Housing costs dwarf 'luxuries'
5:00AM Saturday May 05, 2007
By Simon Collins
Savings on food, clothing and home supplies have enabled New Zealanders to cover a huge increase in housing costs over the past 50 years.
A Weekend Herald analysis of long-term spending patterns confirms property investor Andrew King's controversial statement last week that would-be home-buyers are spending more on "coffee and brand new cars and overseas trips".
Spending on cafes, private transport and overseas travel have all increased.
But this does not explain why today's young adults can't afford to buy the houses that previous generations bought, because spending on housing has increased even more than such "luxuries" - from just 7.6 per cent of the average household's spending 50 years ago to 17.1 per cent 25 years ago and 24.3 per cent today.
Today's young home-buyers, if they can afford to buy a house at all, can pay much higher house prices and interest rates than their parents or their grandparents did because the real prices of food, clothing and many other imported items have come down.
"Food prices have fallen because of increased productivity and, of course, lower returns in overseas markets," says economist Brian Easton.
And prices of clothing, home appliances and virtually all other imported consumer items have dropped dramatically with the dismantling of import controls and the transfer of manufacturing from New Zealand and other high-wage countries to low-wage locations such as China.
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