Start sav­ing now for fu­ture hous­ing buy­ing

Auckland City Harbour News - - OPINION -

Woo-hoo! We’re New Zealand.

I know this be­cause that’s what the Re­serve Bank’s new ‘‘House­hold Bal­ance Sheet’’ says.

We achieved tril­lion­aire sta­tus in June last year when our com­bined net wealth – the sum to­tal of ev­ery­thing house­holds own mi­nus the debt – passed $1 tril­lion.

It’s a lot of wealth. More than half of it is in hous­ing.

That makes our tril­lion­aire sta­tus a bit wob­bly in my book.

Re­spected econ­o­mist Sham-ubeel Eaqub this week likened Auck­land house prices to a gi­ant Ponzi scheme.

Add to that bank ex­ec­u­tives re­port­ing ‘‘ridicu­lous’’ prices be­ing paid for as­sets and my favourite mort­gage bro­ker blog­ging about houses in Auck­land be­ing 25 per cent over­priced in the same week that the Re­serve Bank said the fac­tors driv­ing stupid prices – im­mi­gra­tion, low in­ter­est rates and lack of sup­ply – are ‘‘un­likely to be sus­tained in­def­i­nitely’’.

Th­ese days, like most of my friends, I live in a house I think of as a CABIN (‘‘Couldn’t Af­ford to Buy It Now’’).

But what should a per­son

tril­lion­aires who lives in ‘‘ mad times’’ do?

Mad times aren’t just to do with house prices be­ing outof-whack with salaries, which is ac­tu­ally the case in many parts of this lovely and sparsely pop­u­lated coun­try.

They can be times of high un­em­ploy­ment or rapidly ris­ing in­fla­tion or, more per­son­ally, in­sta­bil­ity at your work.

We can’t choose the times we live through – though we all voted for the lo­cal coun­cil­lors and MPs who al­lowed the build­ing of houses to slump to such an ex­tent that prices jacked up and up and up! – but you can de­cide how to re­spond to them.

House­hold­ers should do in mad times what they do in good times.

In fact, they should do more of it. That means at­tack­ing their mort­gages with gusto and not sim­ply con­grat­u­lat­ing them­selves on cap­i­tal gains they haven’t earned.

They should keep away from con­sumer debt.

If a house price crash hap­pens, there is a very good chance it will be as­so­ci­ated with other eco­nomic trou­bles such as job losses. The less debt a per­son has then, the bet­ter.

House­hold­ers should also make sure they have a lit­tle money set aside out­side of the mort­gage. Ev­ery house­hold needs its trou­bled-times cash store. It’s also a time to think even more care­fully about the risks of in­vest­ing or tak­ing out a re­verse mort­gage or us­ing the fam­ily home as se­cu­rity for buy­ing a rental prop­erty.

If you are not yet a home­owner but want to be, the most im­por­tant thing is not to lose hope. Keep sav­ing. Pre­serve any wind­falls that come your way. Keep bud­get­ing.

Keep away from con­sumer debt. Keep look­ing for op­por­tu­ni­ties but don’t do some­thing stupid and per­ilous. Ev­ery­one has to adapt to the times but tak­ing out a mas­sive, bankrupt­cythreat­en­ing mort­gage for a mar­ginal prop­erty that will be first to fall in value when – or if – prices fall (whether by crash or slow un­wind­ing) is risky. Stay fit. Pri­ori­tise fam­ily time over spend­ing.

Con­cen­trate ahead at work.

Each of th­ese things will im­prove your po­si­tion and hap­pi­ness, whether the mad times persist or not.

I have younger col­leagues determined to be ready to swoop into the hous­ing mar­kets in the cities in which they live should the op­por­tu­nity present it­self.

Whether we re­tain our col­lec­tive tril­lion­aire sta­tus or not, in time I ex­pect them to pros­per.

on

get­ting

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