Something is rotten in the City of Sails. I’ve known it for some time but when you are living in paradise, it’s easy to forget about foul odours, even if they are sweeter than Rotorura.
Okay, so this isn’t a Shakespearean tragedy I admit but it’s no less dramatic for me and thousands of others priced out of this ridiculous housing market. (How much can you afford?)
It’s hardly news, I know. World “experts” have been warning for years now that we are living in a housing bubble. The Economist, in one of its most recent issues (see NZ Herald report here) waved the red flag again but virtually no one seems to care, save journalists maybe.
It’s inevitable I suppose. You live with something long enough and eventually you become immune to the conditions, even if they are toxic. We’re like frogs in a slow boiling pot here, ignoring the shouts of bystanders urging us to get out, or stay out, but we’ve convinced ourselves that we’re luxuriating in a spa bath.
Two years ago I was writing about this bubble and the epidemic that had house crazed New Zealanders blindly piling into the market like zombies. Back then, the market was tagged to be more than 20% over valued, relative to incomes.
Now, according to the Economist, it’s risen to 30 per cent. We were ranked fourth behind Canada (32 per cent). Australia incidentally wasn’t much better at 33 per cent. Belgium took first place. Is it any wonder New Zealand banks, and their Aussie parents, are making record profits.
Regardless of the warnings, many (myself included) continued to dismiss these reports. What do foreigners understand about our patch of paradise at the bottom of the world?! We have land scarcity, we have beaches at our doorstep, we have hokey pokey ice cream and Dan Carter dammit.
Well, this week I was jolted out of my yoga bubble back into the bleak financial reality of our housing bubble.
After being put on notice of my rental house being sold (the fifth since moving to New Zealand) I decided it was time to follow the herd. Despite friends urging me to leverage up for the sake of home security and a good school zone, I couldn’t quite bring myself to marrying my bank for 30 years.
I decided to look outside my current neighbourhood (which clocked one of the steepest price increases in two years in Auckland) to find a more affordable crib for me and my kids.
It didn’t take long before I fell in love. A cute little alpine sweetie that backed onto an old growth Kauri forest. For once, it was a property as billed. “Tranquil and secluded” and charming to boot. It ticked all my hippy boxes, then some. I shelled out more than $25K above the asking price in hopes of realising my dream home. It wasn’t meant to be I guess. I was outbid, by how much I’m not sure. The sellers refused to say.
I’m still drying my tears but I feel like the fever has started to break at least.
What insanity convinces us that paying more than 30% above CV is normal and that $720K (the average in Auckland now) is situation normal. When I last checked, average annual combined incomes were around $50K.
What kind of fool expects that house prices have no ceiling given their dramatic increases over the past decade. Have we learned nothing from the GFC?
Eventually, average New Zealanders won’t be able to afford their own homes, (even with their parents generous support) and eventually we’ll be bemoaning the loss of our best and brightest who will understandably fly the coop in search of jobs that can accommodate house prices.
My friends are in consolation mode. “It’s the same story everywhere. You’re not alone. Don’t worry, your dream house is out there.”
I’m a natural optimist so believe this to be true but I tell ya, it sure as heck isn’t easy to keep one’s spirits up in the City of Sails when the sun ain’t shining. Stories reporting on renter’s woes like this certainly don’t help either.
I have one thing to thank for house prices in Auckland I guess; It cured my writer’s block.