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First-home buyers ‘signing themselves up for a lifetime of debt ‘

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Home affordability for first-home buyers is the worst it has been in 65 years, according to an economics consultancy.

Infometrics compared and analysed the total payments made by homeowners over the lifetime of their mortgage against the value of the property when the loan was repaid, to calculate the net financial gain.

Its research, which goes back to the 1940s, suggests 2022 was the worst year for first-home buyers since 1957.

“Given the increase in house prices during 2020 and 2021 and the lift in mortgage rates since the middle of last year, average first-home buyers currently face initial mortgage payments equal to 49 percent of their income,” Infometrics chief forecaster Gareth Kiernan said.

This figure is the highest on record, surpassing the previous records of 1987 and 2007, he said.

“But the killer for current buyers is that they face committing an average of 33 percent of their income throughout the next 25 years to repay their loan.”

This compared with the 21 percent that prevailed throughout the 2000s and 2010s.

“Young people are effectively signing themselves up for a lifetime of debt if they want to get into the housing market, with much less money left over for discretionary spending than previous generations enjoyed.”

Kiernan said its research brought some perspective to the debate between baby boomers and millennials about who had it harder getting into their first home.

“Our analysis shows that even with mortgage rates below 5 percent, the average home’s million-dollar price means that today’s first-home buyers face much less favourable financial outcomes than a buyer in 1987 did with interest rates of 20 percent.”

The research also indicated that people who bought now were less likely to enjoy the capital gains seen in property values over the past decade, which would otherwise help to offset the high ongoing mortgage costs they were signing up for.

Some of the best years to have been a first-time buyer were 1949 and 1996, as interest rates stayed relatively low throughout the life of the mortgage and there was substantial price rises as well.

The worst years it found were 1955 and 1975 because the following 25 years included periods of a weaker house prices.

“Realistic house price projections for the next 25 years mean that buying in 2022 is almost as bad, financially, as 1955.”

Fears of social division

Kiernan said the most realistic path to homeownership for many young people was with assistance from the “bank of mum and dad”.

“This outcome is likely to reinforce the divide between families that are homeowners and families that are not, and it strikes at the heart of New Zealand’s egalitarian foundations.

“There is a social responsibility for greater political action to ensure that homeownership does not continue to slip out of reach for more and more Kiwis,” he said.

Infometrics principal economist Brad Olsen told First Up that decades ago housing used to be much more affordable but the changes were like “a slow train wreck” that could result in a lot of risk for the country’s future.

“Unless we get serious about combating it we’ve got some huge social divisions that are going to grow in New Zealand because there will be an increasing number of young Kiwis who will just not have the opportunity to get into the housing market or if they do, they will be lumbered with a lot more debt effectively that they have to repay over time than prior generations.

“So there’s a huge difficulty here…”

The outlook suggested the current pattern would continue so decision makers needed to get serious about reforms instead of providing platitudes, he said.

“We have seen no improvement for first home buyers in recent times. That’s a damning indictment on New Zealanders.”

Kiernan told Morning Report that prior to the 1990s low income households could use their family benefit as a house deposit and that form of assistance might be necessary again to ensure the gaps don’t get worse.

In terms of other solutions, he said the government’s moves to free up land for housing development and more intensity would take some time to have an impact.

Kiernan said the worst time to buy a house was after a period of strong house price growth, such as the country has experienced for the last 10 years. Now buyers faced the risk of paying too much in a market that was falling.

“You are at such a terrible starting point in terms of trying to get into the market it really does undermine some of those good financial outcomes that you would otherwise be looking for as a first-home buyer.”

Most forecasters were predicting a softening in house prices over the next 24 months so some would-be purchasers might want to delay, however, he appreciated that first-time buyers often wanted to buy as as quickly because of the stage they were at in their lives.

New Zealand’s tax system also favoured house ownership, he said.

The Infometrics report said the government had a responsibility to ensure the supply of new land and housing is functioning as smoothly as possible, as well as considering what measures might be necessary to assist lower-income families and the current generation of young people towards homeownership.

“It’s not going to be an instant fix, but you give it 10 to 15 years, and that is a long time don’t get me wrong, but this has been a problem that is also been a very long time in the making.

“We’re not going to unwind it immediately.”

SOURCE: RNZ

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Police say person who fired gun at officers still at large

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Police say a person who fired a gun at officers in Napier is still at large.

Eastern District Commander Superintendent Joel Lamb said Police tried to stop a vehicle in the Pirimai Area at about 10pm on Tuesday.

He said someone in the back seat pointed what was presumed to be a firearm at officers pursuing the vehicle.

“Staff have then heard two distinct gunshots as the firearm was discharged.

“Fortunately, neither of our officers were injured, and the patrol vehicle did not sustain any damage.”

He said hours later, the vehicle was seen travelling north on the Waikato Expressway towards Auckland.

Police seized the vehicle at an address in Manurewa, but they had not found the alleged offender.

Lamb said people who lived at the Manurewa address were engaging with Police.

He said Eastern District and Counties Manukau Police were making enquiries.

“Presenting a firearm at a Police officer is a serious escalation that puts our staff and the wider community at risk. This behaviour is entirely unacceptable.

“We are taking this incident extremely seriously and will be pursuing all lines of enquiry to locate the offender and hold them accountable.”

Police asked anyone who witnessed the incident to contact Police on 105 or online using the reference number 261111/3764.

Information could also be provided anonymously via Crime Stoppers on 0800 555 111.

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New Zealand sides named for RLWC finals

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The players tasked with ending Australia’s Rugby League World Cup dominance have been named.

The Kiwis and Kiwi Ferns have announced their squads for this Sunday’s World Cup finals in Brisbane.

Both sides are chasing their first titles since 2008, and both are looking to end their opponents run of three crowns in a row.

“Our Kiwi Ferns have been so dominant in years gone by, and we want to bring dominance back to this jersey, so I think it will be a case of who wants it more,” said co-captain Georgia Hale of the impending clash.

The Kiwis get a major boost for the final as they welcome back Ronaldo Mulitalo after he served a one-match ban for a high tackle against Fiji Bati.

Mulitalo replaces Charnze Nicoll-Klokstad, who moves to the six-man bench, which again includes utility Te Maire Martin, middle forwards Naufahu Whyte, Erin Clark and Xavier Willison plus fullback Keano Kini.

Loose forward Joseph Tapine will make his 30th Test appearance in a familiar pack again, including second-rowers Isaiah Papali’i and Briton Nikora, and props James Fisher-Harris and Moses Leota.

Winger Jamayne Isaako is on the cusp of claiming the New Zealand record for most Test points.

His five goals against Tonga lifted his career points tally to 225 – level with Shaun Johnson – while centre Casey McLean goes into the final with 16 tries in just eight Tests.

Fisher-Harris will again captain the team.

Fullback Ponga said the goal of the group was clear.

“We have high expectations around what we want to achieve, and obviously winning a world Cup is one of them.”

Meanwhile, Ricky Henry has selected a settled side to take on the Jillaroos, led by their lethal centre combination of Stacey Waaka and Mele Hufanga.

Veteran Apii Nicholls takes the number one jersey, Leianne Tufuga and Mackenzie Wiki on the wings.

Henry has stuck with his halves pairing of Chantay Kiria-Ratu and Raecene McGregor with Alexis Tauaneai, Georgia Hale and Otesa Pule up front.

Rounding out the starting pack is Shaniece Monschau, Kaiyah Atai, and Angelina Teakaraanga-Katoa.

“We have been building well throughout the tournament; we understand the Jillaroos side, and will give it our all to make New Zealand proud this weekend,” said Henry.

RLWC Finals:

Kiwi Ferns vs Jillaroos- 6.10pm

Kiwis vs Kangaroos – 9.35pm

Sunday November 15

Suncorp Stadium, Brisbane

Live blog updates on RNZ

Kiwi Ferns:

1. Apii Nicholls 2. Leianne Tufuga 3. Mele Hufanga 4. Stacey Waaka 5. Mackenzie Wiki 6. Chantay Kiria-Ratu 7. Raecene McGregor 8. Alexis Tauaneai 9. Georgia Hale 10. Otesa Pule 11. Shaniece Monschau 12. Kaiyah Atai 13. Angelina Teakaraanga-Katoa.

Interchange: 14. Ashleigh Quinlan 15. Annessa Biddle 16. Shannon Mato 17. Ivana Lauitiiti.

Reserves: 18. Brooke Anderson 19. Zahara Temara 20. Brianna Clark 21. Abigail Roache 22. Tenika Willison.

Kiwis:

1. Kalyn Ponga, 2. Jamayne Isaako, 3. Dane Gagai, 4. Casey McLean, 5. Ronaldo Mulitalo, 6. Kodi Nikorima, 7. Jahrome Hughes, 8. James Fisher-Harris (c), 9. Jeremy Marshall-King, 10. Moses Leota, 11. Isaiah Papali’i, 12. Briton Nikora, 13. Joseph Tapine (v/c).

Interchange: 14. Te Maire Martin, 15. Naufahu Whyte, 16. Erin Clark, 17. Xavier Willison.

Reserves: 18. Keano Kini, 19. Phoenix Crossland, 20. Charnze Nicoll-Klokstad, 21. Scott Sorensen, 22. Leo Thompson.

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Opportunities to mitigate multi-million-dollar RNZ budget blowout likely missed – experts

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Multiple opportunities to identify and mitigate a multi-million-dollar budget blowout at RNZ appear have been missed, according to the former executive director at Audit New Zealand.

The public broadcaster on Monday revealed a near $12 million shock financial loss after a litany of financial blunders, which will now lead to sweeping job cuts.

The $11.8m loss is more than 25 times the $470,000 RNZ had expected to lose over the year to June.

CEO Paul Thompson took responsibility for the result, and said internal reports gave an inaccurate picture of the finances, meaning the scale of the loss only became clear in October.

RNZ’s former chief financial officer Hilary Parker resigned unexpectedly in early October.

The board said it would commission an independent review into what went wrong.

Independent contractor Stephen Walker, who left the Audit Office earlier this year, said the size of the loss was surprising, as was the length of time it took to identify it – months after the financial year ended.

Stephen Walker.
Independent contractor Stephen Walker is a former executive director at Audit New Zealand.

Supplied / OAG

“Probably more of a concern is that they had seemingly been unaware that they were running up a significant deficit until they were in the preparation stage of their annual report in October.”

Walker said public entities typically produced monthly financial reports.

An interim audit also took place before the end of the financial year, he said, but if the organisation hadn’t identified significant losses at that stage, the auditor could also be in the dark.

“It seems that there’s a real weakness in forecasting and budgeting that’s occurred here and that the monthly accounts, when they’re produced, either haven’t identified these significant variances against budget or the magnitude of them really hasn’t come to light until right towards the end of the financial year,” Walker said.

“And really at that point, there’s no opportunity for the chief executive, the leadership team to take, and the board to take, any corrective action because the year has effectively been completed.”

Walker said the “significant miss” was difficult to account for given it was more than 10 percent of RNZ’s total funding.

He said based on RNZ’s annual report, financial complexity didn’t appear to be a factor.

“This $11.8m loss isn’t made up of one particular item … it seems to have been contributed to by a number of separate expense lines running over budget. So I don’t think it’s necessarily to do with complexity.”

Among the errors, RNZ wrongly counted $2m from land sales as income in its budget. Staff costs also came in $3.2m over budget, including $1.4m in redundancy payments.

Professor at Auckland University’s business school Norman Wong said based on media reports the issues identified were “significant and troubling”.

Norman Wong.
Norman Wong.

Supplied / University of Auckland

“But recognising the sale of land as income in their budget is a basic error that one would have expected to have been caught and corrected well before it got to this point.”

With funding reductions at RNZ over the past two years, Walker expected greater scrutiny of financial results.

“Virtually every public entity has had their annual budget reduced. And so you would expect … the leadership team on a monthly basis and board – I’m not sure how frequently the board will consider the information – but you would expect them to be interrogating the results on a regular basis throughout the year,” he said.

Walker said initiating an independent review was the correct course of action and that he’d want to understand what information the leadership team and the board were regularly receiving.

He said he’d “love to say” surprising financial results were rare, but conceded they occured on a semi-frequent basis during his time leading the Audit Office.

“The benefit of independent scrutiny by the Audit Office – and the auditors providing that support to the Auditor General – [is] that the reporting is fairly presented at the end of the year, whether it’s good, bad or ugly.”

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