Can you really afford NOT to buy a house?

Can you afford NOT to buy a house?

As you may expect, the following is a New Zealand and particularly Auckland-centric perspective…and yes, it is a rhetorical question.

Look, for many of us home ownership is beyond reach. That ship has well and truly sailed. Things may change in the future, but then again, they may not.

I’ve managed to scrape into my own place, but I worry about those who haven’t, who won’t.

Buying a house (as in the actual transaction) boils down to nothing more than money – albeit at levels that are wayyyy beyond reach for the average person, seeing as an Auckland house makes more than anyone working an actual job. But owning a home is not just about the money.

New Zealand: where you can’t afford to buy a house … and yet you can’t afford NOT to, either.

What’s your health worth?

Our housing stock is shite and our rentals are the worst. Cold and damp, they are literally making us sick. Renters in NZ have worse health outcomes than homeowners. What’s good health worth? $50 a week? $100? $250?

My house isn’t perfect. In the worst of winter it still gets too cold and the windows mist over. Yet it is many times better than the rentals I’ve endured. I can actually breathe. And that is priceless. More importantly, now I can install insulation, a heat pump, whatever I want.

Fixing renting needs to start here. Longer tenure is pointless if the property still sucks. But that does bring us to…

Can you afford the instability?

Renters have to move. (Often at the most inconvenient times.) Pay nonrefundable agent fees. Pay for the cost of moving (trucks, cleaning, double rent etc) over and over again. Sneak away from work to view houses because viewings are only ever during business hours. And you’ll have to do it many, many times because there’s so much competition for rentals.

That’s before we even try to quantify the stress involved with this lack of tenure. If you want a family, add kids into the picture and imagine how much harder it gets.

And after that…

What will you do when you stop working?

Retirees still need a place to live. Housing is a critical part of the retirement puzzle.

Rents keep going up. In my childhood suburb, my parents’ house has tripled in value, and the price of a 3 bedroom rental then is now the price of a 1 bedroom. Who knows how much market rents will be when it’s time for us to retire, and how much they may rise between then and when we die?

A project that I have been peripherally involved in around retirement policy is generating some discussion here in NZ. One particular submission sums the current situation up quite well, and I paraphrase it here: The political approach to housing is totally dysfunctional, favouring the old and wealthy over the young – and will cause huge problems for the currently young when they come to retire. A key theme among financially secure retirees, or those who are on track to be, is that they own their own homes. They are – or will be – free of a housing payment.

That’s going to change. Even now, there is real concern among renters about what their lives are going to look like in retirement. Moving is expensive, tiring and emotionally draining. Landlords are only going to continue to cash in on their capital gains – I know I would – and who wants to be forced to move at age 70 or 80?

Personally, I didn’t think I could afford to save enough for retirement to make up for not owning a house. I didn’t think the difference between (ever rising) rent and a mortgage payment would actually put me ahead (particularly if I was to try and rent somewhere decent). And there’s definitely something to the ‘forced savings’ discipline of having a mortgage.

But again, this is a choice that is available to fewer and fewer people as time goes on.

Us homeowners have lucked into a huge advantage. And it’s horrendously unfair. Once more with feeling: New Zealand: where you can’t afford to buy a house … and yet you can’t afford NOT to, either.

7 thoughts on “Can you really afford NOT to buy a house?

  • Reply Taylor Lee @ Yuppie Millennial October 12, 2016 at 14:47

    Is housing all across NZ super expensive or just in the Auckland area?

    I worry sometimes that we’re hitting a level of global inequality that cities around the world are increasingly going to be owned by a small subset of folks, making it harder and harder for regular workers to find affordable housing.

    • Reply eemusings October 12, 2016 at 18:58

      I would say it is across all our main cities. Auckland is by far the most unaffordable, but the effect of this is spreading outward to other centres where house prices have already soared and continue to increase. There are of course small towns where everything is cheap and there typically aren’t many jobs.

      I think that is definitely happening already, unfortunately. A trend that looks unlikely to reverse…

  • Reply Linda October 13, 2016 at 15:12

    I hear you. Moving from Chicago to the Bay Area meant that I was going to be really challenged to re-enter the housing market as an owner. Prices here seemed absolutely insane to me, and I kept thinking there would be a market adjustment and they would go down.

    I suppose that’s still possible, but a friend pointed out to me that one of the reasons real estate is so expensive here is that the competition isn’t just people living in the area, it’s also people from other countries who want to own here. That was a turning point for me, and when I decided that I was going to have to stop waiting and take the plunge.

    I think that’s what’s happening in Auckland, too, right? I’ve heard in Vancouver they are actually passing laws to try to stem the spiraling costs of housing due to overseas investors. I wonder if that approach would ever fly in this area or in NZ.

    • Reply eemusings October 13, 2016 at 19:41

      Yes, migration is huge to NZ, they have just upped the criteria for skilled migrants a little bit in fact in an effort to address this. Auckland is becoming a global city.

      Aussie banks (which own most of NZ banks) have cracked down on lending to foreign property buyers – not quite sure how/if that is filtering over to here.

      Vancouver has indeed slapped a tax on foreign buyers. Can’t see that happening here any time soon. Recently they’ve been making efforts to better record who’s buying properties – ie are they local or foreign.

      I see no reason for the trend to change unless something major happens to change either supply or demand, and that seems very unlikely to me.

  • Reply Ankur October 15, 2016 at 11:22

    It is an interesting take on needing home ownership in New Zealand. I still think renting makes sense if you are in Auckland(can’t really say about the other cities). Saving on the travel costs for work itself make it worthwhile. I know I would not be able to afford to buy a similar house, even if I converted my monthly rent into a mortgage payment. Although, retirement is still a ways off, and I could be wrong but I think it should be easy to move to a cheaper city at that time.

    • Reply eemusings October 15, 2016 at 15:18

      Thanks for the comment 🙂 It sounds like you are in a pretty good situation. I have no desire to ever leave Auckland, personally, even when retired. For me, the health benefits of owning a house alone are already worth it. I don’t think any of the people who sing the praises of renting in NZ have ever had to deal with finding a mushroom growing inside their house like I have, and I could go on and on in that vein… They also tend to be in the privileged position of never having had to struggle to secure accommodation due to their work and financial situations. I’ve wasted so much money renting I’ll never get back, and that’s without even accounting for all the stress involved. http://nzmuse.com/2016/04/money-ive-wasted-renting/

  • Reply Ankur October 16, 2016 at 19:36

    I have heard horror stories but luckily I have not faced that situation so far. 🙂 In all fairness, I have just been in New Zealand for 2 years so I guess I do not have much experience to asses the situation. I can see why renting would be a waste of money if you have decided where you want to stay for most of your life or even if you are made to move continuously by landlords and have to eat up the agent fees and deposit bond. Personally, I cant see myself being tied down because of a mortgage and not be able to move to pursue more exciting opportunities in the future. Even if I wanted to buy a house, I don’t think I could afford a nice one in Auckland.

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