Monday, July 7, 2014

You Can Afford A House in NZ, Despite What People Say!

I’ve had a few conversations with people who I’d describe as being middle class New Zealanders. They are earning around $100,000/year, yet they claim they can’t afford to buy a house.

As we talk it over further, it becomes clear that they actually can’t afford a house of the required standard in the desirable area of the major city in which they live.

It’s pretty hard to buy your first house in Queenstown, Christchurch, Auckland or Wellington, especially if you are not prepared to live in the cheaper suburbs.


It occurs to me that people have priorities in their lives and when they say “we can’t afford to buy a house”, they really mean that they are not prepared to make the sacrifices required to get into home ownership.

Some Examples

I have 3 friends who live in & around Rangiora. All of these people have average jobs, they all have young children, all of the wives have chosen not to work & instead stay at home with the children.

They all own their homes.

One friend was in the army for 6 years and left as a private, he now works in forestry driving a digger. He and his wife bought a small slightly rundown house in Rangiora, which they live in. They continued to save his average wage (by NZ standards) until he had a deposit & bought another house around the corner, which he rents. I estimate these two houses are worth $250,000.

He’s now looking for his third house.

Another friend drives a forklift has a special needs child. His wife looks after their child during the day. They bought an average house in Kaiapoi right next to the motorway. It’s a comfortable house but nothing flash.

My third friend is a builder/hammer hand, he has 3 kids which his wife home schools. They managed to buy a house in Rangiora when they were first married. They recently sold it & purchased a larger house on a lifestyle block.

All these couples bought very average properties with flaws. For instance, situated right next to a motorway or slightly rundown or had a very small section. But they did it and they have gained financially as the properties have increased in value.

I just did a property search on trademe. It showed 485 properties in Canterbury under $250,000.

I bought my first house in my early twenties.

I was working as a dairy farm worker in 2001 earning $30,000/year when I saved $5,400 and purchased a property for $54,000 in Invercargill. I rented it out and it was cash-flow positive.

In 2004 my wife and I cobbled together $10,000 & purchased a house for $100,000, which we lived in. It wasn't located in a great area & it had a shared driveway. We spent the next 2 years renovating it ourselves. We sold it five years later & more than doubled our money on that property.
Renovating the laundry

It sounds so easy just writing these examples down now. But the one thing all these people have in common is they sacrificed things in order to be able to buy their properties.

In my early twenties, my friends were buying $12,000 motorcross bikes & spending their weekends racing, others were borrowing money to buy $20,000 cars, while others were travelling the world.

I missed out on all of that. My wife and I lived a very simple lifestyle. Most weekends were spent painting or hanging gib board or simply staying at home as we had no cash.

I do regret not travelling and my wife reminds me constantly about how unacceptable it was to not have a real honeymoon & rather use the money to buy our first house. 

She’s right though; it was unacceptable to not have a honeymoon. I’ll have to make it up to her. I was so focussed on getting ahead.

Money gives you options

When you are young you have no money and I think all money does is give you options. 

When you have no money you have limited options and you have to focus your limited resources.

It’s totally possible for young families to buy a house in New Zealand. The question is are people prepared to make the sacrifices required?

When I look at the people who tell me they can’t buy a house, I notice that they all eat out at restaurants regularly, there’s lots of money being spent of manicures and salons & plenty of nights out on the town & shopping trips to Australia.

The same thing applies to farming. I saw my parents move from Zimbabwe with nothing in there 30s, working as farm workers to buying their first farm 11 years later.

My first employer started dairy farming at 17 and was sharemilking 400 cows at 28 and at 40 years of age owns a large dairy farm, among other things.

These are all examples of ordinary people with ordinary intellect just getting on with it and getting ahead.

It’s all about priorities, attitude & peoples willingness to do what is required.

I'm developing a pot belly. But its not a priority for me to get rid of it and I'm certainly not prepared to make the sacrifices required to get rid of it. So, I can't complain about not having a flat stomach, if I'm not prepared to do what is required to get flat abs.


  1. Interesting post Glen. Wifey and I are not in the same situation in that we have only been saving for two years having just moved back from overseas. But I take your point and agree for the most part. People used to be happier with a lot less and more inclined to sacrifice 'stuff' to get ahead.

    We've been saving about 20% of our income and right now we couldnt afford anything over $145k. Next year when we have both been in Kiwisaver for 3 years with the government subsidy, Kiwiwsaver, savings, and family suppport, might be able to afford a $250,000 house with the welcome home loan perhaps that can stretch to $380,000 (as long as wifey gets a job). We are making sacrifices to acheive this like living with our parents, no holidays this year and so on. So whilst we are saving way more than most we are looking for a modest home. We are happy for something as small as 80sqm but what we want is land which is impossible with a welcome home loan because of the restrictions.

    Having said that, I think that things are very different now. House prices are overheated, the cost of living in NZ is much higher than it used to be and people have way more debt than 20 years ago (student loans and what not). But most of these are personal choices like you say. When I was 21 I bought a flat for 120,000 pounds in London, back then you could buy a property on a 5% deposit with interest rates around 5%. It's a bit different now of course, for first time buyers a 20% deposit with rates looking to reach 8% within a couple of years. Wages have not increased in proportion to the cost of living so its not fair to compare the two periods of time. But this is not in defence of those who spend on expensive trips to Melbourne or whatever, just pointing out that its not as black and white as you make out.

    Personally I am very hesitant to buy a house that is poorly built and likely to devalue when the market eventually self corrects. Hence our desire to build. With the cost of sections starting at around $100k for less than 1/4 acre, choice is thin on the ground. We are looking way out in the boonies to find land cheap enough and large enough for a wee house and garden.

    1. Jaya, you made some good points.

      Everybody's lives are different and life deals people different circumstances. You were in business overseas & took up some pretty cool positions which have contributed to your experience and value.

      The point of the post is that if people really want something, in this case home ownership. Then they can do it, if people make the required sacrifices.

      I was NOT trying to say that if you don't own a house then you are slacking.

      You are definitely making some big sacrifices to put your selves in a better position. You guys are investing in education among other things.

      A few things jumped out at me:
      1- You bought a flat in London, which I assume is one of the most unaffordable cities in the world. Well done
      2- You are saving 20% of your income?! Wow, that is seriously good work.
      3- You are living with your mother in law! Mate, that is going above and beyond the call of duty!


  2. Admittedly Glen, if you were in a fortunate position to purchase a house pre-2003 and sell pre-2008 then most people would have doubled their money. There were also banks lining up to give away money around that time which made it easier to get on the property ladder. The same cannot be said today. Remember those on 50k or less need to save their annual income to put down 20% on a 250k home, in Jaya's case thats 5 years..I hope he gets on well with his inlaws!
    I agree with hard work and sacrifices to get on the property ladder but there is a balance to life and work, particularly with a young family.

    1. Hi, thanks for commenting.
      You are right about that period of time being very good as far as capital gain was concerned. Especially in the small cities & towns like Invercargill, Ashburton, Timaru or matamata.

      I suppose luck also has a lot to do with it.

      You make good points.


  3. BTW, I'm not assuming Jaya earns 50k, just an example.

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