Paying three to four times the gross earnings of a farm when buying one used to be regarded as reasonable.
That’s probably where values are at the moment.
I don’t know what the reasonable ratio between urban house values and average wages is but when houses in low income suburbs are selling for more than a million dollars it is well below current prices.
Last month an unremarkable 1960s weatherboard house on less than a quarter acre section in Ōtara in South Auckland sold for $1.01 million.
Another – which 12 years ago sold for $340,000 – went for $1.1m, more than triple its last sale price in October.
Manukau Ward councillor Efeso Collins said more than 80 percent of Pacific people did not own their own homes, and rising house prices were a cause of pain for his constituents, as rents went up and incomes did not.
“That means there are times where some people have to go without,” Collins said.
“I know there are parents who are decreasing the number of meals they’re having to ensure that the kids are eating enough, and getting three basic meals a day. That’s part of what I call the social trauma that’s being faced by many constituents that I work with.”
He said people felt hopelessness about the situation, which they did not think would get any better.
“I think people have given up. There are many people in the Manukau Ward… that have just given up.
“I’m really disappointed with what the government’s done. I think the government’s thrown money at a banking system that in my view isn’t working, and that’s not going to keep house prices down.” . .
Low interest rates are part of the problem but the root cause is simply demand outstripping supply and the ridiculously high prices of houses is feeding through to higher rents:
New Zealand’s national median weekly rental price finished off the year 21 per cent higher than it was at the end of 2015 according to the latest Trade Me Rental Price Index.
Trade Me Property spokesperson Logan Mudge said the national median weekly rent was $520 last month, marking a 4 per cent increase on the same month in 2019 and a 21 per cent increase on this time in 2015. “November’s median weekly rent matched the all-time high we first saw in February this year.”
Nationally, supply was up by 6 per cent in November when compared with the same month last year. “This is the biggest year-on-year increase in supply we have seen since June. However, with demand sky-high, up by a whopping 20 per cent year-on-year, rental prices around the country have stayed very high.” . .
How can any but the wealthy afford even the basic necessities let alone save for a deposit on a house when they’re paying so much in rent?
How much longer can this madness last?
When farm prices get too high, people stop buying and prices come back a bit.
The ones who get hurt by that are those forced to sell at prices that take most, all, or, sometimes more than all, of their equity.
If there’s a correction in house prices that will happen to some people.
If it doesn’t, is there an alternative to even more people being hurt by escalating rents and the worsening gap between what they could afford to pay for a house and the asking price?