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Average home prices in New Zealand reaches 8.8 times average household income

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21–30 of 172 posts

Re: Average home prices in New Zealand reaches 8.8 times average household income

#21

Compared to some other countries: The Netherlands: €31.5k average household income, average house price €387k - so 12.3x. UK: £31.4k average household income, average house price £274k - so 8.7x.

That's not correct. I suspect that the source you saw said:

> As of 2017, the average annual real disposable income of Dutch households was roughly 31,500 euros.

Disposable household income would be, at a minimum, after tax, and possibly after accommodation. You'd want to increase that by about 60% to account for tax/etc, which would be 50.4K. That seems more reasonable to me, and would put the multiplier at 7.7.

Not sure about the UK - that could very well be accurate, but London throws averages completely out of whack.

Re: Average home prices in New Zealand reaches 8.8 times average household income

#22

So, if the average person can save 10% of their income, it takes 8.8 years to save a 10% down payment? Factor in tax and the time it takes to save a down payment is starting to look close to the time it took my parents’ generation to own a house free and clear.

> if the average person can save 10% of their income, it takes 8.8 years to save a 10% down payment

Not according to this article, where it mentions the average household income, not the average per-capita income. So you can expect it to take quite a bit longer than that to save for that down-payment, for the average person.

Re: Average home prices in New Zealand reaches 8.8 times average household income

#23
post #6

It annoys me when they compare countries and don't consider income tax - you don't pay with pre tax income... If you earn 150k in High Tax Euro Country you're losing 50% of that. In low tax US state you're closer to 33%. Thats the difference between 75k and 100k.

IIRC we pay 33% after 70k NZD ish. Usually people opt into KiwiSaver (3~6%) and fair bit also goes out into paying their student loan.

In many European countries university is either free or nearly free, so you'd have to add that to the tax burden to make it comparable to Europe.

Re: Average home prices in New Zealand reaches 8.8 times average household income

#24

Compared to some other countries: The Netherlands: €31.5k average household income, average house price €387k - so 12.3x. UK: £31.4k average household income, average house price £274k - so 8.7x.

What is most depressing to me, where do people get the money???

It would take me 30 years of saving to get 500k, that's like 70-80% of my working life. That's assuming you don't get sick or lose your job.

This metric annoy me because only a fraction of your income can go toward rent or mortgage . You would pay over 100k in interest fees alone on a long term mortgage.

Re: Average home prices in New Zealand reaches 8.8 times average household income

#25
post #2

The problem with New Zealand seems to be that if you have an education, it is often no where else to use that education than Auckland or Wellington. I have never been to New Zealand, but the problem seems to be very similar to the housing problems we have in Norway. The sub arctic capital city of Oslo, has ridiculously high prices.

Stupid question... is the problem with not enough land (eg. if you want to live in manhattan, you literally have nowhere to build, unless you demolish something else),... or is there enough buildable (physically) land in "near-enough-to-commute" locations, but the government doesn't allow people to build (large enough) housing there?

In Wellington at least (where I live), there are limits on the density of housing that can be built (and height). Recently, the council was going to free up some of these restrictions a bit, but there was a lot of backlash by residents who didn't want the "character" of their neighbourhoods to be affected, so the relaxation in the rules has been a lot less.

Wellington is a bit different in that there is a limit on the amount of empty land in the centre and the neighboroughing regions: it's quite hilly and pinned in geographically, and most of the central regions are fairly built-up already. Some areas (near the CBD) were also built up on reclaimed land from the harbour, and what with earthquakes, that's not great...

Re: Average home prices in New Zealand reaches 8.8 times average household income

#26
post #17

More importantly, mortgage payments have gone from 1/3 of income to 1/2. That's reaching unsustainable levels.

That's not normal? I paid half my income to rent when living in London 10 years ago, and prices have only gone up since then.

For a long time a "rule of thumb" was 33% of income dedicated to housing + debts (usually based on underwriting rules, the bank wanted to see that your home loan payment + any other loan payments would be under 33% of your gross).

Re: Average home prices in New Zealand reaches 8.8 times average household income

#27
post #6

It annoys me when they compare countries and don't consider income tax - you don't pay with pre tax income... If you earn 150k in High Tax Euro Country you're losing 50% of that. In low tax US state you're closer to 33%. Thats the difference between 75k and 100k.

Most Euro countries have capital gains tax rate that's mostly flat and significantly under 50%. By the time the progressive income tax rate starts to exceed the near-flat capital gains tax rate, people start finding ways of converting their income to capital gains.

Re: Average home prices in New Zealand reaches 8.8 times average household income

#28
Here is something I would like to get opinions on -- whether this is a valid historical viewpoint. Talking very macro here.

We (the world) have spent the last 80 years in a period of relative prosperity, peace, and general building up of countries' (and people's) wealth and productivity. Currencies -- stores of value -- have not defaulted generally, and as everyone engaged in producing more over the last decades (real physical goods and services representing raw materials and labor), we have accumulated all those years worth of output and stored value. Any properly operating controller of currency has to issue more currency as physical output increases (money supply, etc).

As long as there are things that do not grow as fast as wealth or people / population grows and are finite in supply (land, housing), that accumulated 80 years of wealth has to go somewhere, and we are seeing it go into rising prices of finite housing by people and institutions searching for where to put it. Everyone is actively seeking ways to spend / invest it for a return and not sit idle.

So much money seeking a return has exhausted the growth of demand for capital, and returns are pretty much 0% these days. (think of it as, how could so much capital all earn 10% interest like it did at one point?) And that money seeks out wherever it can find appreciation -- housing.

Gripe as much as you want about wealth inequality, etc. and debate/tinkering around the edges of who in particular has more money or power to purchase. There is no escaping this fundamental buildup of 80 years of postwar resources in the average person's bank account or that of governments and institutions.

Is this off base? Is my interpretation wrong? Are we just seeing the fundamental force of wealth accumulation manifest into the one place that it finds value? This is a long-term problem, isn't it, if we can't escape this truth? Especially for someone born today, who finds that everyone existing already has tons of money in the bank and you're trying to start on that ladder too, but have nowhere the same resources to compete for limited supplies of the hot item?

Re: Average home prices in New Zealand reaches 8.8 times average household income

#29
post #2

The problem with New Zealand seems to be that if you have an education, it is often no where else to use that education than Auckland or Wellington. I have never been to New Zealand, but the problem seems to be very similar to the housing problems we have in Norway. The sub arctic capital city of Oslo, has ridiculously high prices.

Stupid question... is the problem with not enough land (eg. if you want to live in manhattan, you literally have nowhere to build, unless you demolish something else),... or is there enough buildable (physically) land in "near-enough-to-commute" locations, but the government doesn't allow people to build (large enough) housing there?

I suspect a big part of it is that many people who would have built a new house during the covid years (people are always building) instead changed to buying an existing (since building was reduced/restricted).

And if you build a house you're adding to the housing market (assuming it wasn't a teardown/rebuild) whereas if you buy it's just shuffling existing stock around.

Re: Average home prices in New Zealand reaches 8.8 times average household income

#30
Similar or worse situation is here in Prague, Czechia, person working in Prague needs about ~16 yearly incomes to buy average home here, it's insane, see: https://www.idnes.cz/ekonomika/domaci/praha-byt-cena-bydleni... Also Czech National Bank just increased the base interest rate to 5.75% this week, you can imagine how expensive regular mortgage is currently.
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