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The baby boomer generation had it easy. Or did they? Ask parents if their children will be able to buy a home and the answer is often “no”. Is that badmouthing baby boomers narrative that Kiwis buy into a reality?

The argument that first homes are impossible to buy in New Zealand isn’t borne out by the facts. First-home buyers are finding their way into the market in decent sized numbers. James Wilson, director of valuation innovation at property analysts Valocity, points out that 26 percent of buyers taking out mortgages in Auckland are first-time buyers. Nationwide it’s 28 percent.

At the same time 11 percent of Auckland homes are still classed as “affordable” - priced below $600,000. For the entire country that figure is 45 percent.

Yet the experts OneRoof.co.nz contacted are all in agreement that it’s harder to buy now than in previous decades. Economist Shamubeel Eaqub, who wrote Generation Rent, says that in the future it may be only the children of home owners who will be able to buy.

In 2016, the Reserve Bank of New Zealand noted that overall house prices had tripled since 1994. Another indication of how hard it is to buy is the housing affordability index, the multiple of household income required to buy a home. For decades that multiple sat between two and three times salary, but is now more than six times income nationwide.

Back in my day

Today’s buyers don’t necessarily understand just how hard it was for former generations. When mortgage broker Stuart Wills bought his first home in 1990 the mortgage payments on his first and second mortgages combined were greater than his entire take home pay. His food and living expenses came solely from his flatmates’ rent. Many would say that story tells it all.

Yet comparing the 1970s, 1980s and early 1990s with interest rates that topped 20 percent at times isn’t a fair comparison, says Eaqub.

A better measure of how much harder it is to buy now, he says, is falling home ownership rates across all age groups. “That’s the main measure that matters, everything else is noise,” he says.

Professor Robert Hargreaves, Emeritus Professor in Property Studies at Massey University, agrees about following the falling home-ownership rates, which he expects to see drop further in the latest Census data when released. Yet whilst home ownership rates are falling, they are still higher now than they were in the 1940s, when another generation was renting.

The high interest rates that boomers often complain about were a double edged sword. Although mortgage payments were eye-wateringly high thanks to the interest rates in the 1970s, 1980s and 1990s, inflation ate away at the debt, making repayments affordable relatively quickly.

“Rampant inflation effectively saw the mortgage debt wither away rapidly in real terms before normal interest rates returned, but more importantly, the house surged in value,” says property investor Sir Robert Jones.

Gareth Kiernan, economist at data analysts Infometrics, agrees.

“It was still darned hard for the baby boomers to get into the market. The house price to income multiples weren’t bad [but] there was interest rates

“There is definitely wide support for the narrative that it will be impossible [to buy a house]. That is somewhat scary if it becomes self-fulfilling and they give up on the goal.” – James Wilson, Valocity director of valuation innovation