reasonable house for a reasonable price that’s not where they should be looking or living.
There are trade-offs. When you live in the provinces, you do not just go out for coffee at 10.30 on a Tuesday evening and expect places to be open. And while there are some very good bars and clubs, it is true that you don’t get the variation and choice on offer in the big city.
But if you’re ready to be a homeowner, chances are that much of that is out of your system anyway. . .
If you’ve mortgaged yourselves to the hilt you won’t have spare money for enjoying city attractions and life away from Auckland has other compensations. You won’t waste time and money on the stop-start crawl that is too-often part of driving there, for starters.
It also is true that if you buy in the provinces, your home is unlikely to appreciate in the manner of the inflationary Auckland market. But this is only a big problem if you see home ownership as an investment opportunity.
If you take the quaint view that a home is primarily a place to live (and that spending on it is consumption rather than speculation) then the slower market becomes less of a problem.
Here’s a second secret: there are forms of investment other than real estate. If you have a smaller mortgage, you can take the money you’ve saved and invest it in other things. And if you don’t know how to invest, you can ask a professional to do it. You can even get your bank to manage it for you.
There are even some people out there who say that a diverse set of investments is safer than pouring all your income into one property in the hopes that the market will continue to inflate forever and ever.
Sounds crazy, right?
But what about work? If you’ve got a strong back, you should be able to find work in the provinces.
Remember, these are the regions where farmers have literally have had to hire tens of thousands of migrants to fill jobs Kiwis don’t want to do. Of course, it might mean putting on hold your dreams of being a doghouse interior design consultant or owning a restaurant that specialises in artisan toast.
As the Discovery Channel’s Mike Rowe advises, “don’t pursue your passion, chase opportunity.”
Some of the jobs available out here in the regions might not always be pleasant or glamorous (I can attest from experience) but they are perfectly respectable. You might not start out on megabucks, but the cost of living is low. You have to start somewhere.
Some of those not so pleasant jobs pay well and there’s plenty of pleasant jobs in the provinces too.
Technology means you don’t necessarily have to live where your market is. Garrick Tremain, one of the country’s best cartoonists lives at the foot of Coronet Peak; a couple in rural North Otago make a very good living buying and selling furniture on-line; booming tourism has provided business opportunities in all sorts of formerly out-of-the-way places.
It’s not only small businesses that thrive out of Auckland. Toyota has its headquarters in Palmerston North and Ravensdown is based on the outskirts of Christchurch.
We are the descendants of enterprising people. In centuries past, our ancestors came to these islands by waka and sail, making sacrifices and taking risks along the way because they sensed the chance to make something for themselves in a new place. Many of their successors seem to be too timid or too entitled to venture south of the Bombay Hills.
More fool them.
There is life, and very good living, out of our biggest city.
Those used to higher temperatures might find it a bit cool much further south, but they’ll be able to afford a warm, dry home and as much heating and as many layers of merino as they need with the money they’re not paying for an Auckland house.