Photo: Getty Images; additional design Tina Tiller
Photo: Getty Images; additional design Tina Tiller

The BulletinSeptember 7, 2021

How house prices are dividing the country

Photo: Getty Images; additional design Tina Tiller
Photo: Getty Images; additional design Tina Tiller

Justin Giovannetti writes in The Bulletin about a new way of looking at the country’s housing crisis.

Can you afford your own home? Three out of five property owners could not afford to buy their home at its current value, according to new research from Consumer NZ. The finding shows the impact of two years of rapidly increasing house prices.

The biggest problem. House prices are clearly a concern weighing on the country’s mind, as the non-profit found that housing is the top issue for New Zealanders, outweighing Covid-19, as well as electricity and food prices. The study was conducted before the current lockdown, but it’s worth repeating that house prices are more top of mind than a deadly global pandemic.

The creation of two New Zealands. If you own your home, crunch the math and find out if you’re in that 60% who couldn’t attempt to buy their own home today. Maybe the deposit would be unmanageable and the monthly mortgage would be thousands more than you’re currently paying. However, you’ve paid off your mortgage or it’s quickly shrinking, so why should you care? I put the question to Gemma Rasmussen, the head of campaigns for Consumer NZ.

“The issue is that it means that housing is no longer accessible for the majority of people. It means that we now have this division of people in the country: those who own property and everyone else. It creates a division within New Zealand based purely on property,” she said.

A slippery bottom rung. None of this is new, but Consumer NZ’s data shows a different way of looking at the problem. It also reinforces the argument that of the people who don’t already have a foot on the property ladder, few will cross the threshold into the property-owning class without significant help from parents or two very high-paying jobs.

It’s not about blaming existing home owners, but the national discussion needs to change, Rasmussen said. “The narrative around home ownership has been around capital gains and investments. Not around houses as a home,” she said. “Home owners now expect prices to double every few years and those great gains to keep on coming.”

It’s a division few people would want. Earlier this year, the prime minister was asked if she was comfortable with a situation where New Zealand was divided based on property. She said she wasn’t. “No one wants to live in a country where the only way that you can move into your own home is if your parents can help you,” Jacinda Ardern told reporters in February. House prices have only increased since then.

Falling home ownership. The division is already starting to solidify, according to Consumer NZ. Home ownership is now at a 70 year low and falling. The group in this country most able to afford their property is counterintuitively the one that likely paid the most, those between the ages of 18 to 29. If that’s confusing, remember it only includes people in their 20s who already own their homes, which is likely a small group. Those younger people who can’t are likely still in flats, where almost half are spending over 30% of their income on rent.

Some more data. The average house price is now more than 12 times the average wage, at about $940,000. That’s up $200,000 in a single year. Of those that don’t own a home, 42% told Consumer NZ that they’ve been completely locked out of the market. Another 20% said they are trying to save for a deposit, but with housing prices still climbing at 10 times the average annual wage increase, they won’t be able to catch up.

Looking at Auckland, Stuff reported on the fastest increasing prices across the city over the past 20 years. It found that areas with former state homes increased the fastest, with the median house price in Point England increasing by 616% over the past two decades. The median value in 2001 was $176,400. Had that house increased at the rate of inflation, it would cost $267,111 today. Instead, it’s now valued at $1,263,250.

A housing crisis. While the AM Show’s Mark Richardson has said there’s no housing crisis, only young people who can’t afford a house, the data seems to suggest otherwise. Of all the people surveyed by Consumer NZ, 82% thought the housing market was either overinflated or out of control.

The housing crisis means different things to different people, far more than can be discussed in today’s newsletter. While increasing housing prices have already had an impact on poverty rates, a more lasting change could be felt in the coming years.

How it impacts the country’s future. As a relatively recent migrant to New Zealand, I wonder how the mixture of low wages and high house prices will impact international recruitment in a post-Covid world. This problem isn’t new to New Zealand, but the calculus has shifted tremendously since early 2020. A doctor or nurse would be paid more in Australia, North America or Europe and could buy a home that’s cheaper and likely of better quality. Meanwhile, New Zealand needs more skilled workers, and is searching for them abroad.

It’s not a theoretical problem. Stuff recently wrote about the problems tech companies are facing retaining New Zealanders being offered triple their local salaries in the US, that’s before stock options and bonuses. As a result, some local jobs are now being outsourced via Zoom to workers in India.

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