What those Kiwi expats living in London would give to swap the property headaches of London with those of Auckland city!
Auckland property prices were a focal point in the 2014 election, with both major parties devising governmental schemes attempting to ease the city’s housing woes. Since 2011, house values have increased on average 34 percent in Auckland. That’s a touch over ten percent a year.
For those who own property, as an investment or as a means to save, the ten percent is a solid return. Unfortunately, for private tenants or wannabe homeowners, constant increases like this can strain one’s finances and aspirations of ever owning a home.
Most property and economics experts agree that the problem in Auckland are the shortcomings in supply of houses. There simply isn’t enough competition to level prices. However, this problem isn’t unique to Auckland; most major cities in the 21st century face the same ongoing supply issue, in part because large and economically vibrant cities are magnets for international and domestic migration (which is not a bad thing, by the way).
Time to consider apartment life
Auckland’s population is believed to reach two million by 2030. This suggests that Auckland needs to build more properties on the vertical axis. Indeed, this is exactly what Prime Minister John Key recommends for first home buyers.
“Some people will have to consider going into an apartment for instance; that has been the international change. If you’re a young person buying your first place in Sydney or Melbourne or Brisbane, in most instances you’ll be going into an apartment.”
It’s tough to imagine growing up in New Zealand in an apartment block – even one that resembles a home rather than a student squat. Most Kiwis are brought up in a house with a decent sized backyard or even acres of farmland to kick a rugby ball around. Times are clearly changing for those wanting to live in central Auckland.
Anyway, not everything is all bad in apartment life: there are no lawns to mow, it is quick and easy to clean, the park nearby serves as your backyard, the vibrant nightlife and restaurants below are bound to keep you entertained, and you’re typically a ten minute walk away to work, which, all things considered, is not a bad trade-off when you think about it.
For those not wanting to consider the apartment alternative, there is still the option of good-old fashioned thrift.
Time to get real?
A major problem with many young people today, myself included, is our inability to save and sacrifice for the future.
Peter Thompson, head of real estate agency Barfoot & Thompson, recently commented on the new generation’s complacency and implicit pompousness in complaining about exorbitant property prices.
“They still want to go out on a Friday and Saturday night, and have a good life as well as most probably have Sky TV. You know, sometimes you’ve just got to forgo something if you really want to progress,” Thompson said.
“The young people of today want to live where they finished living with their parents.”
There is a lot of truth in this. It can be a shock for young people to leave the luxury of their parents’ home and accept a worse living standard for a while. Also, many young people cling on to the romantic and lazy idea of not having to start at the bottom in terms of renting or owning your first home.
Thompson says they ought to lower their expectations. “Maybe they’ve got to go out one or two suburbs to slightly cheaper areas. There’s still good buying if you’re looking around that $500,000 mark, and people say there’s no houses for $500,000.”
On the other hand, many young people are realistic and good savers but higher house prices and lack of choice keep them off the property ladder. And without a doubt, the cost of a house in relation to income has gone up suddenly in the last two years in Auckland.
But, for most Kiwis living in London, the troubles of Auckland property almost seem negligible in comparison.
How does the Mother city compare?
Now, let me tell you about the real world of property: London.
In the city of London, those illustrious stacks of red bricks that comprise homes are essentially large stacks of cash. If you own a property in London, you are set for life.
With prices at record levels, its renters who struggle the most. The average home in London is estimated to cost nearly 20 times more than the average salary in Britain. Also, according to the housing charity Shelter, Londoners spend nearly three-fifths of their monthly income on rent alone.
In my own personal experience, and talking with others who enjoy modest incomes, three-fifths could be terrifyingly close to the truth. It seems that London’s housing is no longer for those who need it but for those wanting to accumulate capital and investments.
Indeed, private tenants can be subjected to haphazard short-term contracts, sharp increases in rent, or their overseas landlord from Dubai suddenly deciding to sell because the value has increased so much.
Living in London, there are certain things one accepts as normal life: two hours a day squashed on the underground tube to get to and from work, a small room rented at double the price of most rooms in Auckland and Wellington, no backyard or terrace, and neighbors so close to you that you can’t help overhearing things that one normally shouldn’t be exposed to.
At times, lying in bed listening to the every-seven-minute aircraft fly directly over my flat on its route to Heathrow International, I consider what luxury villa I could rent in Auckland – near a sparkling seascape – for the same price that I pay for my tiny shared flat in London.
That perspective should make Aucklanders grateful still. There is work to do in addressing the housing shortage in Auckland, but for the meanwhile: keep calm and carry on.