KEY POINTS:
Here is an earlier selection of your thoughts and stories:
Andrew Montgomery
Government is a bunch of social engineering dummies. We're off to Oz. We have a house but the policies of this government will make matters worse for all NZers rich and poor. We will rent our house out for a fraction of the cost of debt servicing, but at least in Oz my skills will be respected and I will be paid twice as much. My advice to anyone with the capability is to leave NZ until the current Government are replaced with competent administrators.
Lindsay
Frankly it sucks! We are a middle income family with one home. We don't buy and sell property and we aren't landlords but we have a mortgage. Whatever I read whether it be economists comments or whatever all offered remedies are going to hurt me. Increased interest rates hurts, cut government spending hurts (we need to improve our health system urgently). I am mightily confused as I guess are many others. Seems to me like a hammer is being used to fix a wristwatch. Australia becomes more and more appealing.
Ryan
Well its fine with me as we rent a flat also good for saving as those interest rates will go up. I can see in the future more people renting until the house market crashes!
Rachel Primrose
I am so disappointed - raising the interest rate only hurts those that can least afford it. Small exporters, and families with large mortgages or on low incomes with.
Bruno
If one has a problem that doesn't appear to be rectified by certain actions, why then would you continue to take the same action again, and again, and again. If it didn't fix it the first time, it's most unlikely to fix it the second.... Why then does Mr Bollard continue flogging a dead horse?
P Martin
The Reserve Bank Excel spreadsheet modelling the economy and inflation is broken. Consumer spending is up because the exchange rate is at its highest level in decades on foreign money chasing the highest interest rates in the developed world. If he lowered interest rates dramatically the foreign money supporting the exchange rate and therefore the economy would leave, exchange rates would sink giving exporter earnings reprieve and taking the heat out of domestic consumption because spending power will decrease as imported goods rise in price. The domestic housing market, while buoyant, is not the main problem. Look beyond your nose, Mr Bollard!
Richard Z
No surprises here. What did people think would happen? You didn't expect the government to deal with any of the underlying issues did you? Much easier to tinker around the edges of the problem and make the Reserve Bank look like the bad guy.
Gerald
Thank God I didn't buy another home which would have had a mortgage of about 300,000 dollars. I only have 4 years to run on my current mortgage (probably 5 years now the way bollard is going) so it looks like I'm here to stay but at least I will be debt free. It really is a tragedy for our young people that a push for a global economy by banks is to be achieved by pushing people into debt thus lowering their resistance to the inevitable.P.S: How do you get a job like Alan Bollards cause I'm sure anyone can say every 2 months "raise the ocr a quarter per cent please" aah thats my job done for 2 months.
Koomeister
I thought this year is meant to be the Export year 2007 - it really should be 'Export nightmare year 2007'.
Phil
This has nothing to do with controlling inflation or reducing lending. NZ has become a loan junkie borrowing from other nations' savings to finance our consumerist fix. This new rise won't stop the crazy consumerist spending nor will it stifle inflation. We know this from previous rises but it will stave off the correction to our economy that we will all hate but desperately need. The delay is going to make the pain of correction much worse when the inevitable does finally occur.
In the meantime new homeowners from within NZ will become as rare as rockinghorse poo, existing homeowners will cop yet another hit to the hip pocket as more of our assets are sold or pawned to foreigners and our exporters lose sales. It is madness. Only an ideologue bereft of the ability to think outside the square could consider as a viable act.
NZ has been down this path before when accepted economic wisdom failed to do what the economists had theorised. That was called stagflation (after the fact when the economists finally admitted they had screwed the pooch)and the social consequences are still with us nearly 30 years later. This will be as bad if not worse as the average young Kiwi goes through what every Maori family went through 150 years ago. That is seeing your homeland get sold to the highest bidder few of whom are local or have any affinity for the place. Swapping Tweedledum for Tweedledee in Wellington isn't going to make a blind bit of difference.
Brendan
I am very happy with the increase as it will increase the value of the Dollar, very useful as I am just about off on my OE. Thanks Mr Bollard.
AK
Well bad news for homeowners again especially for the would be first home owners. I think another way should be found out to control the so called inflation, rather than punishing the lower end buyers with such frequent rate hikes. I must say things like tax-cuts, increase of minimum wage, reduction in perks given to ministers(they should be given economy class air-travel perks, rather than business class for long haul travel and reduction in other benefits to them) could help maintain an equilibrium. Respected Reserve Bank Governor has found out a easy way to hike rates rather than finding a solution to the root cause.Its not just the housing market that is creating pressure on Economy. Housing market globally are on rise with the boom in economy. Its pity that would be first home buyers could now just dream of owning a property of their own. With such moves one can say that rich are getting richer and poor are getting poorer!
Les Barnes
Rewards people who save and punishes people who borrow. Seems logical to me.
Sharon
I am pretty sure the words I would like to say about these baby boomers that have multiple properties could not be printed here. My fiancée and I have returned from overseas after six years with a good deposit (around 20 per cent) but could not survive with the mortgage repayments (by the way, we don't drink coffee nor alcohol on a regular basis) and are currently planning to return to the UK with our baby. Investors can keep their rentals and see how good their returns are as New Zealand's young people up and leave for better lives elsewhere.
Lal Perera
Its not cofee or cars but the government!! It is really stupid for Reserve Bank to shoot up the rates to give us houses...lol..... Over the last 3 years how many times did they increase the rates and how many times the national average shot up too? When are they planning to drop out from the primary school and enter the intermediate level? Just bring in capital gains tax and tax the property gains. Give only one in a lifetime exemption for a taxpayer, any gains thereafter must be taxed. The so called boom will burst in no time and prices will drop by half. End of story.
Steven G
I just want to put my weight behind the (wannabe) parents trying to purchase their first home in any safe Auckland suburb (which obviously excludes most of South Auckland, a nice chunk of Waitakere City, and the cheapest suburbs in the other two cities). Guys, it's seriously just fine to get yourself a decent 470k house (and yes it does take you that much to buy a livable house in a decent suburb within about 20 minutes of CBD) when you have about 70k deposit all saved up and close to $120k a year combined income, as we do right now. It would only take one whole of our two after-tax salaries to pay the mortgage and house expenses. And then, she gets pregnant (we wish!). So, how many coffees, flash cars, overseas vacations will we be able to afford when the wife's away with the baby, and our second salary is fully spent on the house alone, on the government's $350 a week and that's for 14 weeks only? Then it's realy 0800MUM&DAD time again innit? Independence - yeah right! Saing only really works when you have something to save in the first place. Lets keep hoping for a recession here... it should not be that far away anymore.
Terry Woods
In Napier, there's very little land available for a modest family home only because of current covenants and zoning. Prices are high because of that. Most sections have covenants for minimum floor areas of 150sqm+ that mean you'd need around $220k or more for just building the house! I have seriously considered moving to Auckland because the house prices aren't much different there (and the pay is higher) - that's crazy!
My fix-it housing package would definitely include:
1. Heavily relax zoning constraints for development on fringes of smaller cities/towns, such as Napier. This will reduce land values and make it attractive for people to move out of the big cities. 2. Disallow covenants that require a minimum floor area of the house, or value of house. This would help prevent rich-person-only subdivisions being developed.3. Introduce capital gains tax for all secondary properties, and those owned by companies. Our homes should not be traded like shares because we need them to live in! 4. Disallow ownership of properties by foreigners.5. Make it easier to build new settlements/towns from scratch - there's not enough of this being done to match population increases.
Di
Kel Sanderson of Berl states (as quoted in Wayne Thomson's article) "The land value is lower per resident than in lower density areas and high productivity in the area can allow incomes to be higher than in lower density areas" The logic and reasoning are both faulty : Land value is a complex issue of perceptions. One very good reason that high density housing areas have lower land values is that the perception of the general populace is that high density suburban housing is not the best way to live.High density suburbia = slum. Whether right or wrong the perception exists and drives down the perceived value.
It also has the side effect of automatically driving up property values of those low density dwellings nearby. Lenders are very aware of this fact and consequently the percentage of the purchase price which can be borrowed is less for high density suburban dwellings than for stand-alone homes. Lenders will not take on the higher perceived risks without the borrower putting up more of their own money. High productivity is not correlated with high density suburban living in any of the research where people live within what seems to them a reasonable commute. Direct correlations between productivity and place of residence only come into play over much larger distances than those being discussed, where towns form around productive economic hubs. Nor does higher productivity automatically lead to wage growth exceeding the rate of non-tradables inflation. As an example my employer has enjoyed a measured 20 per cent rise in productivity over the last four years but wages have grown at a rate of just over 1 per cent above the rate of non-tradables inflation for those years.
C Rivera
If anyone can tell me how we can afford a house on $29,000 a year for a family with two small children and a student loan I would really love to hear from you. You could be the genius who saves our country!
Jo
For God's sake Aucklanders stop whining! If you can't afford to buy in Auckland on your $100k plus income buy elsewhere! Am willing to bet at least one of your jobs are transferrable! Get a bit of equity then move back! You're one hour away from Hamilton, not that much further away from Bay of plenty! Even the Auckland suburbs? Everything isnt the government's fault you know!
Bop Dunk
Its a big question, buy or rent? One choice enslaves you to the bank while the other enslaves you to a landlord. Only one option offers you an outcome of a reasonably inflation proof lump of equity that will grow as you continue to pay off your mortgage. Although it is possible to rent and save what is left over, its not as attractive. (I tend to see a mortgage as a form of forced saving anyway!) The short answer according to me is that there needs to be a capital gains tax to force the capitalist speculators out of the sector so that NZ families can have the basis of a solid home behind them. It won't do the economy any harm, there's plenty of other sectors of the economy where the rampant property investors can put their money and it means you and I won't be priced out of buying a stake in our own country.
Gan
Government should impose heavy "Capital Gains Tax" to keep out the home buyers(for investment)from the housing market. I noticed some of the property sold 2 times within a year which clearly indicates home buyers(for investment) ruling the housing market. These investment buyers created a artificial boom in the housing market thereby depriving the genuine home buyers to have their own sweet home.Its time for the Government to act.
Kiwi Mike
In addition to my other comment, I think it's worth noting that the USA has a First Home Buyers plan (called a FHA loan). It allows first home buyers to put down a minimum deposit of $2500. That definitely makes a difference as the total closing costs for me here (for a 110k loan) were nearly 10k (however this includes a full year of property taxes @ 3k). NZ needs to do something if it wants people to stay.
London Calling
There are a number of interesting comments included here. I personally live in London with my partner and without any exaggeration are able to save more each year here than we would be able to in NZ in six years. We recently visited on holiday and found not only Auckland, but places like Greymouth expensive! Not just luxury goods either, supermarket prices were high compared to average NZ incomes. We would love to come back to NZ tomorrow but it isn't financially viable. As a young New Zealand couple our OE has turned in to much more, allowing us the start in life that New Zealand simply cannot.
Matt London
As a New Zealander working in London I sympathise with the worries facing those striving to get on the NZ property ladder, however I see no simple solution to this issue. New Zealand is a victim of its own safety, success, independence and its long-term desirability. It truly has international appeal and whilst housing in NZ may seem expensive to locals, foreigners who can access financing rates of 3 per cent - 5 per cent in their local countries, see it as a reasonably priced option. By hiking interest rates, the Reserve bank is not attacking the problem, it is only attacking local buyers and hurting our exporters. Should the property market decline in conjunction with a dollar collapse, foreign ownership will only increase as property in NZ becomes cheaper to foreigners. The government needs to introduce a capital gains tax on investment property and remove taxation for locals on their interest savings. As long as the current situation continues, people have no incentive to save and will continue to buy investment property to take advantage of its tax efficiency. If the RBNZ continues to fight off house price inflation with interest rates increases, all NZ property will become foreign owned, we will loose all our intelligent labour overseas, and maybe eventually even our identity as a sovereign nation.
Peter K
Housing should be a necessity and able to be attained by all NZers not some money making scheme that a select few can afford. It disheartens me to think that when I do take to the housing market that I have to look at it like I am investing in the stock exchange rather than my family home . Howq did this happen?
Fosta
New Zealanders not only have to compete to buy property with people from overseas who tend to earn twice as much, but also get taxed a lot less. The government surely has some work to do to even this out. See NZ tax compared with UK: NZ 19.5 per cent up to $38,000 33 per cent from $38,001 to $60,000 39 per cent $60,001 and above. UK: 10 per cent: from $0 to $5,810 22 per cent: from $5810 to $90,000 40 per cent: from $90,000 and above using the 37p per 1 NZD. UK rates are also adjusted by inflation.
Rachel
My partner and I could afford (only just) to buy a $400k house on a 100 per cent loan right now, but we both want children! Take that down to 1.5 incomes.We lose our house. A stable roof over your head is a right. Reproduction is a right. There is no question for me. I will choose children over a mortgage. It's a sad sad state of affairs, the government must immediately stop foreign investment and introduce a capital gains tax for families owning more than two houses (they must not be punished for investing in one additional property). 1.5 incomes should be enough to support a traditional nuclear family! I will be voting for whichever party supports both of these measures in the next elections.
Reece Fowler
Am I missing the point here, but aren't house prices driven by demand? What would happen to house prices if every potential buyer said "I will not pay the asking price for a house, I will pay 20 per cent less than that". If every potential house buyer makes a combined stand then maybe houses wouldn't be so out of reach (and I say this while living in London, sending back the £ to try and get onto the property ladder - even the £ isn't enough to get started).
Matthew
After living overseas for the last 12 years, I have thought increasingly about moving back to New Zealand to live, but after reading all these stories, I wonder whether I will ever come back. I can't believe how many people aren't having an annual holiday from these posts. I have several a year, own my own house on a single income, while still having plenty of disposable income. I would dearly love to come back, but I'm not coming back to no holidays, no money and renting.
Klaus Schuller
We emigrated from EU to NZ 6 years ago. Although we have a combined earning of more that 95K/year we are still renting. Having a child seems impossible to pay the mortgage, raise the child and live. If you buy a house in NZ you'll become slave for life to pay it back. Moreover, the quality of houses built here is the poorest I ever seen. The solution in my case? To return back home or move to Australia. I'm not going to pay someone else mortgage my entire life.
Grant
As an early 30's couple who (luckily) bought a very modest apartment pre-boom, we have now developed a small portfolio of rental properties. As a young couple, on a very average wage, we can see just how difficult it would've been to start from scratch now. In saying that, we have also (and are still in the middle of) sorting out problems to our leaking home that should be resolved soon. As I have said, our first place was very modest.
It appears to me that we are in a time where everyone wants to have their cake and eat it too. What is wrong with a humble beginning in a small apartment (bought for less than CV - as many are these days) in an attempt to build up equity. Heck, if you need to move out and are active in your property management the place will probably be cashflow positive. My parents began in East Tamaki, years ago in a time when it was less than ideal. What is wrong with a three bedroom property in Glendene, Otara, Ranui or Swanson (a suburb that friends of ours have moved to). To me it seems we all want the ideal situation now. Point Chev, Ponsonby, central city. After five years of property ownership, my wife and I are sacrificing immensely so that we may one day move into one of these areas. In the meantime we are taking a huge risk (if you read about the impending bursting of the property bubble) and feel hard done by when we consider the sacrifices and hardships we are experiencing now (and talk of legislation that will make things even harder for us). My advice to non-owners, sacrifice and study the market. Look for ways to establish some equity (small town NZ still has some good deals) and think humbly. We have accepted a great deal of risk and hardship to be where we are and at some stage, unfortunately, so will you.
Young Banker
As a relatively new entrant to the working sector I now have to consider my future in New Zealand and whether or not I should look at owning my own property. I have the fortunate position of working in a bank (the big one) and can see market fluctuations and people's response to the rising interest rates vs housing prices. Also I receive many economic reports a day consisting of Statistical releases and the bank's economic analysis of the market. With fixed rate mortgages sitting around 8.7-8.9 per cent rack rates and the OCR 70-80 per cent likely to go to 7.75 on Thursday things aren't looking cheery for those with hefty mortgages. More and more we are seeing yields go down on properties as prices soar and rent creeps up at a slower rate. It only makes sense for me to rent until the housing market cools off which it will do as fixed mortgage rates roll off and the huge knock on effect takes place from the jacked up OCR. I'm seeing clients roll from sub 7 and more sub 8 per cent mortgages onto 9 per cent and on a 400k+ home loan that it is a sizable dent in the back pocket of many kiwis. Right now the NZDUSD is ridiculously high combining NZ strength with US weakness - what happens when polarities switch? Petrol prices will soar meaning plummeting property prices in outer suburbs as driving/ bussing/ ferrying/ train fares all go up. I live in a villa in Parnell and walk to work in the CBD. No petrol or fares to worry about and no parking either!
Ed
I see several factors here (with the main contributors to this factor). This all leads to high house prices. - supply of housing doesn't meet demand (govt)- large loans available (banks)- people willing to stretch themselves (buyers)- tax incentives for investors (govt)- lack of realistic savings alternatives (govt)- overseas investment (govt rules). There are probably many other factors that exists but it is always a combination of things and not just one factor (eg. foreign buyers).Many people forget that about 25 per cent of people can live in the top 25 per cent of suburbs. The same goes for schools. We can't all have what we want.The govt needs to address the supply issue and the ability to take some investment focus away from housing. It will be a slippery slope if the govt also decides to help buyers with incentives as this will feed back into prices. As with most things where the govt decides who to help and how much to help through handouts, it will be the majority that miss out.
Dont Kinloch
I dont get what the big deal is. If it means so much to you to buy a house and you can't afford to live in Auckland then the answer is simple leave Auckland.Although some might not realise it but theres a whole country out there heck theres a whole world out there. When my parents were in their 20's and looking to get ahead in life in the UK. They moved to New Zealand just for the opportunity to get ahead. I dont see why our generation is any different. My wife and I owned a house in Manurewa and when we looked at our future of struggling away in Auckland versus moving to a different region having a smaller mortgage and lower outgoings we jumped at the opportunity. It's not that we dont want to be Aucklanders but it just didnt make sense. We had 2 kids and had to send them to daycare so both of us could work just to be poor. Its been nearly two years since we left Auckland and moved to Invercargill and we have 3 kids, My wife is a full time mother and I dont earn any less that I did in Auckland we are looking at buying our own rental property and at the end of the fortnight always have money left over. Getting ahead is about sacrifices. We sacrificed time with family and friends to make something of ourselves I don't see why its not good enough for other Aucklanders.
Wayne
If more people looked at property as an asset providing leverage to accumulate more property then they would happily compromise on the type of house/area they live in.People get too emotional over the concept of their own home. I have purchased/sold quite a few homes and some i have never seen prior to purchase - think investment - not emotion and you can own more than 1 property. If owning a home is so key then prioritise and compromise... coffee, smokes, cigarettes, new car , new this, new that.... i think most people need some financial planning/discipline - this is something that should be taught in schools. My parents were financially inept as are most.
Graeme
Take a look at the empty houses listed on the internet and those that are for sale by "overseas investors" who have " had to cash up". In Dannemora for instance, houses are being constantly being resold at higher prices by their Asian owners after buying them a few months prior. It is time the Government brought in some control to stop house purchases by those non-residents who use house purchases in N.Z as an easy tax free capital gain and contribute nothing to the New Zealand economy. A Herald writer should attend a few house auctions to see just what goes on and who generally does most of the bidding. The average young Kiwi first home buyer is at a distinct disadvantage there.There is a house not far from where we live which was purchased by an overseas buyer for about $700,000. They have never lived in it and it desperately needs redecorating and the asking price now is $1.25 to $ 1.35 million. Why is it empty? Oh they had to go back to Hong Kong. Rubbish!
Dave
The rental that someone now lives in is potentially the home they could own. I am not necessarily saying that specific property but the reason they have not bought is that the landlord has the luxury of tax benefits not available to the home owner. All the talk of opening up more land is an excuse and a simplistic answer. Putting all the unoccupied or under utilised houses into circulation would provide a quick fix. Only the Government has the power to make it happen but they do not have the political guts to do so.
A
My partner and I have student loans of 30k each. When we finished studying we saved hard for 2 years for a deposit and then built a house as opposed to buying one. We got a better house for less money (though more stress!). We earned about 80k between us at that stage and bank still lent us the money. We did not go on any holidays and lived off less than one income, no labeled clothing either. It can be done! We are now going selling our house to build another, we will then cut about 100k off our mortgage of about 300k, this may mean than in a couple of years when I want to have kids I may be able to take more than 6 weeks off work. It is really hard but we are doing it, you do need to make sacrifices. We have friends who have travelled heaps and have cool cars - but no non-depreciating assets - it is a choice you make. Councils freeing up more land is not going to make any difference. The prices stay the same and all it means is you pay more for the other stuff (such as petrol and time) to live out in the suburbs. There have more subdivisions of land within the last 5 years than ever and still prices are high. Supply and demand does not work in this case. More efficient use of the existing land resource is needed, lets keep the rural area rural so overseas visitors have something to look at when they come to spend their money here! Save hard and you can do it, if that is not your choice then rent, but try and save something for your future.
Tristam Price
I've been telling friends who want to buy a house to wait until about 2010 for the next major slump. It will come, it's surprising that it hasn't already started. I was lucky to have bought a 3br house in Lower Hutt 6 years ago for $145k, half of what I could sell it for now. But it brings me no joy that people are now borrowing amounts totalling 30 per cent more than their house is really worth, from mostly foreign owned banks, exposing themselves to negative net worth in the next few years (a bit of Bollard-inspired gloom here!). Add to this the proliferation of consumer finance companies feeding a culture of consumerism, and it starts to look like we've learned nothing from 1987. I would recommend saving up a deposit for a few more years and driving a car worth less than $5000 that you bought with cash.
Grant & Tanya
I still see lots of 20 something year olds complaining, and can remember that feeling of despair as house prices keep increasing, but now in my 30's and owning three Auckland properties (sorry!) I think I can help. One; sorry if you have children & can't afford a house, but the old way (and they way we did it) was get careers established and house deposit sorted before having children (we waited until we were near 30). Two; look hard for a house; people are talking about the median house price being a $430 K, so the good news is that half the houses are less than that. We brought a tiny Auckland apartment for $120 last yr & in the local real-estate flyer there are still houses for under $300K. Finally, yes it is hard to save for a deposit - nobody said it was easy. We never went for a overseas holiday, we had one basic car for years but now only 10 years later we are sitting on nearly a million worth of real estate.
John
All you people are getting duped. The government has increased the money supply from $100 billion to $180 billion in less than 6 years. When Spain conquered the New World and brought back gold to to Europe. Someone noticed a strange thing that the prices of everything food , property etc inflation) was rampant / increasing due to all the gold being flooded back to Europe. Here in NZ you have property and the stock market at a all time high. Inflation is rampant. Govt / fiscal spending is it the cure or is it the disease. The losers are PAYE, pensioners etc. Borrow as much money as you can and be a winner and not a loser / a dope. If the govt was serious about the 1st home buyer all they have to do is curb the number of migrants. Property would fall drop like a rock.
Patricia Fields
Owning a house is not a right but a privilege. Those who would like to own a house but can't (whether due to poor savings/budgeting habits OR low income) should get over it: home ownership will remain a dream for you (whether you like it or not). To insist that it is a Government's problem means ignoring the fact that any Government intervention would exacerbate the problem, just as saying that price controls solve inflation.There are some people with money and some without - this is a fact of life.
AC
I receive a good salary but still can not afford a home in Wellington region because I have a family to support. The current tax policy is largely contributing to the rocketing property prices. Investment income from many other sources may be taxed, while the capital gains from property investment are not. Why should not a Capital Gain Tax (CGT) be introduced in NZ like in many other countries on earth? Yes. But politicians are too concerned about losing the votes of the current property owners. Come on, home dreamers, let us raise our voices – we want our own homes, and we want a CGT!!
Andy
We're all doomed.
Nicole
Having lived in New Zealand for a year in 2003 I was shocked at how difficult it was to live in Auckland. My husband earned over 80.000 and I earned a further 32 000. But we quickly realized that we would never be able to make it in New Zealand and so we left. I feel very sorry for hard working kiwis its just not right that they work so hard and get no benafit from their government. Funny enough everyone else seems to as long a they do not work for a living and have five children. New Zealanders need to start looking after New Zealanders first. Stop allowing people into your country unless they actually going to contribute to the economy. Perhaps then you would have a little more space in Auckland.
Sm
It is clear that some people here do not grasp the scale of the problem for today's youth. Given that a 20 per cent deposit is to be paid for the mentioned "affordabl