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What I find interesting is many Kiwis don't actually feel the full brunt of the high cost of living in NZ. Renters are the only cohort who truly feel the full high cost of living.
When you discuss the high costs in the economy and invariably discuss housing, homeowners think 1/
When you discuss the high costs in the economy and invariably discuss housing, homeowners think 1/
they know what you're talking about because "rates" and because "insurance" - but these things are immaterial compared with renting - renters pay all these things PLUS a rate of return on the asset value. 2/
It's astonishing.
Let me draw a picture.
You buy a house around the year 2010 for about $250k. Your mortgage payments are about $1,200/mo.
In the last 10 years that house has doubled and your repayments haven't changed. Rates & insurance have increased, but haven't doubled 3/
Let me draw a picture.
You buy a house around the year 2010 for about $250k. Your mortgage payments are about $1,200/mo.
In the last 10 years that house has doubled and your repayments haven't changed. Rates & insurance have increased, but haven't doubled 3/
Now, at this point you're probably feeling a little bummed about these rising costs of living!
Understandable.
Until you compare that to a renter.
In 2010 a renting household was paying $250/wk for an equivalent house. 10 years later, it's now $500/wk.
What about wages? 4/
Understandable.
Until you compare that to a renter.
In 2010 a renting household was paying $250/wk for an equivalent house. 10 years later, it's now $500/wk.
What about wages? 4/
My friend, as you will know, wages have not doubled in the last 10 years. But, they have risen fast enough to more than cover your housing costs - you are paying less overall into housing costs than you were 10 years ago, and you've gained $250k in equity out of nowhere! 5/
Congratulations you are "getting ahead".
That renting household on the other hand, they are paying a larger share of their wages on rent than 10 years ago. They are further behind, and have even less ability to save money, so have less time & money than 10 years ago.
Crazy! 6/
That renting household on the other hand, they are paying a larger share of their wages on rent than 10 years ago. They are further behind, and have even less ability to save money, so have less time & money than 10 years ago.
Crazy! 6/
This is how the wealth divide manifests. Wealth exists in many forms - time, income, expenditure. The homeowners have gained all 3 of those on an equivalised basis in those 10 years - but the renter has effectively lost all 3.
7/
7/
The renters have to spend more time working more hours, to increase their income to pay higher bills, to have the same (or less) money overall at the end of it.
They are materially in every way worse off than you, and even than they were 10 years ago.
Why? 8/
They are materially in every way worse off than you, and even than they were 10 years ago.
Why? 8/
Because we have a mixture of tax, planning, and competition laws that feed into this formula. It's a literal land & housing ponzi scheme, and it will end eventually.
If younger generations are pushed to the brink by this constant loss, they will revolt. It will not end well. 9/9
If younger generations are pushed to the brink by this constant loss, they will revolt. It will not end well. 9/9
See my previous musing on this here: https://twitter.com/AdamPaarsons/status/1284431110852636673?s=19
