COMMENT: Whether you view the housing market as working or broken is determined, to a large degree, by your personal experience of that market and the way in which it impacts on you – a truth that was recently demonstrated by a surprising, and unrelated, event.
It centred around a recent challenge to the way in which we see the traditional story of Snow White. In that story, Prince Charming kisses an unconscious Snow White – an action which, according to a review of a Disneyland theme park ride, was undertaken without her consent because she was asleep.
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The claim generated considerable debate, which, if you’ll excuse me for generalising a little, was characterised by age, rather than gender. In other words, older people, both men and women, are more likely to see the traditional story as harmless, whereas younger people are more likely to see the story in a new way in light of the "lack of consent" claim, particularly those who are at a stage of their life when such issues are of constant concern and more likely to directly impact on them.
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It would be easy to see these differences in worldview as subjective – but it’s more than that. In a very real sense the world can be two quite different things to two different people – even though they’re observing the same events.
This is certainly also true of the property market. If you’re one of the more than 60% of Kiwis who owns your own home, you’re highly likely to have a positive or at least neutral view of the property market to the extent that it impacts on you. That’s not to say that you won’t be worried about rising house prices – but this concern will almost certainly be about your perception of the impact of the market on others such as children or young people trying to buy their first home. Stripped of that concern, few homeowners or property investors would really have a problem with an asset which continues to increase in value over the decades.
Ashley Church: "If you’re a budding first home buyer, you’re much more likely to have a negative view of the market and rapidly rising house prices." Photo / Ted Baghurst
However, if you’re a budding first home buyer, you’re much more likely to have a negative view of the market and rapidly rising house prices – until you get into your first home. I often use the analogy of the young couple who, having been approved for a mortgage by the bank, find the home of their dreams. They attend their first auction full of anticipation and hope – only to be outbid before they’ve even lifted their hand. Battered but determined, they brush themselves off and go through the process again – only to have the same thing happen with their second and sometimes third, fourth or fifth property.
By this stage they’re in despair. Clearly the system is broken and geared against first home buyers! Something needs to be done! The Government needs to intervene to stop this madness and control runaway house prices!
And then something happens. The young couple finally find a house and have their offer accepted. And guess what happens? The day they take possession of the property their entire worldview changes. The capital growth in their home – which now belongs to them – is a great thing! The system works, they’ll tell you! Don’t change a thing!
So which perspective is correct? Both are – because each represents a view of the market which is relative to the way in which it impacts on us at the time. If you’re struggling to get into your first home, the market IS broken – and once you’ve finally got your foot in the door it’s the best system which has ever been invented. Both things are true.
The challenge for the Government is to adopt policy which recognises both realities without tilting the playing field in one or other direction – but that takes wisdom, experience and an understanding of the history of the market.
- Ashley Church is a property commentator for OneRoof.co.nz. Email him at [email protected]
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