Day 42, Level 1: House prices, Omaha sections, sweet & sour, drink days and diverticulitis

Another day on the computer, ploughing through projects. Achieved quite a lot, making good progress. Main thing is the Omaha Newsletter - and the lead article which I'm writing. It's all about the people from the early days, so it's interesting to write - but there is so much info to condense down. All good. 

I heard an interview this morning about house prices - which are going through the roof from the top to the bottom of NZ. As mentioned in a previous post, the average house price in Auckland is now $1m.That's approx. 18 x the average salary. I can categorically tell you that there are areas and houses that are not worth anything like that, it's preposterous and the situation is not only impossible, it's utterly unsustainable.

Anyway, this guy predicted that in another 6-7 years house prices would be double what they are now! Are you kidding!? Especially as much of the housing stock is unappealing and sub-standard. In 6-7 years the average salary will (should) have risen - but if house prices are going to average $2m - that makes it approx. 22 x average salary. Ridiculous. 

When writing my Omaha article I looked back and researched the prices of sections and houses when mum and dad purchased up there in 1973. 

There were 249 Lots for sale in 1973; the cheapest was $3,000 and the most expensive $12,750. Only 15 Lots were priced at five figures (beach front). The average section price at an "exclusive" resort was $6,000 - so that's just over 1 x a year's average salary. Section only, no house. Bargain by today's standards!

In 2013, the sections for sale in the Omaha real estate windows ranged from $300k to $1.2m – interesting that after 40 years (at that time) the numbers were the same, it’s just that they had two more zeros added (highlighted figures)! An average Omaha section price (based on above highlighted) was $600k - that's 14 times salary.  Land only.

Our Omaha section cost $5,000k in 1973 and the house build (including furnishing and decor) cost $25k. The house slept 16 in beds/bunks and most of the painting, decorating and landscaping was DIY. So that's a total of $30k for the property - which works out at 6 times average salary (1973) (house and land). 

These days, you’d be hard pushed to find a vacant section at Omaha under $1.2m = 15 x average salary. Land only. Add a house and you're talking about 28-30 x salary.

As further comparison ... go back to 2003 when it was around 10 x salary.

Sure, back in the 70s and 80s interest rates were higher but a mortgage still amounted to a lesser amount of disposable income than it does today, despite the low interest rates. And back then the proportion going to mortgage was considered unaffordable. 

Bear in mind this is based on one salary - but it's an indicator of ratios.

What are we doing to ourselves? To our youth? To our future?

Apologies, the above is a bit tricky to convey easily. Here's a quick and rather unscientific summary- but it is based on simple research:

1973:        Av Salary $5,000      Av house price $30,000    6 x salary

2003:        Av Salary $33,000    Av house price $350,000    10 x salary

2013:        Av Salary $43,000    Av house price $600,000    13 x salary

2020:         Av Salary $66,000    Av house price $1,000,000   15 x salary (Auckland)
At Omaha = approx. 28 x salary @ $1.8m average (Omaha is expensive and at the very top end of expensive areas in Auckland)

2026 (predicted):  Av Salary, say $90,000    Av house price $2,000,000    22 x salary

WHAT!?!?! This is simply not sustainable. And I predict it won't get to that.

To go back to London - I've mentioned before I bought a flat in 1986 which was about 3.5 times my salary. Five years later it was worth double what it was when I bought it (salaries certainly hadn't doubled). Five years after that, it was worth what it was when I bought it. That was what the property market did in London in the late 1980s/early 1990s. Doubled, and then halved. It has steadily risen again, but not at those stupid levels. Or the ridiculous situation that is going on here in NZ.

Do you watch Location Location Location? I watched some of it tonight - a 3-bed house that's pretty decent, in a decent part of the UK (not in London), for around the £250k mark. Average salary $35k - that's 7 x salary. That's what prices were here back in the mid-1970s here in NZ!

Building costs here are out of kilter with everything which doesn't help the situation. Add to that high cost of living for food etc, and we are pricing ourselves into oblivion.

Despite this economic housing guru guy this morning predicting that house prices here will be double in five years, I predict they will halve! Just like they did in London after surging to ridiculously unsustainable levels in the 1990s and then taking a massive dive. There will not only be a levelling-off here, there will be a huge decrease in value, of that I have little doubt. No one believes me. We shall see. We've always just trundled along following the patterns of the rest of the world (esp UK) and this house price thing isn't going to be any different. I'll be happy to eat my words ... but beware NZ ... just saying! We're just a bit too quick to be smug and complacent - a mix that is never a good one.

I'll be watching with interest - and utter horror if the prices keep escalating. Maybe I'll be eating my hat, but I really don't think so. I suspect home-owners will be getting a bit of a reality check in a few years' time. 

Enough about these silly prices, it does my head in.

Michael came for dinner tonight - haven't caught up with him for a couple of weeks. I made a sweet & sour chicken dish - he rated as one of my best. I made my own sweet & sour sauce. It was so good that I need to write it down to remember it, so if you like sweet & sour, and like the look of this ... here's tonight's recipe below. 

Sweet & Sour sauce:

1/4 cup water
1/3 cup sugar (mix of brown and white)
1/4 cup ketchup and sriracha sauce combined
1 tbsp soy sauce

slurry of 1 tbsp cornflour with dash of water to mix a paste

Put it all in a pot, bring to the boil stirring all the time, and then turn the heat down immediately. Add the cornflour slurry and keep stirring until thick and glossy. Remove from heat and cool. 

You can add fruit juice if you wish (instead of or with the water) - I didn't have any so didn't bother and it's not required - but adds an extra bit of taste and zing

Chicken (I used whole tenderloins but you can use chopped breast meat or thighs):

• Put cornflour on a plate, add salt and pepper 
• Heat some rice bran oil in a wide frypan
• Dip the chicken pieces in the cornflour and put into the hot oil
• Cook both sides until golden and then drain on paper towels
• (Best to cook each piece individually so they don't stick together - don't overcook as you'll be giving them another quick sizzle)
• If you used whole tenderloins, cut them into chunks at this point
  
• Heat olive oil in a wok
• Add some sliced red onion and lightly fry
• Add the chicken chunks and the sweet & sour sauce and mix over low heat to coat and warm through
  
• Add some chopped veges (I used red & green capsicum and asparagus)
• Stir to coat - don't overcook the veges
• Serve on rice - with some chopped cucumber, spring onion and/or coriander - or whatever you have on hand or feel like. 
• Sprinkle sesame seeds over the top.
  

Delicious!

SHARE-NOTE OF THE DAY:
Drink days ... and diverticulitis ...

When Michael was here for dinner I asked if he wanted a G&T. He declined. 

"I only drink on Thursday, Friday and Saturday," he said. 

"That's a good approach," I applauded him."Except I guess it means you drink enough on those three days to make up for the other days of the week?"

He smiled. "Yep".

"Hmmm, that's not such a good approach," I said. 

He laughed. I sipped my wine!

Brett had come home from work early and was in bed with diverticulitis - which he gets every so often - a gut infection when something lodges in a pocket in the intestine (not everyone has these pockets - generally hereditary - but those who do are prone to diverticulitis episodes which cause fever etc). 

He wasn't going to have any dinner - but when he heard Michael praising it so highly he appeared - and scoffed the rest, which Michael was going to take for lunch tomorrow! Diverticulitis cured by then I think!