This entry focuses more on the Auckland Housing sector than other parts in New Zealand. Although the recent OECD (Organisation for Economic Co-operation and Development) report rates New Zealand houses among the most expensive in the world.
Because of the Reserve Bank restricting the amount of low deposit loans that the banks can hand out this has caused Parents to become the new primary source of payment for their childrens houses being fully grown adults themselves. These parent bank accounts become limited guarantors on the property investing a 20% deposit on the home to insure no additional payments, saving money in the long run. With this 20% deposit someone can save $3000 a year compared to someone with a 10% down payment.
The report details an Auckland mortgage broker noticing a increase of three times as many parents funding their children into their first homes compared to last year.
“Parents have obviously enjoyed huge capital growth and, in a way, created the problem for the kids in making an expensive market, so, in a way, this is righting the wrong, ” says Squirrel Mortgage Brokers managing director John Boltan. With the previous generation taking advantage of inflation rates turning into good investments while also the rising of house prices overtime this is where the older generation are biting the bullet.
We have seen in this in the recent OECD report stating that rents in new New Zealand are marked up 70% Key put forward a good point stating “If you look at what’s driving the housing market in New Zealand, it’s a combination of factors. One is just buoyancy in the overall economy and high levels of employment… that are encouraging people to want to go into the housing market,”
With the amount of Jobs available in Auckland we have seen this dramatic increase on the want to purchase houses. This puts pressure on the housing market as it becomes a competitive industry for people with these new available jobs as well as the limited number of houses available close to these jobs (in city limits) as well as the migration of Christchurch residents to Auckland. This pressure causes house prices to rise which isn’t affordable even with these new jobs available. This has caused the stir of parents digging into their retirement funds to support their now adult – children.
With this pressure we can only assume that the housing supply is unbalanced even if Prime Minister John Key doesn’t agree. We could expect to see more housing in the future to meet demand where Concrete Corp should be ready to make the investment otherwise this cycle will be continuing to the next generation which is worrying as with a rising population this is only going to put more financial stress on older and young adults looking to purchase property and with already a 70% mark up on house prices already when overpopulation hits this will increase dramatically.
References
3 News. “http://www.3news.co.nz/NZ-housing-market-most-overpriced%E2%80%94report/tabid/1607/articleID/344769/Default.aspx.” 3 News (2014): 1. Website. <http://www.3news.co.nz/NZ-housing-market-most-overpriced%E2%80%94report/tabid/1607/articleID/344769/Default.aspx>.
Nordqvist, Susie. “Parents risk retirement buying property for kids.” 3 News (2014): 2. Website. <http://www.3news.co.nz/Parents-risk-retirement-buying-property-for-kids/tabid/423/articleID/344671/Default.aspx>.
Builders and Concrete Advice 