Hamilton housing third-most unaffordable in the country, says new report  Well no surprises there!

So how come the other side of this coin is local and central government promising ‘affordable’ housing? Real Estate agents proclaiming that $400k will get you a ‘great starter’ home? A bank agreeing that saddling a young couple with a debt of half a million dollars is a good idea?

I have long been arguing that affordable housing is a misnomer, and that in fact it has been DECADES since this was a reality for most.  Back in my banking days (around 20 years ago) we were giving customers loans on a 5% deposit, and would sometime stretch to giving them four times their annual income.  For most of my clients this meant taking on a debt of around $200k, maybe quarter of a million if they were well paid.  In a very unPC way we took into account things like paying for groceries, and power, and the fact that one person might even stay at home with kids and thus their income might not continue at the level noted in their application. And then, even then, there were mortgagee sale signs all over the place. I was working hard at keeping my own customers ahead of their repayments and saw many in arrears.  The ‘top-up’ came along, and people could borrow twenty thousand dollars at a time without an application form, provided their was equity in their property. There was a bit of a boom, and so many people did this…and ended up over committed.

Fast track twenty years and we hear that the median wage in Hamilton is $57000.  But a house costs ten times that!  How DARE anyone say this is affordable! It’s not just insulting, its just not true.  A loan of half a million dollars, at the current low interest rate, with two incomes, may well be affordable – now.  But I guarantee it won’t be in a few years.

What can be done? Unfortunately, I think the horse has well and truly bolted, and short of a massive crash where people see negative equity in houses, or see the value of their biggest asset slashed to nothing, I can’t see us recovering from this.  Don’t get me started on ‘neat wee investment’ properties either – even a small time investor is not going to get a reasonable return on a rental if they have to pay half a million bucks for it.  I fear for my kids, who may never own a home. I fear for this city, that still has swathes of substandard 70’s style flats, being hocked off at an ‘affordable’ $300,000 (check TradeMe for examples – it’s insulting to buyers, and the people who currently live in these houses).

Will increasing supply help? It might stem the tide of dramatic price increases, but it’s not going to get prices back to a TRULY affordable level.  Would massive wage increases help? Why even have that conversation – ain’t gonna happen.  The only option left to us is to do something big.  Shared equity schemes such as run in the UK, the inability to buy land unless you’re born there, such as in Rarotonga, or the Channel Islands. Further restrictions on foreign ownership – perhaps only being allowed to buy a house after living here a certain number of years? A crown investigation into the cost of building supplies perhaps?

Some, or none of these ideas might work.  But my blood pressure skyrockets every time I hear someone spout about affordable houses.  For the vast majority, half a million dollars is not affordable. So stop telling us it is. Rant over.