There was a young woman in her 20s, in the beauty industry, training as a nurse and will go into the private sector. She has a plan and good on her.
As part of this particular conversation though, she says she can never see herself owning a house.
Of our five kids, one or possibly two, I suspect they feel the same, and yet the National Party's 5% deposit announcement made over the weekend changes all of that.
Of all the policy released so far from any party, this is by far the most consequential.
There is no Government-owned supermarket, they won't be breaking up gentailers, or buying BNZ back. This campaign has been full of fanciful nonsense.
But the 5% is not only real, it's doable. It's so doable it looks likely the Labour Party will copy it and, above all else, it's the most important thing a policy can be – practical.
5% of a $700,000 house is $35,000. For most young people they can see that.
20% of that house is $140,000. That’s not real.
At last, the biggest issue around housing is solved. It used to be solved, and we used to do this routinely, until we ballsed it up in yet another example of taking a problem that never existed and messing it about.
20% was never needed. The only thing preventing 5% deposits was Adrian Orr and the Reserve Bank and an unhealthy fear of carnage.
Even if you end up for a period in a flat market, as we have now with negative equity, it will pass. It always does.
Even if housing in New Zealand never grows at 10% a year ever again, it will grow. And what I know, as sure as night follows day, is we love houses. We dream of owning our own place.
That is the constant in this whole mad debate that too many people have made too complicated.
Banks should never have been dictated to by the central bank because retail banks know what they're doing.
Between a government-insured scheme and KiwiSaver and retail banks, there should never have been a hurdle as large as it was.
There should never have been a generation for whom owning a piece of their country was seemingly beyond them.
The 5% policy sorts it. The trick now is to get that message out to people like the trainee nurse, who still don’t know how close they might be.
Mike Hosking is a New Zealand television and radio broadcaster. He currently hosts The Mike Hosking Breakfast show on NewstalkZB on weekday mornings - where this article was sourced.
Of all the policy released so far from any party, this is by far the most consequential.
There is no Government-owned supermarket, they won't be breaking up gentailers, or buying BNZ back. This campaign has been full of fanciful nonsense.
But the 5% is not only real, it's doable. It's so doable it looks likely the Labour Party will copy it and, above all else, it's the most important thing a policy can be – practical.
5% of a $700,000 house is $35,000. For most young people they can see that.
20% of that house is $140,000. That’s not real.
At last, the biggest issue around housing is solved. It used to be solved, and we used to do this routinely, until we ballsed it up in yet another example of taking a problem that never existed and messing it about.
20% was never needed. The only thing preventing 5% deposits was Adrian Orr and the Reserve Bank and an unhealthy fear of carnage.
Even if you end up for a period in a flat market, as we have now with negative equity, it will pass. It always does.
Even if housing in New Zealand never grows at 10% a year ever again, it will grow. And what I know, as sure as night follows day, is we love houses. We dream of owning our own place.
That is the constant in this whole mad debate that too many people have made too complicated.
Banks should never have been dictated to by the central bank because retail banks know what they're doing.
Between a government-insured scheme and KiwiSaver and retail banks, there should never have been a hurdle as large as it was.
There should never have been a generation for whom owning a piece of their country was seemingly beyond them.
The 5% policy sorts it. The trick now is to get that message out to people like the trainee nurse, who still don’t know how close they might be.
Mike Hosking is a New Zealand television and radio broadcaster. He currently hosts The Mike Hosking Breakfast show on NewstalkZB on weekday mornings - where this article was sourced.
9 comments:
Just one snag. Lower deposit means higher amount to borrow and higher repayments. Renting is already cheaper than taking out a mortgage and a lower deposit will make the gap even greater. A 25-year mortgage on a $700,000 house with 20% deposit will set you back about $800/week but with a 5% deposit it will set you back almost $1000/week (compare with about $600/week rent for a flat). We're dealing with a "straw that broke the camel's back" situation here.
Couldn't agree more Barend but nobody reads below the headlines.
Banks would still consider a mortgage high risk and possibly decline one if the payments are more than a third of income. That is general rule, banks have no predetermined figure.
Theoretically it would take 3 people on minimum wage to combine their income to pay off a 20-year mortgage (interest 4.5%) for a 700k property with 5% deposit.
The same goes for two qualified nurses on starting salaries, could find themselves homeowners in 20 years (or less as their pay increases).
Not many people purchase a home by themselves there is usually another earning partner involved.
The trick is to ride interest rate changes and remain employed or generate income for the duration.
It's not easy and never has been. And fortitude is not a common quality among most people.
@Barend - who cares - if someone wants to spend more on their own mortgage than what it costs them to rent (and pay someone elses mortgage) let them.
Legislating to save people from themselves just hurts everyone - and our entire economy. We've legislated ourselves to a standstill.
Buying a house is a significant investment - like every other investment class, it should be treated as just that, it carries risk and reward - we don't say someone has to have so many $$ in savings before they're allowed to open an interest bearing bank account. Even a bank account carries risk.
The sharemarket carries risk.
Owning a business, owning a car, owning a house, owning investments - or assets - carry risk.
Leave the banks alone and let them get on with doing their job - and manage their own risk. & stop legislating first home buyers out of the market.
re Barend - Ride a lot of camels, do you?
I just can't agree with you.
25 years ago, the bank laughed at me for wanting to get a pre-approved loan for 100k.
Back then even that was considered useless ...for Auckland.
There are still plenty of ways to get on the property ladder.
It only takes a little bit of thinking outside the box but unfortunately people only look at the negatives because they LACK COIMMITMENT.
When will people understand that giving people money to start their home-owning journey does nothing but increase demand and the $700,000 house becomes an $800,000 house. The problem, people, is SUPPLY (Damn it)...!!! Make land available (the biggest constraint to supply) and ease councils' choke-hold on planning. (Sheesh).
Hardly, Mike. The only thing it might do is prop up inflated property values for a little longer.
The only party willing to put an end to the property Ponzi scheme is TOP, and the property lobby is pulling out all the stops to prevent the music coming to an end. I know where I’m voting.
Anon 1138, I never said anything about legislation. However I suppose by inference I was referring to the attempt to set minimum deposits at 5% but I have no opinion on that, just reservations about the effect this will have on repayments. If the intention of lowering the deposit to 5% is to get more people into homes, it just might backfire because of the higher mortgage repayments that such a move would engender.
Anon 1140, I look forward to your book on how to beat the system and get a house when you really can't afford one. You should make a fortune out of it. It will be a worthy competitor for my upcoming book on beating the fuel crisis by riding a camel to work.
There’s a hidden issue in 5% deposits.
They will cover real estate commissions but won’t leave much with which to meet vendors’ costs should anything go wrong with a transaction.
If a purchaser fails to settle the estate agency and salesperson will be the first to be paid (and deposits are usually held in the agency’s trust account). This applies even if there is no settlement because a contract has been completed and a consideration (the deposit) has changed hands.
Sure, vendors get the balance of deposits after commissions.
However, that may be well short of the legal costs of suing for specific performance of an unsettled contract.
Many vendors are unaware of this risk.
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