When it comes to buying property, beware the Bridget Jones effect
Under the arches of London Bridge in Borough Market sits a trendy gastropub called The Globe.
The small upstairs flat is the property owned by Bridget Jones, the single, bumbling, drunken 32-year-old from the 2001 movie.
Back then I was living down the motorway in the city of Bath, home of Jane Austin and the original Mr. Darcy. Bridget and I were the same age, with no other similarities – albeit the odd bumbling drunken moment in British pubs and some off-key singing.
Yet this fictional Brit was quite financially astute and for that I respected her. In between wallowing in sorrow and wailing to the song All by Myself, she managed to buy property. Number 8 Bedale Street, above The Globe.
Cursed by men, blessed by property
Fast-forward 15 years and Bridget Jones's Baby has just hit the screens.
She's burst back into Borough Market aged 43, miraculously several years younger than me. The city-types are still circling and a decent caveman hasn't swept them aside. Without a partner, the desired double income is elusive.
The hapless Bridget was cursed by men, but blessed by property prices.
London real estate agents estimate her flat tripled in value over 15 years. Number 8 would have cost $340,000 back in 2001. Today it's 3.4 times that value at $1,150,000 (yes that's £650,000 for a one-bed above a pub).
In the UK banks are lending with no deposit on a multiple of five times income. Bridget's bolt-hole would require her to have an income of £130,000 ($231,000). The next Miss Jones will surely live in the Welsh town of Bridgend, not London Bridge. Even a partner and double income won't cut it for the vast majority of 32-year olds.
The Bridget-effect on Kiwi homes
Back home in New Zealand, I couldn't resist visiting the Quotable Value website to compare Kiwi housing with the Jones-Index. What are my original bolt-holes now worth?
The time periods don't quite line up with Bridget's 2001 purchase, but she's a girl who fudges figures. The comparison is more about current affordability of starter homes.
1. Winton Street, Christchurch: Purchased in 1993 for $91,000. Capital value now $270,000. QV statistics show 24 flats sold in St Albans between in the three months to July 2016 at an average of 3 per cent over capital value. New estimate: $278,000.
2. Monaghan Ave, Wellington: Purchased in 1996 for $122,000. Capital value now $415,000. QV statistics show 14 flats sold in Karori in the three months to July 2016 at an average of 19 per cent over capital value. New estimate: $493,000.
The Christchurch starter home is now valued at three times its purchase price.
Our household income in 1993 was $57,000 and we borrowed 1.3 times earnings (with a 20 per cent deposit). Today a young couple would need a $55,000 deposit, but with low interest rates banks allow much higher multiples on mortgages (up to five times income).
A mirror image couple (new graduate in a bank and a chef) might now earn closer to $80,000.
The flat can be purchased on a multiple of less than three times income.
The Wellington property rose to four times its 1996 value and requires a $100,000 deposit (20 per cent). A young couple could buy our old flat with a household income of $80,000 (borrowing five times their earnings) or apply for a 90 per cent mortgage under the Welcome Home Loan scheme.
Bridget's dream was always the achievement of social norms. A husband, children, a home and a slimmer figure. Strangely, home ownership was the only thing she could take for granted. For today's 32-year-olds in London it's not the norm.
In New Zealand our median house prices are trading at levels of almost 10 times income in Auckland, six times in Wellington and 5.3 times in Christchurch. Despite the UK's Guardian reporting the horror of Auckland prices surpassing London, it doesn't feel like the Bridget-effect is quite as bad here.
First-timers don't buy the median and the housing stock is entirely different. Young couples need a rising income from a good education to give a buffer against interest rate increases and the ability to start a family. If you "educate-high" and "buy-low", the bottom end of the market is still achievable.
But the government won't be stealing that slogan as an advert for affordable housing.
Janine Starks is a financial commentator with expertise in banking, personal finance and funds management. Opinions in this column represent her personal views. They are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product. Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.