In NZ we have created a culture that obsesses with house prices. It's been this way since at least 2000, if not earlier. Many peoples retirements plans hinge on them being landlords or holding large amounts of property.
The NZ share market is a joke. Pretty much any serious global company that started in NZ moves away from NZ without even entering our sharemarket. There are a few exceptions of course, but by and large it's a dull, depressing market and there are very few incentives to invest in businesses rather than property.
NZ's tax regime also actively discourages investment outside of NZ. Holding growth shares in US tech stocks will result in annual wealth taxes, even if you hold and never sell. No wonder property is easier and more profitable.
Last year a friend was gloating at how they purchased 5 rental properties in the South Island (with mortgages of course). Yes a degree of rental properties is required but what we're doing in NZ is way out of proportion.
> In NZ we have created a culture that obsesses with house prices. It's been this way since at least 2000, if not earlier. Many peoples retirements plans hinge on them being landlords or holding large amounts of property.
Canada and New Zealand are similar in that respect. There are a sizable number of people with "investment properties", but the majority of homeowners own a single home and are counting on the price to rise indefinitely to fund their retirement.
Economists and politicians regularly brag about how much 'wealth' the average Canadian has; in reality, being able to sell your house for 1.5MM isn't that much of a windfall when other houses are at least 1MM and rising rapidly, and renting is more expensive than having a mortgage.
House prices are like car dependency in that when it becomes an issue it makes so many conversations so boring. Housing and traffic. Exciting! People become obsessed and then it's all downhill.
I'm currently living in Tokyo and have family visiting from NZ. I've already had a few uncomfortable conversations about when I'll be coming back. Realistically I won't be, not only would I lose more than half my salary, but I would then have to dedicate a large portion of what's left on an overpriced hovel that's probably rotting from the inside. It's no wonder that most of the people I graduated with left the country long ago. Those who stayed had well off parents who could get them onto the property ladder.
> I've already had a few uncomfortable conversations about when I'll be coming back
If they truly care for you, they'd understand that where you are right now is better than back home. If a place is expensive and unaffordable, the best option for you (and anyone really) is to leave.
How are the lending laws in New Zealand, if they're regulated?
Here in Norway, one can loan 5x of annual gross income (minus any debt you have), and at least a 15% down payment.
Average annual household income here is 610000 NOK (~64500 USD). Average home price here (end of April) is 4483328 NOK (~473914 USD), so the ratio here would be 7.34 - but that's assuming single income household. For double income, that ratio would obviously halved.
In any case, the average person buying an average home here would have to save up a down payment equivalent to 2.34 annual gross incomes, in order to get the maximum possible loan/mortgage (5x annual income)...and that's assuming this person is completely debt-free.
If this person managed to save up 25% of their annual income, it would still take almost 10 years to save up for that down payment - but the housing market will likely outpace the saving potential of a your average person. So now you have to save up 2-5 extra years to afford the down payment. All while you're paying rent that is much higher than the mortgage would be.
Lesson learned is that being an average single person trying to buy an average house sucks, at least over here.
(Caveat: obviously most people do not purchase "average" homes, but start on the lower end - and most will save up with partners, as well as enjoy appreciating value of their first "starter" home)
Public policies are now heavily favouring public transport and cycling, which both require higher population density than single family homes to be effective. As a consequence, a higher share of the population is expected to live in apartments rather than homes compared to the 70's and 80's.
Additionally, averages tend be impacted by outliers. Take the example of a rich heir buying a multi-million dollar mansion. His property will heavily influence the average house cost and his income is close to 0 since he lives off his capital, thereby reducing the average household income. This can twist the perception of what's actually happening for most people. The best way to fight that is to use medians instead of averages.
I am not able to find reputable sources for data in Norway, but what does your analysis look like when looking at median household income and median appartment prices. As this will more likely reflect the reality on the field.
Of course, people will want to own houses, but large - car optimized - and low density suburbs, are an anomaly of the last 50 years. They actually aren't sustainable, so their expansion has to stop, and the expectation is that the median worker will be steered towards appartment, while the richer elite will be able to afford houses - but that will gradually become a minority.
> Average annual household income here is 610000 NOK (~64500 USD).
Norway's GDP per capita is about USD70.000. Surely you're using GDP per capita, or average individual income, not household income? I have a very hard time believing that Norwegian average household income is just over half that of New Zealand.
So, if the average person can save 10% of their income, it takes 8.8 years to save a 10% down payment? Factor in tax and the time it takes to save a down payment is starting to look close to the time it took my parents’ generation to own a house free and clear.
> if the average person can save 10% of their income, it takes 8.8 years to save a 10% down payment
Not according to this article, where it mentions the average household income, not the average per-capita income. So you can expect it to take quite a bit longer than that to save for that down-payment, for the average person.
This is assuming the priced don’t increase. In many places, the prices increase so fast your downpayment grows faster than your savings.
Home value goes up 10%, from 1 million to 1.1 million, 20% downpayment goes up from $200k to $220k. If you’re saving under $1666 per mo, you’re actually further away than you were last year.
In Vancouver, the average price is $1.36 million and it went up 21% in a year. For detached, $2.12 million/25% yoy.
Waiting and saving money is no longer a feasible housing strategy, unless you can save at least a few thousand every month.
I can’t believe this hasn’t been mentioned, but NZ has no capital gains tax, making property an interest-free investment. People put their wealth into the housing market ever since the 80s and are putting their untaxed profits back in. Source: kiwi.
Can you explain what the cause of this sharp rise is? The linked article has nothing on that. It even feels a bit alarming without much depth. And is anything being done?
In the Netherlands, many investors, big and small, are buying up houses to rent out. Airbnb renting was a part of this as well. Many local governments are now creating rules, like, you have to live in the house when you buy it. Also, some taxes for investors have increased a lot. What is happening in the last few months is that less investors have bought houses and more have been bought by people buying their first home. The sharp rise in prices has been more normalized.
Still, there is a shortage of housing and the low interest caused over-bidding by people in a rushed market. The result was that only investors and people which had financial support from their parents could buy houses. Of course somewhat to their own detriment with paying too much and having too big loans.
I'm Brisbane outskirts. Moved here to avoid the crazy Sydney prices about 5 years ago. We would expect a bit under double now, maybe 70% up.
It's crazy. Great to feel you have more equity on the surface, but it's meaningless really as you have to sell to buy if your moving and then things like rates and stamp duty are higher than ever.
I think the best solution is cap how many properties people can own. Homes are good for people or investors, not both. While interest rates are the main driver, a country like Australia has little ability to far steer outside global rates. From that I think the best solution is to place a limit of ~3 residential properties per person, or something like than with a grace period to ease the new rules. Get the big investors out of the market. Make homes for people again. Action should have been 15 years ago before it was todays problem, but was still obviously heading this way. It's going to be hard to unwind now without creating serious pain somewhere.
NZs on its way to a crash. Debt to income ratios of recent mortgages are insane, and they don't do long-term fixes there. Either lots of defaults or massive drying up of disposable income. https://www.stuff.co.nz/business/128396590/world-watching-nz...
Similar or worse situation is here in Prague, Czechia, person working in Prague needs about ~16 yearly incomes to buy average home here, it's insane, see:
https://www.idnes.cz/ekonomika/domaci/praha-byt-cena-bydleni...
Also Czech National Bank just increased the base interest rate to 5.75% this week, you can imagine how expensive regular mortgage is currently.
it's household, not person income, which is consisting usually from 2+ people at least in Czechia
the problem with mortgages is that they should be heavily regulated long time ago requiring at least 20-30% first downpayment, cheap mortgages are just pushing prices for everyone including poor people, I'm glad for current regulation, but sadly it's way too late, my apartment in Prague also doubled value in last 5 years, which is insane.
I'm idiot, so I paid it in cash. I am also idiot, I could buy next apartment in cash again without being mortgage slave (I have savings roughly worth 40 m2 Prague flat currently), but nowadays mortgage slaves are preferred instead of people who can save their own money and stupid people happy with cheap mortgages don't realize these are just pushing prices up, instead with inaccessible mortgages prices would be much more stable and you would need to scrap money elsewhere but without greedy banks.
But there are good news, recently prices started to go down and need to be already cut, because they are even beyond of mortgage slaves already.
What does an average home in Prague look like? Is it an apartment or a detached house, how many bedrooms?
In Eastern European countries, the quality of housing varies greatly, from cramped apartments in gray concrete buildings to elegant mansions. I wonder, which of this is worth 16 times annual income.
How have other countries dealt with that? In Norway, the cap you can borrow is 5x your income. This cap is total of all loans (student loans, mortgages, limit on your credit cards etc)
Not sure of the effect, but perhaps it has cooled it somewhat You notice certain "bands" on apartment prices. An apartment for a single person is capped at ~5x what a single person makes, then there is a gap until the next band etc. One problem is that normal people are capped, but someone with upper class parents can get help to win the bidding round by bidding just above what most people can. So it can feel unfair, at the same time one probably shouldn't be liable for that amount of loans as well. Dunno.
In Ireland we've got a cap of 3.5X income (which banks can sometimes stretch to 4.5 income but it's pretty difficult to do due to government limitations) and that hasn't seemed to have helped house prices much (although it was iirc more to stop a housing bubble and crash rather than to keep house prices down). It's just meant that it's easier for investment firms and cash-buyers to outbid everybody else.
Housing prices and income have a skewed distribution (more like a lognormal than a normal distribution); therefore the mean is higher than the median.
What's the median home price and median income? Also, can the average household get a mortgage on these houses? Affordability is pretty much arbitrary and depends on the banks' lending criteria and interest rates (which depends on regulatory factors mostly).
Edit: this is on top of supply and demand for the houses themselves, of course.
In Norway the median income is NOK 550 920,- and the average income is NOK 609 480,-. The average price for a home is NOK 4 483 328,-. So respectively 8,1 and 7,3 times.
And in Norway it's still very common for young people (25-50) to buy property. Often couples buying together, but it's almost a given that you buy instead of renting.
Here is something I would like to get opinions on -- whether this is a valid historical viewpoint. Talking very macro here.
We (the world) have spent the last 80 years in a period of relative prosperity, peace, and general building up of countries' (and people's) wealth and productivity. Currencies -- stores of value -- have not defaulted generally, and as everyone engaged in producing more over the last decades (real physical goods and services representing raw materials and labor), we have accumulated all those years worth of output and stored value. Any properly operating controller of currency has to issue more currency as physical output increases (money supply, etc).
As long as there are things that do not grow as fast as wealth or people / population grows and are finite in supply (land, housing), that accumulated 80 years of wealth has to go somewhere, and we are seeing it go into rising prices of finite housing by people and institutions searching for where to put it. Everyone is actively seeking ways to spend / invest it for a return and not sit idle.
So much money seeking a return has exhausted the growth of demand for capital, and returns are pretty much 0% these days. (think of it as, how could so much capital all earn 10% interest like it did at one point?) And that money seeks out wherever it can find appreciation -- housing.
Gripe as much as you want about wealth inequality, etc. and debate/tinkering around the edges of who in particular has more money or power to purchase. There is no escaping this fundamental buildup of 80 years of postwar resources in the average person's bank account or that of governments and institutions.
Is this off base? Is my interpretation wrong? Are we just seeing the fundamental force of wealth accumulation manifest into the one place that it finds value? This is a long-term problem, isn't it, if we can't escape this truth? Especially for someone born today, who finds that everyone existing already has tons of money in the bank and you're trying to start on that ladder too, but have nowhere the same resources to compete for limited supplies of the hot item?
No I think this may be off base (but appreciate your original viewpoint) but also correct.
I think for luxury goods like artwork boats etc what you say is correct, but what I think doesn’t work is property prices. There’s no reason for the majority of the world to be struggling with rent given all the advancements in the world. it is human generated scarcity that doesn’t make no sense except to existing capital owners taking advantage of the rest
A lot of our current problem is actually caused by too little domestic population growth. They tried to cover it up with low interest rates and immigration but it isn't working.
The problem with New Zealand seems to be that if you have an education, it is often no where else to use that education than Auckland or Wellington. I have never been to New Zealand, but the problem seems to be very similar to the housing problems we have in Norway. The sub arctic capital city of Oslo, has ridiculously high prices.
Where I live (southern Germany), you cannot find a house under 600,000 EUR. The average net household income in Germany is around 43,000 EUR. That means that house prices here are over 16 times the average household income. Yupp, it's bad.
My wife and I both have university degrees, we have good and secure jobs, and our net household income is above average. But we have generally accepted the fact that it is impossible for us to fully own a house before we are dead here, even with the national or state-wide support programs for families (we would not get much, if any, support because our income is too large). Our parents don't quite get this. When my parents were our age in the early 90ies, my mother was a homekeeper and my father worked as a carpenter at a small company with a completely average salary. Yet it was no problem for them to build a fairly large house in a very nice neighorbood, without any financial support from their families. I remember we didn't go on vacation for 2 years in the late 90ies "because we now have to pay off the mortgage", but that was it. Their house is today worth so much (> 1,000,000) that it would be impossible for us to find a bank willing to lend us the money to buy it.
We currently rent a 4 room apartment, but lived in a 2-room apartment with our daughter for 2 years before because we couldn't find an apartment in a 30 km radius around our home town. The problem was not money - there was simply nothing available. For our current apartment, we were one of around 500 families that were initially interested, and one of 50 families who made it through the various hoops and obstacles created by the estate agent to get that number down to something managable. This is completely standard here. We only got the apartment because we were lucky.
At the same time, we are now starting a legal battle with our local district for a kindergarten place for our 3 year old daughter, which she is very clearly entitled to by law and for which we applied years ago. But their are no free places anywhere, and nobody in our local town seems to care anymore. Our local mayor basically said "well, sue the district". The people in charge at our town hall also regularly quit. The previous person, who has now also left, told us she cannot bear parents in tears anymore who scream and yell at her because they have to both work full-time to pay of massive mortgages, and don't know what to do with their children. Again, this is something our parents cannot even remotely understand, because the situation was completely different 30 years ago, when it was absolutely standard for a child to enter kindergarten when it was 3 years old. You just went to the town, asked for a place, and one was assigned to you.
The situation for families here has become so bad that we are seriously considering leaving the country.
>Where I live (southern Germany), you cannot find a house under 600,000 EUR. The average net household income in Germany is around 43,000 EUR. That means that house prices here are over 16 times the average household income. Yupp, it's bad.
1.65 % for a 5 year fixed mortgage at sparda bank. While inflation is at 7.4% in germany...
Each year you don't pay any interest, you are paid 5.75% to have debt. They(mainly retirees) are giving you roughly $34,500 each year to buy a house. Mind you, they(mainly retirees) want to sell their homes. Hence the beneficial arrangement for you.
Even when inflation gets under control and they get back to ~2%. You'll still be earning some small stipend.
If you don't buy a house, your rent is literally equity that you lost. That's coming out of your retirement fund.
Moreover, that $600,000 isn't going to be paid in 5 years. You'll amortize it for ~25 years. In 15 years the remaining mortgage will feel like it's nothing. Your salary will be $100,000 or more and the remaining mortgage will be nothing.
In high inflation, low interest rate environments. Buying a house is a no brainer with only 1 exception. Are you betting the housing market will crash? That you'll be able to buy homes for much cheaper and possibly cheaper rates? That's the only bet you're playing right now.
Well… 100 km around Munich €600k brings one 3-4 room apartment with the size of ~100 square meters. No house under 1 million EUR and it gets more and more worse every year.
With rather average salaries and lots of borrowed money in the family we managed to get a mortgage from the bank for a super old house. Then a super surprise came in - there was no handyman or a company who wanted to work for less than 1000€ a day. Every free minute goes into renovation, even very promising side project was put on hold. I already mastered plastering. Thinking about getting electrician’s license, then I will make more than McKinsey consultants.
It's pretty much the same for anything around the city of hamburg in the north and most of the time it's less about the houses and more about the land they sit on.
Building got more expensive but land even more so. 1.000 EUR/m² of land for adjacent cities are becoming the norm.
Most of my friends graduated from university with either a bachelor or a masters degree and only those who stand to inherit a sizable sum of money or their parents home are going to have houses. A 50k salary simply won't cut it. Most have given up on the dream entirely since 30+ years of debt is not something they can justify.
As a quick back of the envelop calculation:
Let's say you had a household income of 86k for two people (43k+43k) which translates to about 4550 EUR per month after taxes, health insurance and pension fund. Their cost of living on average (not including rent) in the hamburg area would be somewhere around the 1900 EUR mark, leaving about 2650 EUR per month. Since people need to save at least a little money, or go on vacation once in a while or repair their car or maybe they have kids it's probably generous to assume they could use 2000 EUR per month to pay off a house.
Let's say you'd get a house for 600k all inclusive and you had to take on 500k of debt. With a current interest of about 2.76% fixed for 20 years and paying off 2000 EUR per month, then after 20 years you'd still be at about 224k of debt and you'd have paid 203k in interest. Assuming the same interest thereafter it would take a total of 30 years and 10 months to pay the house off entirely. During that time larger repairs or renovations are likely needed which would most likely forbid to pay off more than 2000 EUR per month.
Now one could argue that people could find places for half as much in rural areas but then again, lots of professions won't find any jobs there and those that do often get paid way less. Somehow the situation saddens me. My parents bought a semi-detached house 20 years ago for 200k (which would be 264k today adjusting for inflation). Two identical semis in the same street got sold last year, each for more than 500k, so pretty much double the inflation adjusted prices albeit being 20 years older houses now.
I'd say same in Italy, even in small cities of 100k residents you cannot find a barely basic and nice home for less than 400k, which is over 10x the average household income.
This seems a fairly easy thing to fix except for the politics. (Similar to climate change)
Anyone got a good solution including the politics angle?
You'd need to give people an off ramp from their house investments and give them confidence that they'd get a share of the economic goods that they currently receive by holding a house plus a bonus from the bounty unleashed by the sane housing market.
There's no need: Stubbornly high inflation due to loose monetary policy (which is the largest contributor into asset overvaluations; including housing) is forcing central banks to raise rates.
Higher interest rates means buyers can afford to offer less, causing property prices to fall.
Home prices in Auckland is already down 10-20% and the RBNZ is continuing to hike. The same is happening in Canada, and if you check Zillow's latest report, it's happening in America too although likely to be more muted (i.e. take longer) due to the US's fairly unique 30-year fixed rates and people's 3 month interest rate locks expiring.
Just give it another year or two, the housing bubble will have sorted itself thanks to normal levels of interest rates.
Is this a NZ-caused problem like the article seems to imply?
Or is it foreign countries / companies buying up houses in place of stock like seems to be the case everywhere else?
Or is it just more billionaires (from other countries) buying backup/vacation homes in NZ?
[+] [-] yardstick|3 years ago|reply
The NZ share market is a joke. Pretty much any serious global company that started in NZ moves away from NZ without even entering our sharemarket. There are a few exceptions of course, but by and large it's a dull, depressing market and there are very few incentives to invest in businesses rather than property.
NZ's tax regime also actively discourages investment outside of NZ. Holding growth shares in US tech stocks will result in annual wealth taxes, even if you hold and never sell. No wonder property is easier and more profitable.
Last year a friend was gloating at how they purchased 5 rental properties in the South Island (with mortgages of course). Yes a degree of rental properties is required but what we're doing in NZ is way out of proportion.
[+] [-] richbell|3 years ago|reply
Canada and New Zealand are similar in that respect. There are a sizable number of people with "investment properties", but the majority of homeowners own a single home and are counting on the price to rise indefinitely to fund their retirement.
Economists and politicians regularly brag about how much 'wealth' the average Canadian has; in reality, being able to sell your house for 1.5MM isn't that much of a windfall when other houses are at least 1MM and rising rapidly, and renting is more expensive than having a mortgage.
[+] [-] bigDinosaur|3 years ago|reply
[+] [-] mrep|3 years ago|reply
Can you explain this more?
[+] [-] Bilal_io|3 years ago|reply
I wonder if local investors could focus on that, even if they have to import talent. Perhaps there are regulations preventing this?
But, of course I am saying this realizing startups are not a "quick buck" like real estate.
[+] [-] tjpnz|3 years ago|reply
[+] [-] chii|3 years ago|reply
If they truly care for you, they'd understand that where you are right now is better than back home. If a place is expensive and unaffordable, the best option for you (and anyone really) is to leave.
[+] [-] TrackerFF|3 years ago|reply
Here in Norway, one can loan 5x of annual gross income (minus any debt you have), and at least a 15% down payment.
Average annual household income here is 610000 NOK (~64500 USD). Average home price here (end of April) is 4483328 NOK (~473914 USD), so the ratio here would be 7.34 - but that's assuming single income household. For double income, that ratio would obviously halved.
In any case, the average person buying an average home here would have to save up a down payment equivalent to 2.34 annual gross incomes, in order to get the maximum possible loan/mortgage (5x annual income)...and that's assuming this person is completely debt-free.
If this person managed to save up 25% of their annual income, it would still take almost 10 years to save up for that down payment - but the housing market will likely outpace the saving potential of a your average person. So now you have to save up 2-5 extra years to afford the down payment. All while you're paying rent that is much higher than the mortgage would be.
Lesson learned is that being an average single person trying to buy an average house sucks, at least over here.
(Caveat: obviously most people do not purchase "average" homes, but start on the lower end - and most will save up with partners, as well as enjoy appreciating value of their first "starter" home)
[+] [-] IMTDb|3 years ago|reply
Additionally, averages tend be impacted by outliers. Take the example of a rich heir buying a multi-million dollar mansion. His property will heavily influence the average house cost and his income is close to 0 since he lives off his capital, thereby reducing the average household income. This can twist the perception of what's actually happening for most people. The best way to fight that is to use medians instead of averages.
I am not able to find reputable sources for data in Norway, but what does your analysis look like when looking at median household income and median appartment prices. As this will more likely reflect the reality on the field.
Of course, people will want to own houses, but large - car optimized - and low density suburbs, are an anomaly of the last 50 years. They actually aren't sustainable, so their expansion has to stop, and the expectation is that the median worker will be steered towards appartment, while the richer elite will be able to afford houses - but that will gradually become a minority.
[+] [-] svth|3 years ago|reply
Norway's GDP per capita is about USD70.000. Surely you're using GDP per capita, or average individual income, not household income? I have a very hard time believing that Norwegian average household income is just over half that of New Zealand.
[+] [-] donmcronald|3 years ago|reply
[+] [-] edf13|3 years ago|reply
[+] [-] throwaway3b03|3 years ago|reply
Not according to this article, where it mentions the average household income, not the average per-capita income. So you can expect it to take quite a bit longer than that to save for that down-payment, for the average person.
[+] [-] nikanj|3 years ago|reply
Home value goes up 10%, from 1 million to 1.1 million, 20% downpayment goes up from $200k to $220k. If you’re saving under $1666 per mo, you’re actually further away than you were last year.
In Vancouver, the average price is $1.36 million and it went up 21% in a year. For detached, $2.12 million/25% yoy.
Waiting and saving money is no longer a feasible housing strategy, unless you can save at least a few thousand every month.
[+] [-] elliottkember|3 years ago|reply
[+] [-] ferdowsi|3 years ago|reply
[+] [-] Tiktaalik|3 years ago|reply
[+] [-] xupybd|3 years ago|reply
[+] [-] mpol|3 years ago|reply
In the Netherlands, many investors, big and small, are buying up houses to rent out. Airbnb renting was a part of this as well. Many local governments are now creating rules, like, you have to live in the house when you buy it. Also, some taxes for investors have increased a lot. What is happening in the last few months is that less investors have bought houses and more have been bought by people buying their first home. The sharp rise in prices has been more normalized.
Still, there is a shortage of housing and the low interest caused over-bidding by people in a rushed market. The result was that only investors and people which had financial support from their parents could buy houses. Of course somewhat to their own detriment with paying too much and having too big loans.
[+] [-] Gustomaximus|3 years ago|reply
It's crazy. Great to feel you have more equity on the surface, but it's meaningless really as you have to sell to buy if your moving and then things like rates and stamp duty are higher than ever.
I think the best solution is cap how many properties people can own. Homes are good for people or investors, not both. While interest rates are the main driver, a country like Australia has little ability to far steer outside global rates. From that I think the best solution is to place a limit of ~3 residential properties per person, or something like than with a grace period to ease the new rules. Get the big investors out of the market. Make homes for people again. Action should have been 15 years ago before it was todays problem, but was still obviously heading this way. It's going to be hard to unwind now without creating serious pain somewhere.
[+] [-] jacquesm|3 years ago|reply
[+] [-] andi999|3 years ago|reply
[+] [-] te_chris|3 years ago|reply
[+] [-] martinsuchan|3 years ago|reply
[+] [-] Markoff|3 years ago|reply
the problem with mortgages is that they should be heavily regulated long time ago requiring at least 20-30% first downpayment, cheap mortgages are just pushing prices for everyone including poor people, I'm glad for current regulation, but sadly it's way too late, my apartment in Prague also doubled value in last 5 years, which is insane.
I'm idiot, so I paid it in cash. I am also idiot, I could buy next apartment in cash again without being mortgage slave (I have savings roughly worth 40 m2 Prague flat currently), but nowadays mortgage slaves are preferred instead of people who can save their own money and stupid people happy with cheap mortgages don't realize these are just pushing prices up, instead with inaccessible mortgages prices would be much more stable and you would need to scrap money elsewhere but without greedy banks.
But there are good news, recently prices started to go down and need to be already cut, because they are even beyond of mortgage slaves already.
[+] [-] yafinder|3 years ago|reply
In Eastern European countries, the quality of housing varies greatly, from cramped apartments in gray concrete buildings to elegant mansions. I wonder, which of this is worth 16 times annual income.
[+] [-] matsemann|3 years ago|reply
Not sure of the effect, but perhaps it has cooled it somewhat You notice certain "bands" on apartment prices. An apartment for a single person is capped at ~5x what a single person makes, then there is a gap until the next band etc. One problem is that normal people are capped, but someone with upper class parents can get help to win the bidding round by bidding just above what most people can. So it can feel unfair, at the same time one probably shouldn't be liable for that amount of loans as well. Dunno.
[+] [-] cianmm|3 years ago|reply
[+] [-] NiekvdMaas|3 years ago|reply
The Netherlands: €31.5k average household income, average house price €387k - so 12.3x.
UK: £31.4k average household income, average house price £274k - so 8.7x.
[+] [-] HPsquared|3 years ago|reply
What's the median home price and median income? Also, can the average household get a mortgage on these houses? Affordability is pretty much arbitrary and depends on the banks' lending criteria and interest rates (which depends on regulatory factors mostly).
Edit: this is on top of supply and demand for the houses themselves, of course.
[+] [-] Manheim|3 years ago|reply
[+] [-] sgt|3 years ago|reply
[+] [-] Markoff|3 years ago|reply
[+] [-] supernova87a|3 years ago|reply
We (the world) have spent the last 80 years in a period of relative prosperity, peace, and general building up of countries' (and people's) wealth and productivity. Currencies -- stores of value -- have not defaulted generally, and as everyone engaged in producing more over the last decades (real physical goods and services representing raw materials and labor), we have accumulated all those years worth of output and stored value. Any properly operating controller of currency has to issue more currency as physical output increases (money supply, etc).
As long as there are things that do not grow as fast as wealth or people / population grows and are finite in supply (land, housing), that accumulated 80 years of wealth has to go somewhere, and we are seeing it go into rising prices of finite housing by people and institutions searching for where to put it. Everyone is actively seeking ways to spend / invest it for a return and not sit idle.
So much money seeking a return has exhausted the growth of demand for capital, and returns are pretty much 0% these days. (think of it as, how could so much capital all earn 10% interest like it did at one point?) And that money seeks out wherever it can find appreciation -- housing.
Gripe as much as you want about wealth inequality, etc. and debate/tinkering around the edges of who in particular has more money or power to purchase. There is no escaping this fundamental buildup of 80 years of postwar resources in the average person's bank account or that of governments and institutions.
Is this off base? Is my interpretation wrong? Are we just seeing the fundamental force of wealth accumulation manifest into the one place that it finds value? This is a long-term problem, isn't it, if we can't escape this truth? Especially for someone born today, who finds that everyone existing already has tons of money in the bank and you're trying to start on that ladder too, but have nowhere the same resources to compete for limited supplies of the hot item?
[+] [-] JohnJamesRambo|3 years ago|reply
https://www.investopedia.com/terms/k/kondratieff-wave.asp
https://www.bridgewater.com/big-debt-crises/principles-for-n...
[+] [-] math-dev|3 years ago|reply
I think for luxury goods like artwork boats etc what you say is correct, but what I think doesn’t work is property prices. There’s no reason for the majority of the world to be struggling with rent given all the advancements in the world. it is human generated scarcity that doesn’t make no sense except to existing capital owners taking advantage of the rest
[+] [-] usrn|3 years ago|reply
[+] [-] thomasfl|3 years ago|reply
[+] [-] AndrewDucker|3 years ago|reply
[+] [-] lqet|3 years ago|reply
My wife and I both have university degrees, we have good and secure jobs, and our net household income is above average. But we have generally accepted the fact that it is impossible for us to fully own a house before we are dead here, even with the national or state-wide support programs for families (we would not get much, if any, support because our income is too large). Our parents don't quite get this. When my parents were our age in the early 90ies, my mother was a homekeeper and my father worked as a carpenter at a small company with a completely average salary. Yet it was no problem for them to build a fairly large house in a very nice neighorbood, without any financial support from their families. I remember we didn't go on vacation for 2 years in the late 90ies "because we now have to pay off the mortgage", but that was it. Their house is today worth so much (> 1,000,000) that it would be impossible for us to find a bank willing to lend us the money to buy it.
We currently rent a 4 room apartment, but lived in a 2-room apartment with our daughter for 2 years before because we couldn't find an apartment in a 30 km radius around our home town. The problem was not money - there was simply nothing available. For our current apartment, we were one of around 500 families that were initially interested, and one of 50 families who made it through the various hoops and obstacles created by the estate agent to get that number down to something managable. This is completely standard here. We only got the apartment because we were lucky.
At the same time, we are now starting a legal battle with our local district for a kindergarten place for our 3 year old daughter, which she is very clearly entitled to by law and for which we applied years ago. But their are no free places anywhere, and nobody in our local town seems to care anymore. Our local mayor basically said "well, sue the district". The people in charge at our town hall also regularly quit. The previous person, who has now also left, told us she cannot bear parents in tears anymore who scream and yell at her because they have to both work full-time to pay of massive mortgages, and don't know what to do with their children. Again, this is something our parents cannot even remotely understand, because the situation was completely different 30 years ago, when it was absolutely standard for a child to enter kindergarten when it was 3 years old. You just went to the town, asked for a place, and one was assigned to you.
The situation for families here has become so bad that we are seriously considering leaving the country.
[+] [-] incomingpain|3 years ago|reply
1.65 % for a 5 year fixed mortgage at sparda bank. While inflation is at 7.4% in germany...
Each year you don't pay any interest, you are paid 5.75% to have debt. They(mainly retirees) are giving you roughly $34,500 each year to buy a house. Mind you, they(mainly retirees) want to sell their homes. Hence the beneficial arrangement for you.
Even when inflation gets under control and they get back to ~2%. You'll still be earning some small stipend.
If you don't buy a house, your rent is literally equity that you lost. That's coming out of your retirement fund.
Moreover, that $600,000 isn't going to be paid in 5 years. You'll amortize it for ~25 years. In 15 years the remaining mortgage will feel like it's nothing. Your salary will be $100,000 or more and the remaining mortgage will be nothing.
In high inflation, low interest rate environments. Buying a house is a no brainer with only 1 exception. Are you betting the housing market will crash? That you'll be able to buy homes for much cheaper and possibly cheaper rates? That's the only bet you're playing right now.
[+] [-] lnsru|3 years ago|reply
With rather average salaries and lots of borrowed money in the family we managed to get a mortgage from the bank for a super old house. Then a super surprise came in - there was no handyman or a company who wanted to work for less than 1000€ a day. Every free minute goes into renovation, even very promising side project was put on hold. I already mastered plastering. Thinking about getting electrician’s license, then I will make more than McKinsey consultants.
[+] [-] Escapado|3 years ago|reply
Most of my friends graduated from university with either a bachelor or a masters degree and only those who stand to inherit a sizable sum of money or their parents home are going to have houses. A 50k salary simply won't cut it. Most have given up on the dream entirely since 30+ years of debt is not something they can justify.
As a quick back of the envelop calculation:
Let's say you had a household income of 86k for two people (43k+43k) which translates to about 4550 EUR per month after taxes, health insurance and pension fund. Their cost of living on average (not including rent) in the hamburg area would be somewhere around the 1900 EUR mark, leaving about 2650 EUR per month. Since people need to save at least a little money, or go on vacation once in a while or repair their car or maybe they have kids it's probably generous to assume they could use 2000 EUR per month to pay off a house.
Let's say you'd get a house for 600k all inclusive and you had to take on 500k of debt. With a current interest of about 2.76% fixed for 20 years and paying off 2000 EUR per month, then after 20 years you'd still be at about 224k of debt and you'd have paid 203k in interest. Assuming the same interest thereafter it would take a total of 30 years and 10 months to pay the house off entirely. During that time larger repairs or renovations are likely needed which would most likely forbid to pay off more than 2000 EUR per month.
Now one could argue that people could find places for half as much in rural areas but then again, lots of professions won't find any jobs there and those that do often get paid way less. Somehow the situation saddens me. My parents bought a semi-detached house 20 years ago for 200k (which would be 264k today adjusting for inflation). Two identical semis in the same street got sold last year, each for more than 500k, so pretty much double the inflation adjusted prices albeit being 20 years older houses now.
[+] [-] jurmous|3 years ago|reply
[+] [-] mdrzn|3 years ago|reply
[+] [-] ZeroGravitas|3 years ago|reply
Anyone got a good solution including the politics angle?
You'd need to give people an off ramp from their house investments and give them confidence that they'd get a share of the economic goods that they currently receive by holding a house plus a bonus from the bounty unleashed by the sane housing market.
[+] [-] dannyw|3 years ago|reply
Higher interest rates means buyers can afford to offer less, causing property prices to fall.
Home prices in Auckland is already down 10-20% and the RBNZ is continuing to hike. The same is happening in Canada, and if you check Zillow's latest report, it's happening in America too although likely to be more muted (i.e. take longer) due to the US's fairly unique 30-year fixed rates and people's 3 month interest rate locks expiring.
Just give it another year or two, the housing bubble will have sorted itself thanks to normal levels of interest rates.
[+] [-] goodpoint|3 years ago|reply
https://www.numbeo.com/property-investment/rankings_by_count...
Please stop spamming the thread with anecdata.
[+] [-] bgro|3 years ago|reply
[+] [-] Pete-Codes|3 years ago|reply