Snapshot of 1975: Auckland’s real estate market then and now
A copy of Auckland Star of 1975 reveals how much the city’s housing market has changed during this time.
Found in the wall of a Westmere house undergoing renovations, the newspaper’s weathered property pages offer a window into a past where there was no shortage of housing and house prices were reasonable.
Dated November 28, 1975, the day before the election that saw Rob Muldoon become prime minister, property prices for sale were largely between the early 1920s and early 1950s. ‘time was about $ 125 per week.
Properties in the $ 20,000 price bracket dominated, although there were a few for less (a one-bedroom house in Hillsborough for $ 17,000, for example) and a few that were in the upper end of the price bracket (a Castor Bay mansion with a pool and views for $ 140,000, for example).
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Given Auckland region average value is now approaching $ 1.2 million, with latest CoreLogic data putting it at $ 1,198,564 in February, the prices announced in the 1970s are surprising.
They also raise the question of what these properties might be worth in 2021, so Stuff picked one of the advertised ones to get a feel for what it might be worth in the current market.
The selection was determined by the fact that unlike most properties on the market today, all of the properties listed for sale had prices, but most were not listed with mailing addresses.
Only two properties had an address and one of them was a large five bedroom house that was not a standard house size in the 1970s. John Tookey, professor of construction engineering at TUE, says two- to three-bedroom homes were the norm at the time.
This meant that the property we focused on was a three to four bedroom, brick and tile house located at 12 Moana Terrace, Maraetai. Built in 1965, it was for sale for the highest bid of over $ 36,000.
Using the Reserve Bank’s inflation calculator to adjust the home’s value for inflation reveals that it was worth $ 1,038,757 in the third quarter of 2020 (which is the most recent comparison date available. ).
However, Homes.co.nz shows that it last sold for $ 1.1 million in July 2019 and Homes.co.nz now estimates the property to be worth $ 1.32 million in March 2021. In today’s frenetic market, it is likely that if the market did, it could sell for over $ 1.32 million.
That’s a significant price difference, but there are other factors at play in the equation. Veteran housing affordability activist Hugh Pavletich said the house price-to-income ratio was very different in 1975.
He and his wife bought their first house in Christchurch around this time. It cost $ 24,000 with a mortgage of $ 20,000. It was a one-income household, as was common at the time, and its income was $ 8,000 per year.
“This equates to about three times my income for a new home – and that was normal at the time,” says Pavletich. “There was no housing affordability issue as there were a lot of new homes available for purchase and their cost was more in line with average income.”
These days the Demographia’s latest international housing affordability report puts Auckland house price-to-household income ratio at 10.0, which makes the city the fourth least affordable city in the world.
Pavletich says housing affordability began to decline in the 1980s.
Interest rates are one of the few things on the modern buyer side. In recent years, mortgage rates have fallen to record highs, with rates below 3% now commonplace.
In 1975, retail interest rates started at 9.21 percent in January 1975 and ended the year at 9.65 percent, according to Reserve Bank data. In November 1975, they reached the highest rate of the year at 9.87 percent.
This means that the cost of borrowing was higher back then, even though it was far from the levels it reached in the 1980s, when mortgage rates peaked at 20.50% before the crash. 1987 scholarship recipient.
But it was also a very different time to access mortgage finance. There was a whole range of government assistance programs. Foremost among these was the State Advances Corporation, predecessor of Housing New Zealand, which offered low-interest home loans to low-moderate-income households.
From the mid-1960s, it was also possible to capitalize the “family allowance,” which was a universal weekly payment paid to families between 1945 and the mid-1980s. Funding meant that families could take the entire amount. amount that would be payable for a child, up to the age of 16, as a lump sum, to help buy a first home.
Home savings accounts were also available from various organizations. These worked in a similar way to KiwiSaver: savings had to be made for at least three years and the account holder could then make withdrawals and get real estate loans from Housing Corp based on what had been saved.
Massey University banking professor David Tripe said that while there was help available, especially for low-income families, it was not as easy to access funding for a home loan than it seems.
“The public would now be unhappy if there was a return to the lending situation that existed at the time. Often a first-time home buyer had three loans with three separate lenders and some people had loans with up to five lenders.
“Banks didn’t lend more than 30 percent, so you had to raise a lot of money from different sources to get a loan. There were also strict criteria and conditions in place to be eligible for government assistance. “
It’s relatively easier to borrow today than it was 40 years ago, says Tripe. “While there was some seller financing involved in home sales in the 1970s, it was not unusual. It was a way for the seller to secure a sale and it is no longer necessary to do so.
Obtaining a home loan was particularly difficult for single women in the 1970s. Access to finance was seen as a man’s role and it was rare for a single woman to receive a full mortgage.
Despite the complexities of securing home loans, available government assistance is widely believed to have been the source of the post-war housing construction boom and, therefore, the growth of the country. home ownership.
Tookey says that back then it was relatively easy to get started on a speculative construction project, without requiring expensive consents, and that meant there was a constant supply of new homes to buy.
The impact of the law on resource management, as well as successive interventions by central and local government, have changed that, he says.
“Construction has become increasingly time-consuming and expensive and this has an impact on the supply of housing. Speculative construction is dead because no one can afford to build a house that isn’t occupied right away.
A change in the size of homes, which can be seen in listings for sale in the Auckland Star, is also noticeable, Tookey continues. The types of homes built in the 1970s were different: the majority were homes with two to three bedrooms and one bathroom.
“Now five to six bedrooms, multiple bathrooms are common and desirable. The average size of a house has gone from 120 to 130 m² to a few hundred m². Expectations have changed: there are more gadgets, more expensive materials, and bigger houses. And people wonder why it costs more to build.
The 1975 housing market was a very different market than it is today, he says. A point that the recovered Auckland Star property pages are for highlighting only.