One housing rung at a time
Election: we need to talk about housing
The ongoing infatuation by the media adds fuel to the proverbial fire that there is a housing crisis.
I accept that the price of housing in desirable suburbs of the major centres is always going to be at the upper end of the price spectrum.
However, there is always a substantial property available in other areas of the cities/towns which are of a lower price.
We constantly hear people going on about affordable housing. In order to quantify this information it is important to determine the figure that is affordable, otherwise we are simply hearing fallacies from various segments of New Zealand.
Affordable, in regards to housing, is described as being affordable to those with a median household income. It needs to be further reduced from that. Various countries use a percentage of the median household income which is spent on housing to determine that figure. Canada for example uses a 30 per cent rule, which is to say that affordable is described as being no more than 30 per cent of the median household income being spent on housing. Conversely, India uses 40 per cent. Of course, there is no one percentage that could be applied right across all countries as all countries are different.
As we are in New Zealand, it is only logical to look at what New Zealand uses. In 2011 an independent report stated that affordability was no more than 30 per cent of gross income being spent on mortgage repayments.
Accordingly, taking the median total household income it is relatively easy to ascertain what is academically affordable.
Statistics New Zealand state that the median weekly total income for households in 2013 was $1,358 (based upon 1.458 million households). As such we can determine that mortgage repayments need to be below $407.40 per week in order to be classified as affordable.
So what does $407.40 per week get you? Westpac's calculator suggests that with today's rate you could buy a house worth $350,000.
Realestate.co.nz has in excess of 12,000 properties with at least one bedroom under $300,000 currently available in New Zealand. Increase the threshold to $400,000 and there are 18,795.
There are 1,312 properties with at least one bedroom under $400,000 available in Auckland; 578 in Christchurch; 1,129 in Wellington; 582 in Wellington.
I freely admit there are not that many when you look across the country, however there are properties there and available which are deemed to be affordable.
The above properties are not likely to be in the highly sought after locations, they may require a longer drive to work, perhaps they aren't brand new with double glazing and modern insulation. They may only have two bedrooms.
However, getting on the property ladder will enable people to build equity in their house, later sell that house, purchase one the next rung up.
It's call the property ladder because more often than not you start at the bottom and climb, one rung at a time up.
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