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Is your house earning more than you?

By Victoria Norrie

Ray White Chief Economist, Nerida Conisbee, had a closer look at this and the results are pretty darn interesting. Over the past 12 months the median house price for New Zealand has increased by $161,700 while the average household income across the country was $97,760. It is quite likely that over this time your house was earning more than you.

The likelihood of your home being the best income earner in your household is higher if you are in Auckland. Over the past 12 months Auckland’s median house price increased by $309,000. At the same time the annual median household income was $107,692. The only city in New Zealand where the people that live in the house were earning more than the house in 2021 was in Dunedin – the median increased by $55,000 compared to household incomes of $84,136.

Obviously the biggest challenge is that it isn’t possible to spend the capital gain you have made on your home without selling the house, unlike your household income which comes in the form of ready to spend cash. This concept is one we find really interesting and is often forgotten about when buyers are considering the merits of an investment property. While the yearly returns may not be as attractive as other investments, it’s really important to remember:

  • That you are getting a return on the total value of the property, not just the deposit/equity you had available
  • It’s a great form of compulsory savings
  • From time to time (about once every market cycle – every 10-12 years or so historically) capital gains will reward your patience really well.

As to whether your house will continue to be a better earner than you, that remains to be seen. At this stage, however, it does seem unlikely with median house price growth slowing. In some places prices will also go backwards. Your house may have earned more than you in 2021 but that is less likely to be the case this year.

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