After recent conversations with friends who are flathunting (renting) and househunting (buying), I’ve been giving serious thought to a scary and depressing scenario: renting for life in Auckland.
Let me cut you off right here: I don’t want to hear your comments about the pros of renting for life, unless you live in Auckland. I have been a renter since age 17. I know all about the pros, and for me, in the Auckland context, they don’t outweigh the cons, especially because we want to have a family. Okay, onwards…
This post over at The Conversation tackles the state of the property market in Australia, but it could just as well have been written about New Zealand.
“Renters are the losers in the property game. Not only do they struggle with high rents but tenant protection in Australia is among the weakest in the developed world. This is not coincidental: Australia’s 1.8 million and counting property investors support and are supported by tenancy legislation heavily weighted in favour of landlords. This produces a fundamental lack of security in rental housing.”
(I note that the UK is looking at introducing tenancy reforms, recognising that members of ‘Generation Rent’ need more rights.)
That piece at the Conversation argues that factors like tax laws and rapid appreciation create “effectively an infinite demand for property in Australia”, which I think is also applicable to us; NZ is right behind Australia in terms of ratio of housing stock to GDP.
A Forbes post recently did the rounds warning of a housing bubble here in NZ, and much as I would like to hope that Jesse Colombo is right (being an aspiring homeowner myself and all), I am more inclined to agree with local writers Brian Fallow and Bernard Hickey’s assessment of the situation. They both lay out some high-level reasons as to why they think a huge crash is unlikely, and while I’m not going to pretend I know anything about the Reserve Bank or exchange rates, here’s my plebeian take: here in Auckland we continue to have a shortage of housing; land is limited; and there are obviously still people with the means to pay current prices – and potentially higher.
According to a Salvation Army report:
Housing has become more and more expensive for first-time home buyers and home-ownership rates have fallen. This fall has been aided by tax policies that favour existing property owners, and easily available debt that allows those who already own property to buy up lower-valued houses as rental investments. To some extent, this rental investment has been propped up by Government housing subsidies to low-income households that have now grown to $1.8 billion annually.
We, therefore, have the worst of all worlds when it comes to housing. Housing is too expensive for up to a quarter of all households to afford without Government assistance. Much of the housing is poorly-built and now needs further public subsidies to repair.
Worst case scenario: we are permanently priced out and left with no choice but to rent for life. What would this realistically mean for us?
No dogs in our future. It is damn near impossible to rent with pets – maybe cats, definitely not dogs. That said, based on my observations, I am not surprised that many landlords don’t want to rent to dog owners. Compared to the US where even apartments allow dogs, I found the dog culture over there a pleasant surprise – overall I felt most pet dogs were well trained, well behaved, quiet and clean, moreso than my experience of dogs here. I suppose a lot of that comes from having more of an indoor pet culture rather than an outdoor pet culture, as a result of density.
Spending a fortune on heating and dehumidifying. Aside from the top-priced tier of the market, the quality of housing here is generally quite ridiculous. It’s no good having a mild climate if you don’t actually insulate your buildings – might as well sleep under a bridge. Thanks landlords who don’t care about providing healthy accommodation and updating old houses! Longtime readers will recall my stories of mold in bedrooms, in wardrobes (trying to clean spores off your favorite dress blows), being able to see our breath in front of us while INDOORS and mushrooms growing through carpet.
Most likely bouncing around and around. Literally almost everyone I can think of who has rented a family sized house for any significant period of time (think your typical 3-bedroom) has been forced out at some point due to the landlord selling. Or, in a few cases, the landlord moving in a family member (in which case the notice period is only 42 days instead of 90 – this seems to happen suspiciously frequently, actually). Cash in those capital gains, quick!
This is mildly annoying at best. At worst, if you’re settled with kids in school, I imagine it’s a freaking nightmare. We don’t exactly have an oversupply of rental housing, let alone quality affordable rental housing, and add in our lack of density and it can be a tough call to find a comparable nearby place in a pinch.
Renting is still cheaper, though the gap seems to be narrowing. I was surprised to plug in some numbers and find out that the mortgage on a $500k house would only be $550 a week; rent for a 3 bedroom house would start at about $400 for a crap place and run up into, oh, the 600s for somewhere nicer. (I’m not even talking central Auckland here, obviously, where a starter house is $1 million.)
While mortgage payments may fluctuate with interest rates, rent always goes up eventually over time. Here, rent can be increased as often every 6 months – granted, it usually isn’t raised that frequently, thankfully. And yes, there are additional expenses that come with being a homeowner, but at least they’re going into an asset. The problem of course is that coming up with a six figure down payment is a hell of a lot easier said than done, even if repayments are manageable. Thus, my fading dream of buying a humble house, insulating it, and living happily after with kids and dog. Who even knows how we’d house ourselves in retirement?
Stuff reader Susan Wells is apparently living my future fear:
We continue to rent a tiny 105sqm, three-bedroom, leaking, crooked, mouldy, old house, that barely fits our family of five.
Do we upsize our rental so we are not falling over each other and pay out to a landlord more of what we could save as deposit, or sit tight for three to four years to save that money to reach our dream of getting a small lottery-sized deposit together?
Commentators report that it is better to be renting now than buy, but what happens when we retire in 23 years at 65, and if still renting, will this be affordable on superannuation income?
Could we afford to pay a landlord rent out of our Super or Kiwisaver until our 90s if we live that long? Will we be constantly on the move when rental properties are sold, and have no solid foundation steady home dwelling in which to welcome grandchildren and our children to?
But even if leaving Auckland were feasible work-wise, I simply wouldn’t want to. T threw out the idea of re-enlisting and moving to an army base – and that’s when I realised what I am NOT willing to sacrifice for cheap housing. I would not want to move to the middle of nowhere away from friends and family and my job. Financially I can see that it might make our lives a lot easier – lower expenses, and I could do some freelancing – but I know I would be miserable in all other aspects.
