Paul’s Update

November 2016

Compromise and sacrifice a key to home ownership

Tired of listening to people saying housing is unaffordable? Well, it’s actually been that way for the past 40 years in Auckland. And as we’ve now grown into a major international city, housing will remain unaffordable, particularly for first-home buyers.

So what’s the solution? You can’t get ahead without sacrifice, compromise and hard work. Young people need to think laterally, do what our parents, grandparents and also post-war migrants did when they arrived in New Zealand with nothing – share houses. In 1952, I was only a child, I recall seeing up to three migrant families sharing a three-bedroom house which they had bought, which my father had sold to them, with one family and two kids per room. Far from ideal, but it enabled them to quickly get ahead. Years later my father explained that they had 2 jobs each and paid off the mortgage within 1 year.  Over the next 2 years they bought one house a year, so after 3-4 years they owned 3 houses between them with no mortgage. They were prepared to put up with hardship in the short term to gain security in the long term. They spent only on essentials. It was a no-frills life. It’s called delayed gratification.

What is the answer today?

Two couples or two to three singles could share a mortgage to get a foot on the property ladder today.

When I was 18 three mates and I bought houses together and did them up. We painted them in the evenings after work and in the weekends, bonding over a fish and chip dinner and a bottle of beer. Simple pleasures. That’s how we got ahead.

Should we reinvent the old wheel?

In the past, communities pulled together to help each other out. If a mate bought a new house, he’d hire a concrete mixer and all his mates would come around in the weekend to help mix and pour. Social structures are breaking down. How many of us even know our neighbours today? We need to rekindle community, get to know neighbours, reach out.

I’ve now been in real estate for 53 years and I’ve seen many property cycles come and go. Between 1946 and 1960 New Zealand married couples received a government-funded Universal Family Benefit, the amount of which was determined by their number of children. Most families of that era were able to buy a house by capitalising on the family benefit, receiving a lump sum in advance to put it towards a deposit. Admittedly there was full employment at the time. But there were also other factors that enabled people to buy houses. Families could get a mortgage from State Advances and make up the shortfall with a second mortgage by borrowing off the family solicitor or the Building Society. We all saved in the Building Society. They were co-operatively owned and we were the members. Banks weren’t involved in home loans.

It was a simpler time. We had a workable system. We didn’t have homeless people. Young people could realistically expect to buy their own home if they worked hard. Not any more. The governments have dismantled a system that worked. Should the Universal Family Benefit be reinstated – something more than Working for Families, which only some families are eligible for?

The goal of a modest house in the past has been replaced by today’s dream of a small apartment.

It’s still possible if young people band together and share a mortgage and are prepared to sacrifice the good life – in the short term.

The key is just to get on the property ladder.

We can’t all be high fliers.