Why advisers should take notice of housing

According to consulting firm Demographia’s housing affordability survey New Zealand’s housing is “severely unaffordable” at more than five times incomes, rising to more than six times in Auckland, where the rate of home ownership has dropped from 74% in 1986 to 58.7% in 2011.

Out-going Retirement Commissioner Diana Crossan said recently that the issue of people reaching retirement age without owning their own homes was even bigger than the rising cost of New Zealand Superannuation.

“Rates of poverty amongst retirees who own their own home outright are much lower than those who are still paying a mortgage or rent," Crossan told a seminar on the government’s fiscal projections earlier this month.

“Unfortunately, housing affordability has declined to a point where, now, a house costs five times a salary, compared to two-and-a-half times a salary in the 1990s, and rates of home ownership are declining."

Institute of Financial Advisers president Nigel Tate said if the issue wasn’t being addressed by financial planners then it should be.

“It’s the one single factor that will influence requirements in retirement. Rent or mortgage is the biggest individual component of people’s budget; 30-35% of people’s budget goes on that one outcome,” he said.

“If you can get a debt-free home by the time you retire you will be substantially better off.”

G3 Financial Freedom adviser Tracey Coxhead said her experience was that most people have a home but if they don’t do proper retirement planning they won’t pay their mortgage off in time.

“People have an inclination to borrow but a flasher house isn’t going to pay the bills.”

Coxhead said there was a gap between investment planners with lump sum clients who tend to own their own home outright and mortgage brokers who often aren’t AFAs and therefore can’t provide their advice as part of a wider financial plan.

Comments from our readers

On 31 December 2012 at 1:18 pm John Milner said:

Well said Tracey. The problem being though; how to convince those people to pay for your much needed advice. It appears as advisers our role in life is to save our clients from themselves.

On 3 January 2013 at 10:38 am w k said:

Home ownership should be a priority in a financial plan. Falling home ownership will become a big social problem in the long term, especially for retirees, and this WILL become a burden to future tax payers.

It is not too late to put a structure in place. A tested and proven structure was presented, but simply ignored, and the govt haven't got a clue how to do it ...... sigh!

On 5 January 2013 at 4:49 pm Miles Hayward-Ryan said:

The government wants lower priced housing. Buyers want lower priced housing. What are the banks doing to government to stop the government taking decisive action. Perhaps a threat to dump mortgagee sales properties suddenly. That could cost the government the election. So is the government under the control of the banks on this one? Home ownership is a priority in financial planning because everyone needs a home. Should the IFA be pressuring government to make homes more affordable as a counter-foil to the banks? Too much money is going on mortgage repayment even at low interest rates. Lower house prices means more affordability which means more funds for retirement planning.

Why advisers should take notice of housing

Rising house prices and the falling homeownership rate make it more important than ever that financial planners focus on housing costs as part of retirement planning, experts say.

Monday, December 31st 2012, 6:00AM 3 Comments

Comments from our readers

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