6 OneRoof.co.nz
HOME AFFORDABILITY: COVER STORY
GOING GOING GONE? New Zealand has a housing crisis. In the last decade the cost of buying a home has risen faster than most Kiwis can save and saddled those who have been lucky enough to buy with crippling debts. Homeownership levels have plunged and $1m prices have become the norm. CATHERINE MASTERS looks at how the country lost control of the housing market.
he Covid era has seen house prices go through the roof - but they were rising anyway. Despite all the noise about price hikes over recent years, and despite measures by the Reserve Bank and both National and Labour governments to rein prices in, they have rocketed from a 2.3 per cent value rise in 2011 to a 27.8 per cent one this year. There have been loan-to-value ratios (LVRs, which affect borrowing), Brightline tests (a tax on gains), high density-enabled plans for Auckland, a building boom, a nationwide foreign buyer ban, a failed KiwiBuild scheme and tax changes targeting property investors/speculators – yet through it all, prices have marched on, reaching spectacular heights since Covid arrived. Just last month, Reserve Bank governor Adrian Orr issued a warning house prices are unsustainable, saying they pose a threat to financial stability and telling the Property Council there is no silver bullet. “House prices and housing affordability are affected by both supply and demand factors, ranging across immigration, tax policy, government benefits or transfers, land availability, building standards, infrastructure and training programmes.” But access to land and space remained the biggest challenge to ensuring a smooth functioning housing market, he said.
Housing Minister Megan Woods points to “decades of inaction” leading to a severe housing shortfall, saying multiple interventions are needed to increase new development, particularly for affordable homes. It’s true the past decade can’t be looked at in isolation. Key themes emerged, including a decades-long period of lower interest rates, not enough houses being built, and population growth and migration inflows all impacting housing. There has also been the emergence of a new property investor class the country didn’t have 30 years ago.
THE LAST 10 YEARS
By 2011, housing unaffordability was gaining traction as a real thing but back then more people were leaving the country than coming in. The market was fairly quiet and few new homes were being built. Kelvin Davidson, chief economist at property data firm CoreLogic, says this post-GFC period was a time when construction confidence was shaken, and we are still dealing with the housing shortages from then. By 2013, however, sales and prices were rising and net migration went from negative to positive. Former Housing Minister Dr Nick Smith told OneRoof John Key’s National Government at the time “jumped for joy” when migration turned around. A big move from Key was to reverse a brain drain that had seen a consistent loss of 40,000 to 50,000 Kiwis to other countries for the preceding 20 years. “When it turned in 2010 and 2011 we were surprised how
