I’ll write more about housing next week. Suffice to say that the central themes discussed last year as relevant for 2016 remain unchanged – investors flocking to the regions and boosting prices there, raising the risk of the RB following behind and imposing Auckland’s 30% investment purchase deposit requirement. Interest rates staying low encouraging more people to buy. Booming net immigration raising demand. Supply everywhere but Auckland particularly constrained by shortages of builders and land, land banking, and red tape. Here is something I penned for someone over the summer break. Why have house price pessimists got it wrong for three decades?
1. Thinking buying a house is solely a financial decision of comparing rent with mortgage servicing and maintenance costs
2. Failing to realise most people are in NZ for the lifestyle not maximising disposable income and part of that is home ownership.
3. Low interest rates boosting what are considered “affordable” prices because people calculate affordability based on debt servicing costs, not debt versus income.
4. Quarter of a century of messages to people that they need to save and boost assets for their retirement.
5. Lengthening lift expectancy and need for income in retirement.
6. High profile sharemarket failures wiping out wealth of people who for one reason or another failed to diversify.
7. Strengthening average net migration inflows.
8. Internationalisation of the Auckland housing market (foreign buyers).
9. Ever rising construction costs and hassles of building
. 10. Decreased availability of builders.
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