How many coffees is a house?
RadioNZ have How many years would you have to skip coffee to save enough to buy a house?
The story correctly says (a) a lot, even if house prices didn’t go up, and (b) that’s not really the question.
There’s one point they miss which is important to a lot of the narrative on house prices and saving (perhaps because this is a personal finance article, not a housing prices article).
The reason for housing unaffordability isn’t that Kiwis aren’t spending enough on housing. You could imagine a world where housing was readily available and affordable, but people in general, or some group of people, couldn’t buy houses because they were spending all their money on beer and holidays and not saving anything for a deposit. In a world like that, advising people to save might be useful (if they listened).
That’s not the problem in New Zealand. Kiwis, collectively, are spending far too much on housing. If one person gave up coffee or avocado toast to save faster it might help them a little bit. If we collectively gave up coffee and avocado toast to save faster, housing prices would just increase faster to compensate.
Thomas Lumley (@tslumley) is Professor of Biostatistics at the University of Auckland. His research interests include semiparametric models, survey sampling, statistical computing, foundations of statistics, and whatever methodological problems his medical collaborators come up with. He also blogs at Biased and Inefficient See all posts by Thomas Lumley »
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Affordability is always a very strange issue to discuss because there is almost always some way for commenters to moralize. When grocery prices got very high in Canada, people started critiquing the contents of baskets instead of admitting that was a very high price for a small amount of food. I think housing has some of the same curse — one can always imagine saving money somewhere or somehow. Or putting in more work — a second part time job at Walmart would impact your savings.
That said, I think the housing supply restriction hypothesis (pushed in Canada by Mike Moffatt) is really looking like the most plausible story for unaffordable housing. One of the bigger pieces of evidence is Auckland, in NZ, where improved housing policies had relatively large impacts on prices (in the US, it was Austin, TX). I am surprised that the press there doesn’t promote the good urban planning of NZ and push for more of it, instead of wondering if a few coffees are what is making the difference.
2 days ago