Parents should not be guilted into forking out for kids' forays into housing
Guilt-ometer; a measurement of the unfortunate side-effect of being overly exposed to morality.
The housing Guilt-ometer is the latest gadget to upset your children with.
It will soon be launched in the form of a highly sophisticated phone app.
Parents will input the size of a house deposit request, followed by their offspring's income, expenses, car value, holiday destination, paddleboards, mountain bikes, flat-white and craft beer intake. Tick boxes will appear for bullet blenders, weekly jars of coconut yoghurt, and chia drinks. There will be a secret hatch for Sky TV, because any judgment of this luxury makes applicants so irate it could blow families apart.
The technology will directly link into the property websites of Trade Me, Realestate and Homesell to allow parents to seamlessly click on the house of their child's desires.
It will whirr and buzz, leaving you in suspended anticipation. Will they emerge as a property-brat or a worthy charity?
In your heart of hearts you probably know if the cheeks of the Guilt-ometer will glow pink. Despite this, so many parents ignore the signs and are swayed by the mountain of commentary claiming the bank of Mum and Dad are an absolute necessity in today's housing market.
A bunch of young millennials recently staged a cyber beheading of a mortgage commentator who raised the subject of ditching Sky TV. Their problems are much larger than giving up a measly telly subscription.
Auckland houses are now selling at almost ten times the median income ($820,000 house price and $88,000 income), with Wellington ($564,000 house price and $102,000 income) and Christchurch ($468,000 house price and $84,000 income) at a multiple of over five times. Affordability seems to be entrenched in folk law at a multiple of three.
Roaring at politicians to do something is good sport, but as the table shows, New Zealand ranks 90th out of 102 countries. We are nearly in the cheapest 10 per cent. As much as we squeal, the rest of the world is worse off.
Yet the numbers seem quite breath-taking compared to my first home purchase of $92,000 on a joint income of $50,000. We maxed-out our borrowing limit at that embarrassingly low multiple of 1.8 times income.
Yet for us, the scary part wasn't the price but interest rates exceeding 10 per cent and the fact we didn't see a capital gain for seven years. It wasn't a backlash against summerhill stone granny flats, it was just the market.
Our granny flat was certainly not the median price. Somewhere between the lower quartile and decile would be more accurate. It has always been legal to use a median income to purchase a cheap house. What is the obsession with matching those two numbers in real life?
Part of me bristles when I read the words of a young millennial defending her generation's position on Sky TV, because the median price is out of reach at $820,000 and she refuses to live in an Avondale one-bed with no garden for $375,000. She wants a cat. Fair enough about the cat. It was what I wanted too and I got one in St Albans and then I moved the moggie north to Karori and my multiple never hit two times income.
What I'm hiding behind is that I didn't have a median income. This is defined as the middle income of an adult male plus a female working 50 per cent. We had a double income. And we didn't buy a median house, it \was bottom quartile. Even the cat wasn't median, he was fat. The numbers change vastly depending on your decisions.
The truth in any situation usually exists at some point between the facts. My multiple can't be repeated, even if couples aim low. Current buyers now benefit from low interest rates, which allow multiples to rise. Yet they are becoming highly exposed to future rate shocks on high mortgage values.
Many now require and deserve parental help, but never forget that Guilt-ometer. Ten flat-whites a week each, two tubs of coconut yoghurt and a Sky TV subscription with 3 per cent compound interest over a decade will add $90,000 of savings. Factor that in to your donation.
Janine Starks is a financial commentator with expertise in banking, personal finance and funds management. Opinions in this column represent her personal views. They are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product. Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.