Rising house prices and high interest rates are shutting the door to home ownership for many New Zealanders.
Dreams of a three-bedroom house with a big lawn for backyard cricket, a patio for the BBQ, and a garage for the boat have been reduced to thoughts of infill housing, apartments, or townhouses.
A report commissioned by the Government-funded Centre for Housing Research says that rapidly rising house prices, the inability to save a deposit and high household debt mean many people cannot have their own homes.
The reports' authors, property consultants DTZ New Zealand, predict the home ownership rate will fall to 61.8 per cent by 2016 from the present 68 per cent.
The report calls for $50 billion of new investment in rental properties in the next decade to cope with demand.
Many banks appear to have seen the dip in home ownership coming and are offering low deposit mortgages, allowing lenders to borrow up to 95 per cent of a property's value.
Internet bank BankDirect last week went a step further, offering zero deposit mortgages, a move directed squarely at Generation X (people aged 25 to 39).
These people have lived through the introduction of university fees and student loans - an early road to debt. "We understand the pressures this generation faces," says Jim Anderson, BankDirect's chief executive. "The 100 per cent home loan package is about helping people fast forward their life goals."
However, with the national median house price at $290,000 in August (up from $248,000 a year ago), even a no deposit mortgage is not all that attractive.
On a 25-year mortgage at BNZ's two-year fixed rate of 7.75 per cent, that amounts to a whopping $2190.45 in monthly repayments. That is $547.61 per week - consuming nearly all of the average weekly wage of $586 before tax.
It is also more than double the national average rent of $250, based on the latest figures from Massey University's Real Estate analysis unit.
Nationally, rents rose by $10 a week last year, compared with $100 a week for mortgages (based on the two-year fixed interest rate this time last year of 7.15 per cent and the average house price a year ago of $248,000).
The Massey study says the housing boom has created an oversupply of rental properties, particularly in the volatile Auckland inner-city apartment market, and landlords have been forced to drop rents.
Auckland apartment numbers are expected to double to 21,000 by 2007, which is bad news for investors who have already seen the average rent for a two-bedroom inner city apartment fall from $420 to $372 per week in the past two years.
DTZ NZ forecasts a change in home-owner demographics: fewer newlyweds and more wealthy retirees.
Anecdotal evidence from real estate agents suggests that even people with a foothold in the residential market may be looking to cash up the windfall equity in their homes, in favour of renting, as mortgage payments and rents fall out of kilter.
However Bob Hargreaves, from Massey's housing research unit, says there is still a good case for buying a property if you have the cash and the stomach for it.
He says the old rule of thumb was that if you were willing to stay in a property for three or more years then it made sense to buy it.
That was based on annual price appreciation around 4 per cent to 5 per cent - sufficient to cover transaction costs like real estate fees.
But with house prices rising by up to 20 per cent in some areas recently, it's a "no brainer", he says.
"It is obviously better to buy most of the time.
"The old problem with renting is that the capital appreciation is going to the landlord not to you."
- NZPA
Generation X heads into the arms of landlords
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