The housing journalism can’t stop interpreting why housing is so expensive. Unfortunately I can’t see they looking at the roots.  Everybody who is looking for a place to live already knows New Zealand has a widespread housing shortage and that is even worse than the journalism about housing un-affordability.

Housing affordability - the economists are on the topic, followed by reports from Massey University and the public opinion like somebody (I think it was Gary McCormack on the radio, can’t remember), he said if the government can’t bring down house prices then “the democracy is stuffed”. Well, I think you are stuffed if you live in the “red zone” in Christchurch or you are the owner of a “leaking home”.

When it comes to housing as landlord I know what I talk about. Most people know that living in a house became expensive and it doesn’t matter as owner or tenant, the occupier pays for the running costs.

The purchase price or market value is what the home-buyer is willing to pay. That price depends on his income and the interest rates he can afford. How many buyers compete is controlled by supply and demand – right?

Many buyers agree that housing is “overpriced”, saying they paid too much for a shelter that is cold and damp, nowadays insulated but leaking and is low value for money. Well, that isn’t the good news either.

So, will the building costs go down in future or are they driven up by inflation? Certainly, you know the answer. But what is with all the other related costs like legal compliance cost, land values (and related City Council levies), and legal fees? It is obvious that driving up CVs for the purpose of increasing rates might have side effects for housing affordability. In contrast, where I grew up levies were based on the size of land and the services provided, were approximately a fifth of the market value and not exposed to sales statistics.

By the way, since 2007 the property CVs went down slightly and I asked the City Council why my rates are still going up. Interestingly the answer came from the City Council's lawyer – but that is another story.

As you can see the affordability of housing is a figure between purchase price and income - right? If you increase your income at the same the affordability gets better.

Regarding building costs we haven’t looked at the global driven and local costs for material. Let us have a look at the transportation of building material. For instance, we pay with higher petrol prices higher petrol tax and on top of it even more for GST and finally the sale price for a product includes again GST. I have seen the percentage of taxes we pay – they are absolutely huge compared with figures for wages and related expenses.

What then is the good news?

By reading so far, you have realized there is neither good news nor a quick fix to this problem. Get real and stop applauding to the "paid" real estate journalism. Why should it matter to you that the index of after-tax annual income to house price ratio is in US around 3, or Britain 5.1. You live in New Zealand and housing is even more expensive. Fresh air has its price or similar. If you want to get onto the property ladder start saving, get a better paid job and do some part-time work. It won’t get better as it is. Good luck.

Klauster

Renters tell me that they prefer renting for flexibility reasons. I talked already about “Does renting gives you more flexibility than owning a place?” In these discussions I often sense a lack of commitment.  If you own your family home or an investment property you are committed to keep your property well maintained and pay your mortgage. For renters is it convenient to call the landlord, if the water tap is dripping – right?

Flexibility is a mindset. If you keep your property in good conditions and upgrade your house within your lifestyle standards then your property will be desirable for other people. And you maintain a high re-sale value. High re-sale values attract buyers who look for good properties to live in.

How to keep the re-sale value high?

In most cases when walking along the street you can identify a proud homeowner’s property. Looking at the front garden, drive way, cladding, roof and windows tell you everything. These are the areas to maintain a high re-sale value.

Consider this:

• Quality maintenance and repair saves money on long-term, short-cuts often cause hidden damage.
• Faulty by design houses lose substantial re-sale value. Leaking homes are a good example.
• Keep up with renovations and lifestyle trends such as solar technology, thermo insulated walls and windows, etc
• Do online checks on trades people you hire and research about proposed solutions or materials. Don’t trust blindly a “Silicon Fix”.

To summarize, if you own a property in a desired area and maintain a high re-sale value, you will be flexible to sell your home at any time in any market. If you enjoy a comfortable lifestyle in a warm, energy efficient home with indoor-outdoor living and landscaped garden, you can be sure that other people desire that lifestyle, too.

Let me tell you a quick story;

Shortly after moving into my current home I started renovating and people asked me “Do you want to sell?” Much later I understood the question, because where I live people used to renovate before moving out to sell.

TIP: As buyer I am very inquisitive when inspecting a fresh painted house and you can guess why.

And by the way, life is unpredictable because of career changes, health issues, family and relationships. That is why it makes sense to be prepared by keeping the re-sale value high – would you agree?

Good luck

Klauster