Housing crisis: Arbitrage the job market
How can we get more Kiwis into homes?
When I started out I was apalled at the cost of housing. I came from a small town, where, in my early 20s during the early 1990s, $70,000 could buy a three bedroom house and at the time Auckland housing was about $250,000 to $300,000.
The strategy I used to afford a house was a form of arbitrage. I initially rented and invested in an education. I then rented and moved to develop my career and got a partner.
When we could, we bought a house in an area we believed was good value (Christchurch in our case - $100,000 cheaper than Auckland when we bought) with a 10 per cent deposit.
We rented it out and continued renting in Auckland where we could maximise our incomes, focusing savings on mortgage repayments in Christchurch.
Eventually we built up enough equity and bit the bullet and bought our own home in Auckland, keeping the rental.
When we both ended up facing unemployment in 2009, we followed the jobs and moved to Australia, where we are still renting and sending money home to pay down our mortgages.
The strategy is to (a) invest in education (including financial education) to maximise earning capability (b) move to where the jobs are and work hard to realise the income potential (c) rent to maintain job mobility and maximise savings (d) buy property in a market that is more affordable (and rentable) and (e) focus on repaying the mortgage.
It's not without its risks and sacrifices (especially distance from family), but in the long run it has worked for us.
If I was buying now, I would be looking at regional centres as Auckland/Christchurch are both inflated due to housing scarcity.
I believe prices will drop significantly in both markets when building finally catches up in four to five years time. The regions will be more stable.
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