We're living beyond our means...

[slowpoke]

Bit simplistic, I thought. Also disagree about telling that couple to sell the house and save. Once you are out of the property market, especially in Auckland, its hard work getting back in.

Staying in the market is only important if values are rising. I think everything is pretty flat everywhere at the moment so if you are able to sell up and realise some cash gains from the growth over the last few years then you've taken the pressure off making ends meet and it allows you to invest the surplus somewhere it will continue to grow.

Thanks for the article Boob.

Always wondered about the property thing. Even if I do find a buyer for one of my kidneys and get a deposit together, I need at least 300,000 for a decent hut (liar/lawyer fees, etc, etc all inclusive). At an interest rate of around 9% thats 27,000 for the 1st year in interest alone. Sure it gets a little less the next, but still it's years before it starts eating into the principal. Also I need to come with $4-500 a week to pay the mortgage which means if I want to have any kind of a personal life I may have to eat on alternate days.

Now paying cheap rent at $150/week - that's less than $8,000 a year, better than paying $27,000 a year or so isn't it? So isn't it better renting until one can save a 30%+ deposit or is it worth buying at all?

Hate maths and happy to be corrected with good advice.

Yep, in the short term it's hard to justify buying....but over the long term I reckon you are better off as you are investing in an appreciating asset. If you are able to scrape up slightly more than the minimum payment then the difference comes directly off the principal and makes a big difference over the lifetime of the loan.

The best monetary solution is probably to rent and invest the difference between your rent and what would be a mortgage in the sharemarket (better long term growth than property). The problem is this takes a hell of a lot of discipline and you don't have the advantages of living in your own place and being able to do what you like to it or improve it. Don't forget wages go up over the years so the payments become easier whereas your rent will only go up.

Each to their own, it's not a competition after all.

[fire eyes]

ohh thankyou Boob! .. this article is definitely a reminder for me to tighten things up .. Ill admit it I get a lil wayward when it comes to money .. Iv realised that I do not monitor my money the way I need to in order to make it work for me, I put money away into a specific account but the rest well its a bit of a free for all .. and then I complain about petrol hikes? lol .. hmmmm .. wake up slap .. so thankx for posting this! tis timely

[Flatcap]

My wife and I bought a house in central Auckland 8 years ago and paid off the mortgage last year. We are often asked how we did it.

The answer is simple - we did without.

[Subike]

Is it so easy to forget those amoung us who have no chance what so ever to get above the bread line?
Here we see an article that talks about 100k incomes to households as if it is common as, like everyone gets that sort of money, or close to it!
FFS I work $13.50 an hour,
I survive on that comphy as, and ride a bike, prob one of the most exspensive hobbies I can have..concidering my income.But Im single.
I read here of the wealth of you rich bastards have...home owners...new bike owners..multi bike and car owners... friggin capatalists!
The arrogance of the ...go buy a house and pay it off in 10 years....
Hey the reality is, rentals are fast becoming the only way forward for low income workers.
Look at the motor camps, lots of low paid workers live there...let alone the people who live in older house busses, on minimum budjets.
I get aggro when I see people telling others how spend their money, what they should have, then laugh at what they have !!!!
This site is bad for it...judgement on a persons wealth....
Yet we do need to tighten the belt and budjet.
Stop buying all that bling for your bikes so that it is better, faster, shinnyier, newer than the other guy on the rides from last week.
Budjet? Whats wrong with sausages, spuds and peas for a month so you can afford the gass to go for a ride on a 30 year old bike ...thats one ride a month!
Go get a higher paid job???? Really???Where?
Get cheaper rentals.... really?? where??? you landlords are crushing us lower paid workers with your high rental fees....then moan when we cant afford $5 for the mower to mow the lawns.....
Hello...3rd world here we come!

Now, on 27K gross a year, single, 50 years old, what do you experts recomend!!!!

I like this place (KB) and I like the people in it, if anyone takes what I say personally, ( as some have in the past ) then deal with it, dont bleat to me.

[fire eyes]

I am not on a high income .. I have 3 kids to provide for .. but Im in the best position I have ever been in .. not everything is about money .. attitude has alot to do with it to ...

[smokeyging]

Is it so easy to forget those amoung us who have no chance what so ever to get above the bread line?
Here we see an article that talks about 100k incomes to households as if it is common as, like everyone gets that sort of money, or close to it!
FFS I work $13.50 an hour,
I survive on that comphy as, and ride a bike, prob one of the most exspensive hobbies I can have..concidering my income.But Im single.
I read here of the wealth of you rich bastards have...home owners...new bike owners..multi bike and car owners... friggin capatalists!
The arrogance of the ...go buy a house and pay it off in 10 years....
Hey the reality is, rentals are fast becoming the only way forward for low income workers.
Look at the motor camps, lots of low paid workers live there...let alone the people who live in older house busses, on minimum budjets.
I get aggro when I see people telling others how spend their money, what they should have, then laugh at what they have !!!!
This site is bad for it...judgement on a persons wealth....
Yet we do need to tighten the belt and budjet.
Stop buying all that bling for your bikes so that it is better, faster, shinnyier, newer than the other guy on the rides from last week.
Budjet? Whats wrong with sausages, spuds and peas for a month so you can afford the gass to go for a ride on a 30 year old bike ...thats one ride a month!
Go get a higher paid job???? Really???Where?
Get cheaper rentals.... really?? where??? you landlords are crushing us lower paid workers with your high rental fees....then moan when we cant afford $5 for the mower to mow the lawns.....
Hello...3rd world here we come!

Now, on 27K gross a year, single, 50 years old, what do you experts recomend!!!!

I like this place (KB) and I like the people in it, if anyone takes what I say personally, ( as some have in the past ) then deal with it, dont bleat to me.

with the age that you are, you should be better off, anyway, does'nt matter, they are a good bunch here and all you have to do is ask, helpful imformation is free here.

[Number One]

with the age that you are, you should be better off, anyway, does'nt matter, they are a good bunch here and all you have to do is ask, helpful imformation is free here.

that has to be one of the most patronizing and rude posts I've seen in a while on here. Good on you ya judgemental know it all

[Mikkel]

I recall reading a book written by a guy called Dolf de Ruis in the mid-90's about this. Dolf was a well-known property guru in the 90's who is in the USA now. In the book he quoted the example of a home in Christchurch that had been built in the early 1920's and was still there 70 years later. It hadn't been structurally altered or modified or subdivided, it had simply been repainted, maintained and renovated when required. Importantly it had changed hands every 5 - 10 years and never under mortgagee instruction, so it could be used as a fair example of price trends. The study found that the property had increased at an average rate of 10% per annum.

There's no doubt that investing in real estate is one of the most lucrative and secure investments you can make, provided:

1. The economy is growing, not receding.
2. You buy it with money that you actually have.

The problem that property inverstors are facing right now is the fact that interest rates are going up and they have borrowed money at variable rates using other properties as security. At least that's how I understand it.

If too many people speculate and try to get a slice of the cake the apparent value of real estate increases even faster - however, this increase is not a true representation of supply and demand and eventually the market will collapse/recede depending upon how large the artificial inflation of prices have been.

Give it a year or two and I think you'll be able to get some really good deal on houses around New Zealand - unfortunately for some people.

[Cruisin' Craig]

There's no doubt that investing in real estate is one of the most lucrative and secure investments you can make, provided:

1. The economy is growing, not receding.
2. You buy it with money that you actually have.

Agreed entirely.

But your second point hasn't always been the case has it. In fact, it's a pretty new concept to some of us. I personally have lost out in a big way by saving a large deposit before buying my home. For several years the amount I have been able to save each year hasn't even kept up with property price increases. The more I saved, the further away from owning a home I became!

Far better off are the people who jumped straight into the property market on 100% mortgage and capitalised on the rising prices. Even better off are those who mortgaged themselves up to the eyeballs to buy more than one home.

I'm 31 years old, but have always had the more old fashioned approach of saving and using money you actually own to buy the things you want. I would be FAR wealthier today if I had only learned to build up assets on borrowed money like so many of the rest of my generation have done.

Living within your means has not always been the smart way to live!

[Forest]

I recall reading a book written by a guy called Dolf de Ruis in the mid-90's about this. Dolf was a well-known property guru in the 90's who is in the USA now. In the book he quoted the example of a home in Christchurch that had been built in the early 1920's and was still there 70 years later. It hadn't been structurally altered or modified or subdivided, it had simply been repainted, maintained and renovated when required. Importantly it had changed hands every 5 - 10 years and never under mortgagee instruction, so it could be used as a fair example of price trends. The study found that the property had increased at an average rate of 10% per annum.

Now, that's not going to apply to any and every property in NZ. There are way too many variables, including the obvious such as location, presentation and vendor circumstances. And that's without considering the prevailing economic climate.

10% per year compounding over a long period of time is unrealistic.

Over a 70 year period this equates to an increase in value of 789 times the initial purchase price.

[Cruisin' Craig]

10% per year compounding over a long period of time is unrealistic.

Over a 70 year period this equates to an increase in value of 789 times the initial purchase price.

Not necessarily that unrealistic.

Average UK property price in 1937 = 540 pounds.
Average UK property price in 2008 = 221 580 pounds.

That's 410 times the initial value over a 70 year period.

http://www.communities.gov.uk/housin...et/livetables/

[Mikkel]

Agreed entirely.

But your second point hasn't always been the case has it. In fact, it's a pretty new concept to some of us. I personally have lost out in a big way by saving a large deposit before buying my home. For several years the amount I have been able to save each year hasn't even kept up with property price increases. The more I saved, the further away from owning a home I became!

Far better off are the people who jumped straight into the property market on 100% mortgage and capitalised on the rising prices. Even better off are those who mortgaged themselves up to the eyeballs to buy more than one home.

I'm 31 years old, but have always had the more old fashioned approach of saving and using money you actually own to buy the things you want. I would be FAR wealthier today if I had only learned to build up assets on borrowed money like so many of the rest of my generation have done.

Living within your means has not always been the smart way to live!

I hear what you are saying - but the reason that the market has worked in that way is because of speculation.
You can only inflate a balloon to a certain point before it burst...
So while some of these people have reaped from taking out large mortages - if they have continued to do so without consolidating their assets at some point along the line, they are most likely in a financial predicament of dimensions now. And I don't think we can expect the squeeze to stop just yet.

If you have kept on being as sensible with your finances I suspect you're not one of the people who are moaning about rising fuel and food prices

[justsomeguy]

The best monetary solution is probably to rent and invest the difference between your rent and what would be a mortgage in the sharemarket (better long term growth than property). The problem is this takes a hell of a lot of discipline

Good post.

What would be your advice on entering the sharemarket? To me (a layman) it seems something for people with lots or moneys or who are very intelligent. Since I'm not really one of them... what do normal folks do?

[Boob Johnson]

Bit simplistic, I thought. Also disagree about telling that couple to sell the house and save. Once you are out of the property market, especially in Auckland, its hard work getting back in.

Mate of mine is selling up, and renting, but buying two rental units with the money he is paying on "his" mortgage. The units will be negatively geared and will reduce his personal tax, and if it all turns to shit, he can sell one and live in the other, and stays in the market.

Yep it is simplistic but it can't be any other way as it is generic advice for the unknown masses.

Without knowing your mates full circumstances that is one good way to go about it. I've always told my clients there are 1000 ways to go about it you just have to settle on the way that suits you personally. Gearing property has been my area of focus in my previous professional life, it is a fantastic tool but needs to be fully understood first.

Do they actively teach this sort of stuff in schools yet? They didn't in my day

lol great pic

To the best of my knowledge, not even close to being taught in schools. The closest I remember at school (70's) was being taught how to open a till & ring up the cash lol, not exactly economics 101, even at high school economic studies had nothing to do with wise money management & or investment.

[Boob Johnson]

Thanks for the article Boob.

Now paying cheap rent at $150/week - that's less than $8,000 a year, better than paying $27,000 a year or so isn't it? So isn't it better renting until one can save a 30%+ deposit or is it worth buying at all?

Hate maths and happy to be corrected with good advice.

Your welcome

As previously mentioned there are 1000 ways to go about it, its about identifying what will work for your circumstances & what you are personally comfortable with.

In a rising market saving up is often as helpful to baby making as putting your John Thomas in a vice. You won't be able to keep up, do whatever it takes to get on the property wheel (within reason). That doesn't mean you need to live in the house either. I have a mate who's first property he bought at 18yrs old, he is now mid 20's & still doesn't own his own home, he does however have 3 investment properties now. And part of the cost of owning them has been off set by his personal tax liability. You can't claim depreciation etc etc on your own home.