New Zealand house prices soar despite Covid recession, worsening affordability crisis
Property market posted an 11% rise in median values, masking rising homelessness and a widening social divide, critics say
Construction workers at the Kainga Ora housing development in Auckland. New Zealand suffers a chronic lack of housing stock, critics say. Photograph: Hannah Peters/Getty Images
New Zealand house prices have defied the Covid-19 recession and soared to record levels, prompting warnings that the hot property market will damage the country’s long-term economic wellbeing and widen inequality.
New Zealand, which already had some of the most unaffordable housing in the world, saw median prices rise 11.1 % in the year to September, while the median price in Auckland reached nearly $1m (US$660,000). Prices rose 2.5% across the country in September compared with August.
But while cheap loans and looser lending requirements designed to stimulate the economy during the pandemic have attracted investors back into the market, many fear that first-time buyers and lower-income groups will be increasingly left behind by the rise in prices.
Investors have been given a big advantage after the requirement to have a 30% deposit to buy an existing house was removed, he said. The measure was aimed at encouraging investment in new houses to ease a chronic shortage but was lifted to stimulate the market during Covid-19.
In some small towns, house prices have increased by 40% on the back of rental yields as high as 10%, says Eaqub.
“It’s good for people who own houses but it’s terrible from an equity perspective,” he said. “For first-home buyers and young people, it gets further out of reach. This just worsens everything we have been experiencing for the last 30 years. The lot of Generation Rent has just got a lot worse.”
First-time buyers who reason that if they can’t buy a house now they never will, are in the market, too. “And they are kind of right,” says Eaqub.
The pandemic tipped New Zealand into a sharp recession with a record 12.2% fall in GDP in the quarter to September but the loosening of regulations on mortgage lending has aided the recovery and helped those still in work, Eaqub said.
“There’s still nearly 75,000 who have lost their jobs, really tough for them but for the other more than 2 million workers things are pretty good.”
According to the recent Demographia International survey, New Zealand has one of the most unaffordable housing markets in the world, and over the past decade homelessness has increased to more than 40,000, or 1 in 100 Kiwis.
The United Nations has described the housing shortage as “a human rights crisis”. “They allowed the perfect storm, and that’s successive governments, UN special rapporteur on the right to adequate housing, Leilani Farha told the Guardian during a visit to New Zealand this year.
She was surprised that New Zealand had such entrenched issues with homelessness, housing affordability and poor-quality homes despite its progressive left-leaning government led by Jacinda Ardern.
Farha visited an Auckland marae that has housed homeless families, cramped motels in the Hutt Valley, near Wellington used as emergency housing, and boarding houses she described as “deplorable”.
Bernie Smith, the chief executive officer of charitable organisation Monte Cecilia Housing Trust, which houses homeless families in south Auckland says there is “no strategic plan in terms of making a difference … There’s a hell of a lot of money going into motels and transitional housing, but very little going into building homes”.
The waiting list for state housing is at a record high at a time when the government has scaled back the flagship KiwiBuild programme started in 2018, after finding the target of 100,000 affordable homes in 10 years impossible to deliver. As of August, 602 KiwiBuild homes were built with a further 927 under construction. Though a far cry from the target, the government has built more homes than any other in recent decades.
Policies such as building more houses, freeing up land and infrastructure financing take years to deliver benefits, says Eaqub.
David Schnauer, author of Covid: Catalyst for Change, said there were signs that the public’s mood was moving in favour of tackling the lack of affordability, citing a New Zealand Herald/Kantar poll this month which found 52% thought prices were too high. Though strongest among younger age groups, 46% of people older than 40 shared that view. Only 6% wanted prices to rise.
Recent data indicated that the biggest lender behind the big four (Australian-owned) trading banks in New Zealand was “the bank of mum and dad”, said Schnauer.
Both Schnauer and Eaqub said the Reserve Bank needed to change its “very narrow view” of what financial stability means. “They think it’s about banks not failing, rather than saying it’s about how much money is created in the economy?” Eaqub said. “Where does it go? Is it efficient and equitable?”
Leave A Comment