Thursday, February 28, 2008

Helen's Lucky and selfish generation!


As the country reels in yet another rise in Mortgage rates, Bernard Hickey at Fairfax fuels the housing affordability debate with an inter-generational attack on on selfish baby-boomers like Dear Leader who had it all.
Noting how an average mortgage consumes 80% of an average income, barring a lotto win , generations X and Y will have to rely on their parents should they ever get on the housing ladder.
My theory is that the New Zealanders who run the place haven’t really confronted and don’t want to confront the ugly truth. I’m talking about the generations who graduated in the 1970s and 1980s and who now run both central and local goverments, who run the media and who generally set the parameters in a national debate.
These are the generations who graduated without student loans into good jobs when a home loan cost less than 40% of after-tax pay to service. They bought houses before 2003 and are now sitting on massive capital gains. Many have become semi-professional landlords with fancy Loss Attributing Qualifying Companies that allow them to offset operational losses on their rental properties against their salaries to reduce their tax bills. They have become addicted to the tax free capital gains on these properties. They’ve started consuming some of those gains in the form of holidays, electronics, cars and boats financed through their mortgages.
And Bernard continues:
These generations are exceptionally attuned to anything that might threaten those capital gains. They are practised at the art of saying “NIMBY!” (Not In My Back Yard). They are also a generation that worships the idea of a big backyard or, even better, a quiet lifestyle block in the country. They have been raised and believe to their bones that urban sprawl and big motorways are a BAD idea. They either believe property developers want to rape the environment, or they themselves are property developers who realise the best way to make money is to drip-feed land and properties on to the market. This is a generation that believes building lots of houses that look the same in one place at one time is a bad idea. Building consent growth has been stalled since 2003.
Preserving the existing environment is preferred at all costs to development. The Resource Management Act and the bureaucratic minefield it has become achieved this subliminal aim brilliantly. The construction of impenetrable green belts delivered the coup de grace. It is now virtually impossible to build large-scale housing developments in New Zealand. Dwelling consents have dropped a third since 2003 when the boom started.
Bernard outlines what will be necessary to help remedy the problem.
Yes, the asset rich boomers will have to pay somehow.
As he notes, what good is sitting on a pile of cash, if your kids and grandkidds end up flying to Australia!
And as a member of Generation X, I think he could well be right.

3 comments:

mawm said...

Yes we are a lucky generation - but I would dispute the selfish part.

I could afford to buy my 1st home when I was 36, I paid interest on my mortgage of up to 27%pa - certainly a lot more than paid now.
I bought my first car at 24 and used the buses until then. My father helped me with uni fees - I did not get 1c paid by the goverment. I have worked non-stop since leaving school, upto 90 hours a week. I went on my first overseas trip when I was 29.

Now I'm 57 and I own two properties without any mortgage, I have a paid off motor car - just an ordinary vehicle that is 10 years old, I'm educating 1 child through a private school........and I'm still working 40 hours per week with an additional 12 - 20 hours per week overtime. My nieces and nephews - generation X'ers - earn more than me with little or no working experience.

So, yes we are lucky - but we knew that we had to work hard and save to be able to afford the things we wanted.

Sittingbull said...

Mate, I dont get this nieces and nephews earning more than you with no experience. I have spent roughly $18 000 on education gaining a Masters, never had a loan, and work 50 hour a week, pay a huge rent and petrol bill. Single income family with four kids. I earn under $60, 000. I must be the last of a dying breed, and no wonder! What am I doing wrong? Living in NZ?

Sean said...

FFM, you are a bit off with the generational assumption - gen X also fits perfectly, esp in the quote:

"These are the generations who graduated without student loans into good jobs when a home loan cost less than 40% of after-tax pay to service. They bought houses before 2003 and are now sitting on massive capital gains. Many have become semi-professional landlords with fancy Loss Attributing Qualifying Companies that allow them to offset operational losses on their rental properties against their salaries to reduce their tax bills. They have become addicted to the tax free capital gains on these properties. They’ve started consuming some of those gains in the form of holidays, electronics, cars and boats financed through their mortgages."