Josh and Sophie Blair of Bethlehem dream of moving to the country with their three children, Lillia (age 12), Hazel (7), and Fletcher (3). But they fear the dream may be out of reach for now
Tauranga's spot as the eighth least affordable city in the world means families are stretching to pay monster mortgages. Bay of Plenty Times Weekend reporter Dawn Picken spoke with locals who revealed how taking on a super-sized housing payment has changed their lives.
The Blair family
"We'll probably be 80 and still have a mortgage."
Sophie and Josh Blair live in Bethlehem with three children, ages 12, 7 and 3. The couple are both 30 years old and became homeowners at age 22.
"I think the timing was better back then," said Josh. "Houses weren't as much, but we both worked hard and saved a lot of money for a deposit."
He said the couple also got help from parents to buy their first home in Brookfield for $360,000. The median home price in Tauranga at that time, 2011, was just above $300,000.
The median value of Tauranga properties in April, according to OneRoof-Valocity figures, is $660,000, up 4.3 per cent on the year before.
The Blairs sold their Brookfield home in the low $500,000s, and bought in Bethlehem in the high $600s.
They're now servicing a half-million dollar mortgage.
"We both have to work full-time to be able to afford to pay the mortgage and live in Tauranga, really," said Josh. Payments amount to around $1200 per fortnight.
He works for a refrigeration company and Sophie teaches at a childcare centre. She estimated their combined income to be between $80,000 to $100,000 and said each week is a struggle.
"Not only do we have a big mortgage for our age and income, we have two coeliacs in the family, so our grocery bill is probably triple what a normal-eating family would be."
Sophie said she spent more than $300 per week at the supermarket.
"If it's a big gluten-free shop, each loaf of bread is close to $9 and we go through three a week."
The couple sets aside an amount each week in a separate account for recurring bills, including their mortgage and rates.
"We're just manually writing it down in a book, all our monthly costs and everything," said Josh.
The kids sometimes miss out on extra activities such as swimming lessons, Sophie said.
"It's sad when we have to say no because it costs too much. When they see their friends do it, it's hard to say we can't do it because we have a big mortgage instead."
Even if they could afford lessons, Sophie's 36-hour work week and Josh's 40+ hours of work mean they probably couldn't take the kids where they needed to go.
"If it wasn't so expensive to be in the property market and raise a family, then I wouldn't have to work the amount of hours I do," said Sophie. "It would make it more flexible to do some of the things, or have extra time to go to the park and have ice cream after. There's just no work and life balance. It's all work to live."
It's not just a big mortgage and food costs squeezing the family. Sophie said it's extra taxes, too: "... Rates, extra water rates, rates going up again ... The houses are so expensive and then you're asked to pay money on top. Wages don't make ends meet."
The Blairs dream of selling up and moving to Te Puna or Whakamarama for more land.
Their current home sits on a 700sq m section.
"It's a beautiful home in a beautiful area, but there's no space for us," said Sophie.
The couple wants a lifestyle property where they can grow their own food and their kids can be freer.
Josh said they went to an auction but figured it was too risky to buy before selling their house.
"Unless something has a price on it, it's tough to make an offer."
The rural reverie might be out of reach for now. "We always intended to buy a lifestyle block, but there was nothing in our price bracket," said Sophie.
Still, she anticipates they'll grab the next rung on the property ladder when the time is right.
"We hope to sell the house and it'll get us through to our next chapter of life. What we have are positivity and goals."
Price spikes and soft spots
Tauranga beat Auckland as New Zealand's most unaffordable city when comparing median salaries and house prices, according to the annual Demographia International Housing Affordability study published in January.
It showed New Zealand has continued to be one of the most unaffordable countries in the world to buy a home, with the median price more than six times median annual household income.
Tauranga was rated the eighth least affordable city in the world, behind Hong Kong (most unaffordable), followed by Vancouver, Sydney, Melbourne, San Jose, Los Angeles, Auckland and Tauranga.
The OneRoof.co.nz property report out earlier this year said house price growth in Tauranga had softened the past 12 months, with median values growing 3.3 per cent during that time.
Four suburbs - Bellevue, Bethlehem, Matua and Tauranga Central registered no growth or dropped slightly in annual figures.
Other suburbs have seen big leaps the past year - Tauriko was up 18.7 per cent; Gate Pa rose 8.9 per cent. Most sales in the city - about 54 per cent - were $600,000 to $1 million. Poike and Gate Pa were the only two Tauranga suburbs with median values under $500,000.
OneRoof and its data insights partner Valocity found the number of homes without a mortgage has slipped from 36 per cent in 2014 to 33 per cent in 2019. Tauranga saw one of the steepest declines in freehold homes nationwide: down 8 points, from 40 per cent to 32 per cent.
Neither family we spoke to for this story anticipated being able to pay off a mortgage early, if ever. Sophie Blair said, "I don't think we'll ever be mortgage free is how it feels. We'll probably be 80 and still have a mortgage, which is sad for our children."
A study released in 2017 by consumer credit information company Credit Simple found debt-free retirement is moving out of reach for New Zealanders. It said people over 55 make up an increasing proportion of bankruptcies and still hold 28 per cent of mortgages.
Hill family
"We're not gonna try to pay off our mortgage really fast and let our kids miss out."
Corbyn and Vanessa Hill live with their three children, Noah (age 11), Camryn (4) and Jorja (2) near Tauranga Boys College. They moved to their home in 2015, before the market, as Corbyn put it, "went mad". The Hills sold their house in Katikati for $330,000 after buying it six years ago for $220,000. "We walked away with $120,000 - that was our deposit for a house in Tauranga."
They paid $410,000 for their current home and spend around $350 per week on their $300,000 mortgage. Corbyn does installations and sales for a home-improvement company, and owns a window maintenance business, as well. He said Vanessa will stay home until their youngest son starts school, because childcare costs could cancel out her wage. Between his salary and Working for Families, they have about $80,000 per year to budget.
Corbyn said he feels good about where the family stands. "We're both 29 years old. We've had our children and invested a lot of money into that and are able to have our house, as well. We bought a boat and we take the kids out; the wife loves fishing. We found something we can all enjoy together."
Corbyn and his oldest son play football, and his youngest son started this year, too.
Vanessa said she's grateful to be able to stay home with her kids, but still feels she doesn't have money left over at the end of the week. "We don't have the stress of a landlord coming in and selling the house from underneath ... that's where we're fortunate."
And while their section is cross-leased and small (around 380sq m), it backs onto football fields. "The kids love it. It's a massive field and pretty much theirs."
Searching for savings
A money guide called The Barefoot Investor has helped Vanessa glean tips to whittle the family budget. The couple started a savings account they don't touch, though, she said, "When you live week-to-week, you don't have much left over to be saving, anyways."
Another tip is buy what you need, not what you want. "If you look back five years ago to something you bought - do you still like it?"
Vanessa said buying groceries online has helped save money. She plans meals for each week. "I take meat that I bought from the shop and order what I need to make my meals. My pantry now isn't as full because I get what we'll need throughout the week rather than holding onto all this extra food we don't need." She said can better control what she puts into a virtual shopping cart versus a real trolley. "We were reaching $260-270 a week on groceries - and now I can keep it to $210-$220, so it has dropped quite considerably."
In addition, the family has switched energy providers to Electric Kiwi. "It's dropped $5 per week. Over a month that's still $20 that you will be saving." Electric Kiwi offers a free "hour of power", where customers aren't charged for energy during a non-peak hour of their choice. That's when Vanessa runs the dishwasher, washing machine and vacuums the house.
Like the Blairs, the Hills would also like to move out of town so their children can have more space. They've had appraisals on their home in hopes of shifting to Omokoroa. But median values in that Western Bay suburb sit at $761,000, compared with the median value of Tauranga South homes at $579,000. They're not sure they can afford the move.
No matter where they land, Vanessa said she and Corbyn are resigned to keeping a mortgage. "That's always gonna be there but we want to be able to give our kids as much fun, as well, so we're not gonna try to pay off our mortgage really fast and let our kids miss out."
Buyers win after interest-rate cuts
Experts say first-home buyers are the biggest beneficiaries of lower interest rates - if they have a 20 per cent deposit saved. Colliers International's Peter Evans told OneRoof.co.nz interest rates are the most critical factor when buying property.
"If you can't afford them then, whatever the market cycle is doing, it doesn't matter."
"[Interest rates] will be low for the next five years, may go as low as 3.5 per cent, and we look at more developers bringing on more Kiwibuild product. Buying off the plan gives people 12 months' more time to build up their savings."
The Reserve Bank of New Zealand cut the official cash rate (OCR) from 1.75 per cent to 1.5 per cent on May 8 - a new record low which puts New Zealand's cash rate in line with Australia's official cash rate.
The country's largest bank, ANZ, has cut its one-year fixed special rate to 3.89 per cent. Two years ago, in March 2017, the rate was 4.39 per cent. ASB, BNZ, Westpac, Kiwibank and others have also cut mortgage interest rates. HSBC is advertising a two-year fixed rate of 3.69 per cent.
OneRoof.co.nz editor Owen Vaughan says, "Rewind to last year, and the mood was that rates would go up. The cut is good news for first-home buyers and those who are in a position to renegotiate their mortgage."
Floating interest rates in 2007 were around 8 per cent, and two-year fixed rates that year shot as high as 10 per cent.
Simon Anderson, chief executive at Realty Group, which owns Bayleys and Eves, said while suggestions of a rise formerly focused on 2020, "... it now seems likely that barring dramatic unforeseen circumstances, it could be 2022 before rates move to any great extent".
Budget Advice
Former Tauranga Budget Advisory Service manager Diane Bruin said there were 2350 clients on the books so far in 2018/19 - an increase of 500 people from 2017/18 - with a collective debt of $29m.
Bruin said banks typically limit mortgage borrowing to about 30 per cent of gross income. She recommends not piling on extra debt. That means resisting the temptation to put renovations, holidays and car loans on your house payment. Bruin said, "If it is affordable, then it's not an issue, however, if for some reason you move to one income, will you still be able to meet your commitments?" She also recommended people try to pay off their mortgage before retirement. "We see people struggling to pay their mortgage if they can't continue to work past 65."
Bruin said deciding whether to pay interest-only on a mortgage is a short-term option dependent on a homeowner's personal situation such as waiting on a house sale or purchase. "The principal debt remains. It can be risky if property prices drop and you have to sell."
People can look for savings not only by packing lunches and skipping takeaway coffees, she said, but also by reviewing recurring payments: insurance, phone and internet, power, pay TV versus Freeview, rubbish collection versus paid bag and recycling and food shopping.
Bruin said taking the following actions can help:
• Budget for an annual increase in rates and pay automatically to the council or save in a bill account.
• If water rates are high, contact the council to learn why.
• Check online for the best power deal through Consumer Powerswitch
• Shop around for the best deal on phone and internet service. Consider dropping your landline.
• Weigh the cost of rubbish collection versus a weekly $2.60 council bag. Drop off recycling.
• Start tracking food waste and plan meals.
For low-impact savings, Bruin recommended having a bill account for things like mortgage repayments and power, as well as an emergency account with auto payments. "It quickly gathers savings that you don't miss and when something happens you don't need to get into high- interest debt."
Free Financial Helpline
MoneyTalks is available from Monday to Friday 8am to 8pm and on Saturday from 10am to 2pm with free, confidential access to trained financial mentors:
• Free Phone: 0800 345 123
• Free text: 4029
• Email: help@moneytalks.co.nz
• Online chat/website www.moneytalks.co.nz
Local Help
Tauranga Budget Advisory Service
https://tgabudget.org.nz/
07 578 0969
info@tgabudget.org.nz
Online Budgeting Tools
https://sorted.org.nz/
Jefferies and family will enjoy a leg of lamb with summer sides.