Apartment living, common overseas, may be the way of the future for some.
A quick scan of recent media commentary reveals Auckland's housing "crisis" narrative picking up momentum. And it's understandable when prices like the $1.4 million recently recorded for a 70sq m unit in Takapuna shouted at readers from the headlines.
This leaves potential buyers wondering what their options are.
In Auckland, as in many other regions of the country, the housing struggle is real, with demand far outstripping supply. For those starting out on the property ladder in New Zealand's largest city, it's common for their first mortgage to be well north of the half-million-dollar mark.
Home ownership has long been held as the great New Zealand dream, but getting into the housing market has never been easy.
As part of Auckland's community for more than 170 years, ASB has helped generations of Kiwis into homes. And every generation has faced its own set of financial challenges, including high interest rates, student loans, serviceability challenges, saving for the deposit or simply finding a suitable property at a suitable price.
In the context of a hot Auckland market — where the pace of new lending is speeding up and where millennials fear for their home ownership aspirations, I'm often asked how young people can afford to take that first step.
Undoubtedly the prospect of a half-million-dollar mortgage is daunting to young people starting out, but that's not stopping people from taking their first leap on to the property ladder.
Yet, with more competition for entry-level properties, steadily-increasing rents, slow wage growth and transport challenges facing suburbs further from the city, it's easy to understand why aspiring home owners feel the market is running away from them with little prospect of ever catching up.
As the comparison in the table shows, the debt-servicing cost of buying a median-priced house in Auckland today compared with 20 years ago is significant, even with historically-low interest rates.
The debt burden is 65 per cent higher in today's money to buy the same house relative to 20 years ago.
With two children just out of university, I understand the decisions the younger generation is facing — how can they travel and enjoy life when saddled with a half-million-dollar mortgage in their 20s?
I often connect with customers on this issue whose children are facing the same challenges.
Sometimes the smart decision is to delay committing to a property and lean into building a KiwiSaver deposit with higher potential returns than a savings account. We are seeing more examples where groups of friends or family members are buying their first home together, and families assisting through shared equity or guarantor arrangements.
What's going on?
It's clear that historically low interest rates are impacting the housing market in several ways.
In the low-interest rate environment, people bid up prices to the limit of what they can afford, driving up prices across the board and making it harder for those starting out without existing equity in property.
Increasing numbers of investors are choosing property over other investment options. This is fuelling the residential property investment market and driving up property prices overall as people use the "cheap money" to leverage their equity.
The RBNZ's speed limits of restricting lending to people with less than a 20 per cent deposit took some heat out of the property market, but also made it tougher for first home buyers.
Under the rules, banks are allowed a proportion of loans for customers with a lower deposit, however across the industry the increasing "speed limits" aren't being fully used as people need to ensure they can service the loan.
We are seeing an increase in the number of customers including income from boarders or flatmates in home loan applications, as people look at different ways to own their own home.
Ultimately Auckland needs an increase in the housing supply, which means taking a more creative approach to how we view housing.
We can see examples internationally of housing options where people don't have the luxury of the Kiwi quarter-acre dream.
Apartment living is commonplace in densely populated cities internationally; housing co-operatives are popular across Europe, the US and Canada; and a self-build community is gaining popularity in Almere in the Netherlands where serviced plots are available with few restrictions about what people can build.
Regardless of the challenges facing our customers and our city, ASB is here for the long haul. There's no magic wand one organisation or industry can wave to solve decades of undersupply and affordability challenges, but we'll partner with the community and our customers to find solutions — as we have always done.
Craig's list for buying a house in Auckland
• Become a Sunday driver. Look outside your most desirable suburbs, and beyond places you're familiar with. You never know what hidden gems you might uncover if you extend the search range just a little, or check out ASB's suburb seeker (suburbseeker.asb.co.nz) if you prefer to let your fingers do the walking.
• Be brave and crank up your KiwiSaver contributions. A couple earning combined $120k with $50k of existing savings, each contributing the minimum 3 per cent in a conservative fund could have $82,011 in four years, compared with both contributing 10 per cent for four years in a moderate fund could have $119,252 towards a deposit.
• Check in with the experts. Talk to one of ASB's mobile lending managers who can guide you about best structure for your loan, which will ultimately save you money over the long term.
• It's not forever. Look towards units or apartments which have a lower entry price point. You'll be able to service debt and build equity in the property – which can be realised further down the track when you sell or hold as an investment.
• Get informed and set goals. Speak to one of ASB's mobile lending managers to get pre-approved before you start looking. You can use the home loan calculators on asb.co.nz to work out what fits within your budget.
• Craig Sims is ASB executive general manager, retail.