Angry Andy’s own house example debunked

David Farrar takes a closer look at Andrew Little’s house value.

I blogged yesterday on how Andrew Little’s outrage at his old house increasing in value from $315,000 to $830,000 over 17 years was odd as it was a compound increase of just 5.9% a year.

Also noteworthy was that it increased 81% under Labour and 48% under National.

But I got interested in whether this house would even break even if it had been purchased by some smart property investor who financed it entirely through lending.

Well if you borrowed the $315,000 and paid standard mortgage rates each year from 2000 to 2017, then the amount you would owe the bank would be $936,000 so after you get the $830,000 sale, you are $100,000 down.

Of course in reality you would pay back some principal over that time, but that has an opportunity cost so the fair comparison is total financing vs total increase.

So in reality the average 5.9% increase in house value would not even cover the cost of interest on the initial house if financed through borrowing.  Now you would get rental income from the house for 17 years but as you can see the gain would be from the rental income, not from the increase value.

Clearly, house owners and investors need to get back under a Labour government.  They were making out like robbers’ dogs back then.  Under National, not so much.

 

Kiwiblog


Do you want:

  • Ad-free access?
  • Access to our very popular daily crossword?
  • Access to daily sudoku?
  • Access to Incite Politics magazine articles?
  • Access to podcasts?
  • Access to political polls?

Our subscribers’ financial support is the reason why we have been able to offer our latest service; Audio blogs. 

Click Here  to support us and watch the number of services grow.

As much at home writing editorials as being the subject of them, Cam has won awards, including the Canon Media Award for his work on the Len Brown/Bevan Chuang story. When he’s not creating the news, he tends to be in it, with protagonists using the courts, media and social media to deliver financial as well as death threats.

They say that news is something that someone, somewhere, wants kept quiet. Cam Slater doesn’t do quiet and, as a result, he is a polarising, controversial but highly effective journalist who takes no prisoners.

He is fearless in his pursuit of a story.

Love him or loathe him, you can’t ignore him.

48%