Think housing is hard now? 1975 had its challenges too

The discovery of a copy of the Auckland Star from 1975 reveals some stark differences between the city’s housing market then and now. Miriam Bell reports.

Found in the wall of a Westmere house in the midst of a renovation, the battered property pages of the Auckland Star paper provide a window into a past where there was no housing shortage and house prices were reasonable.

Dated November 28,

1975, the day before the election that saw Rob Muldoon become Prime Minister, the properties were largely priced between the early $20,000s and the early $50,000s. An average income at the time was about $125 a week.

Properties in the $20,000s price bracket dominated, although there were a couple for less (a one-bedroom house in Hillsborough for $17,000, for example) and a few in the premium price range (a Castor Bay mansion with a swimming pool and views for $140,000).

Given the Auckland region’s average value is now nearing the $1.2 million mark (CoreLogic’s latest data put it at $1,198,564 in February) the 1970s prices advertised are startling.

Stuff selected one of those advertised to get an idea of what it might go for in the current market.

The selection was determined by the fact that, unlike today, all of those listed for sale featured prices but most were not listed with street addresses.

Just two properties featured a street address and one of them was a large, five-bedroom house which was not a standard house size in the 1970s. John Tookey, Professor of Construction Engineering at AUT, says two- to three-bedroom houses were the norm then.

The property we zeroed in on was a three- to four-bedroom, brick-and-tile house at 12 Moana Tce, Maraetai. Built in 1965, it was for sale for the highest offer over $36,000.

Using the Reserve Bank’s inflation calculator to adjust the house’s value for inflation reveals it was worth $1,038,757 in

‘‘Often, a first-home buyer would have three loans with three separate lenders and some people had loans with up to five lenders.’’ David Tripe Massey University professor of banking, left

the third quarter of last year, the most recent comparison date available.

However, Homes.co.nz shows it last sold for $1.1 million in July 2019 and Homes.co.nz now estimates the property’s value at $1.32m as of this month. In today’s frenzied market, it is likely that if it were on the market, it could sell for more than that amount.

It’s a significant price difference but other factors are at play. Veteran housing affordability campaigner Hugh Pavletich says the house-priceto-income ratio was very different in 1975.

He and his wife bought their first home in Christchurch around that time. It cost $24,000 with a mortgage of $20,000. They were a single-income household, as was common then, and his income was $8000 a year.

‘‘That equates to roughly three times my income for a new home and that was normal in that era,’’ Pavletich says. ‘‘There were no housing affordability issues as there were plenty of new homes available and their cost was more in line with the average income.’’

These days, the latest Demographia international housing affordability report puts Auckland’s house price-tohousehold-income ratio at 10.0, which makes the city the fourth least affordable in the world.

Pavletich says housing affordability started to decline in the 1980s.

One of the few things on the side of modern buyers is interest rates. In recent years, mortgage rates have plummeted to record lows, with sub-3 per cent rates now common.

In 1975, retail interest rates started at 9.21 per cent in January 1975 and ended the year at 9.65 per cent, according to Reserve Bank data. In November 1975, they were at the highest rate of that year at 9.87 per cent.

Although high, it was nowhere near the levels it hit in the 1980s when mortgage rates rose to a peak of 20.50 per cent before the 1987 stock market crash.

But it was also a very different age when it came to accessing finance for home loans. A range of government assistance schemes were available. Prime among these was the State Advances Corporation, a predecessor to Housing New Zealand, which provided low-interest home loans to households in the lowmoderate income group.

From the mid-1960s, it was also possible to capitalise the ‘‘Family Benefit’’, a universal weekly payment made to families between 1945 and the mid-1980s. Families could take the entire amount which would be payable for a child, until the age of 16, as a lump sum, to help buy a first home.

Home ownership savings accounts were available from various organisations, too. These were similar to KiwiSaver: savings had to be made for a minimum of three years and the account-holder could then make withdrawals and get home loan grants from Housing Corp based on what had been saved.

Massey University professor of banking David Tripe says it was not as easy to access home loan funding then as it might sound. ‘‘The public now would be unhappy if there was a return to that lending situation. Often, a first-home buyer would have three loans with three separate lenders and some people had loans with up to five lenders.

‘‘Banks didn’t lend more than 30 per cent, so you had to cobble together a whole lot of funds from different sources to get a loan. There was also strict criteria and terms and conditions in place to qualify for government assistance.’’

It’s relatively much easier to borrow now than it was 40 years ago, Tripe says. ‘‘Although, there was a certain amount of vendor finance at play in house sales in the 1970s – that wasn’t unusual. It was a way for the vendor to assure a sale and there’s no need to do that any more.’’

Getting a home loan was particularly difficult for single women in the 1970s. Accessing finance was considered a man’s role and it was rare for an unmarried woman to be given a mortgage.

Despite the intricacies around obtaining home loans, the government assistance available is widely considered to have driven the house building boom of the post-war years and, correspondingly, the growth in home ownership.

Tookey says it was relatively easy to embark on a speculative building project, without requiring expensive consents, and that meant there was a steady supply of new housing.

The impact of the Resource Management Act, plus successive central and local government interventions, has changed that, he says.

‘‘Building has become more time-consuming and costly and that has had an impact on housing supply. Speculative building has died because no-one can afford to build a house that isn’t occupied right away.’’

A change in house sizes, is notable too, Tookey continues. Most houses built in the 1970s were two- to three-bedroom and one-bathroom.

‘‘Now, five- to six-bedrooms and multiple bathrooms are common. The average size of a house has gone from 120 to 130 square metres to a couple of hundred sqm. There are more gizmos, more-expensive materials, and bigger houses. And people wonder why building is more expensive.’’