KEY POINTS:
New Zealanders are paying some of the world's highest house prices compared to our incomes and Auckland ranks alongside London as one of the world's most expensive housing markets.
How can this problem be helped? Can you afford a home?
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Here is the latest selection of your views:
Kealii
My wife is a Kiwi and I am Hawaiian. We live on Oahu. Somebody in NZ should look at what happened in Hawaii and take note. The Japanese came into our property market in a big way in the 1980s and forced prices up beyond the average families reach. We just had an influx of another group of outside investors that has created an even worse situation. The government was happy to collect taxes on all of that, but now we have a homeless problem with families living in a tent at the beach and going off to work and school every day. Grant it, NZ has much more land - so the effects that we have in Hawaii wont happen as quickly. But if the NZ government continues to let non NZ citizens buy up property you will have a similar effect over time. In general the Asian investors who bought up property here were in it for the money. They are not concerned about the long term, culture, environment, etc. What the NZ government is doing is ransoming the NZ way of life on behalf of tax revenue. Look to Hawaii and beware.
Benni
These figures must be rounded down rather conservatively or is it a joke. Aucklanders have an average income of $57,000. Sure, take out the top income earners like Mr. Hart who earns a billion dollars a year and all these investors capitalising on the housing market and then you will find the average kiwi working 60 hours+ a week for $35,000 who will get instantly fired for voicing any concerns at working another 20 hours a week for no overtime $$$. Ive been there twice in the last 12 months. I pay more rent than I would on a mortgage and I live in a dog box in Auckland. Try and save for a deposit when 60 per cent of your income goes on rent. But wait its not the politicians problem, they have a nice house and give themselves regular pay increases that are more than most people I know even earn in a year. I wouldd rather commit suicide than wait expecting a politician to change things for the positive. And house prices are $395,000. What comedy skit is this. Umm who has seen a home for this price in the last few years in Auckland? Thanks to the half a bedroom sized apartment blocks that beautify the city, that must be the only answer for $395,000. Im sorry but these figures are a joke! Reality check folks, average earning is about $35,000 and average house is more like $600,000 making the scale a healthy 17 years at full time earnings. I know how to fix this, sterile myself and give up trying to have a family and sell my kidneys on the black market.
Thomas Land
The reason that housing prices are so inflated is that we allow foreigners to freely purchase land. In many countries for example Japan, it is not possible for a foreigner to buy land. In the UK they actively advertise how easy it is for a person to buy up a beachside property in New Zealand. As New Zealanders we are disadvantaging ourselves by selling our land to absentee landlords. This overinflates our property market and creates a class difference between land owners and those that are forced to rent. Another disadvantage of having foreigners purchase our land is that they do not understand or support the New Zealand Outdoor culture and our enviroment. I dont understand why the government is not addressing this issue. In my opinion we should be protecting our country instead of selling it to people that are only interested in making a profit at the expense of the average New Zealander.
Felix Green
As a New Zealander living in London and a regular visitor home I am constantly amazed at the housing cost. Income to house cost, Auckland for example is clearly overpriced. We own a good 3 bed sized apartment in an excellent London suburb which cost roughly 5 times my income, in comparison if I worked in Auckland to buy an equivalent property would cost 7-8 times income. That coupled with interest rates of 7+ per cent versus 4 per cent in the UK makes New Zealand a work to live country instead of the other way around as it was when I was growing up.Forget about extra taxes - the real issue New Zealand faces is that expatriates and foreign investors can still buy NZ property at good prices in their currencies. Some sort of curb on this investment where the buyer does not live in the property should be sought. An interesting alternative is the requirement of new build properties to apportion some of the build to be affordable housing so lower income families have a chance.
Beck
Almost five years ago I left NZ for a working holiday in Australia. Two years ago I returned to NZ with a reasonable deposit for my first home in Auckland. To cut a long story short I took my deposit back to Australia and bought a 4 bedroom stand alone house for AUD$130,000 and it has a pool! One is lucky to find a tidy 2 bedrm unit in Sth Auckland for that price! Investors/Landlords (especially in Sth Auckland) need to be realistic about how much a property is really worth because there are a lot of dumps for sale/rent at unrealistic prices and the government need to monitor this. A capital gains tax on investment properties is a must and some if not all of this tax can be used to go toward a grant for first home buyers. There are too many small money lending institutions and too many people foolish enough to apply for loan after loan. People need to learn to save, get a budgeter if they have to. These institutions exploit the strugglers and charge the most interest! Low or no deposit schemes are not as attractive as they seem as people pay back double if not more what they borrowed in the long run.
Mitch Fitton
Andrew Plinston stated in a previous post that he was envious of Canada's house price index. Canada's overall index is indeed lower than that of NZ but keep in mind that 90 per cent of the Canadian population lives along the border with the US where the weather is more tolerable. The best climate is in the Southwest corner of the country around Vancouver/Victoria, British Columbia where the winters are generally mild compared to the rest of the country. Vancouver is currently the 13th most expensive city in the rankings while Victoria is ranked 23rd. Auckland is 21st. As a resident of the Vancouver area for 45 years I have given up and am moving to the much more affordable Auckland area this spring.
Randall
Unbelievable but true. It is cheaper for me to live in Switzerland than in New Zealand! Exchange rate included! If supply of land is the problem take a step back and look at how people live in Europe, where many cities developed in the pre-car time. Centralised, dense populations. I live in a city which covers perhaps the area of Hamilton and accommodates over 600,000 people, across three countries. Although much of it is 3 6 stories high it's not so ugly, and I can go from one end of it to the other in less than 30 minutes...by bicycle. I have a comfortable quiet apartment 5min from the centre that costs less than $300 NZ per week. The sense of community is enormous, despite the language barrier.Urban New Zealanders must change their attitudes towards home ownership, away from space intensive sprawling suburbs (which eat into the productive mainstay of New Zealands economy; primary production) the quarter acre with three (or four) bedrooms and attached garage. I know that its nice to have a lawn and space but many suburban developments now have massive houses taking almost the entirety of the section. Where is the space? And to achieve this one may then have to commute for over an hour to the city centre! We have many good things in New Zealand, but we should not be so arrogant to believe we can learn nothing from overseas.
Matt Jeffs
What this problem highlights is the very real need for a pay weighting system similar to the one which operates in the UK. It is totally unfair and completely unreasonable to expect a key worker such as a teacher, Dr, Nurse, Fire Officer to be able to buy a house in Auckland, Wellington or Christchurch when their annual salary is the same as someone who lives in Timaru, Dargarville or Whakatane where house prices are substantially cheaper as well as the overall cost of living. The UK would cease to operate if someone in London was paid the same as someone living in the Outer Hebrides. Anyone who works fulltime in greater London recieves an extra £3,000 per year, on average, than other people around the country. This now has to be introduced for people working in New Zealand's 3 major centres otherwise there is going to be a noticeable drain especially on qualified key workers in the near future. This isn't an issue which affects just Akld, Wgtn or Chch but all New Zealanders in the long run.
Karl
Put a 3 year hold on immigration for current non-residents and let the market cool off. So many people I know, and including myself, have given up the idea of even thinking about buying a house. People criticise us for spending so much of our incomes, well why not, its that or save and spend a larger proportion of our lives paying off a mortgage than our parents. What's the point?
Berthy
A property gains tax on all housing, apart from ones own home, would go a long way to slowing house price increases but we need to look at the underlying reason why NZers as well as others are buying properties at the cheaper end of the market. That reason is lack of surety in old age that the government will provide for old people and housing has always been a sure bet in NZ.The surplus should be put into a portable retirement fund so that there is less uncertainty about the financial future of Nzers.
Matt
The fact is too many people have invested in housing I wouldnt be surprised if the pillocks in the council that make these stupid regulations are landlords themselves hoping to make it rich by capital gain, Its not the house thats worth the $ its the land, The reason for the high land prices is due to our councils and their regulation on land development call it what you want green fields, ring fencing this is the #1 cause of our high housing prices, as soon as this ridiculous regulation is reviewed kiwis will again be able to afford their own homes. We dont need any more high density Bronx style leaky homes, we want affordable develop able land, Bring on the market crash.
Dean
I does not matter if more rural land is made available" at the end of the day the market will decide the price to pay. Flooding the market with more land will effectively drop existing house prices (may end up in mortgagee sales)and those who appear to get the cheap land will profit as the market settles down. There is no solution in a market driven environment.
Zaki
Dont worry guys,the house prices are about to come down in few months.The hot air in the balloon is over and the balloon should be back on earth soon.
Broose
With the NZ housing market being increasingly being driven by sentiment it becomes more of a bubble. Why we think it can only go upwards beats me. Now we officially are one of the least affordable markets with a huge number of citizens who can't afford to buy in it will only take a change of sentiment to see the market go into reverse as is currently happening in the USA.
Loki Thompson
Like most pricing, the cost of housing is dependent on demand and supply. Owning a house for many people is desirable. Long term historical house price growth tends to support the perception that owning a house is a good financial investment, as well as providing security and various positive psychological benefits. Sure there are a number of variables which drive house price inflation, such as government immigration policy, local and central govermnent policies on land supply and so on, but ultimately we all play with the hand we're dealt. The reality for many New Zealanders is that their house is their main asset. If the value of housing stock is significantly reduced by various possible means, this represents a significant reduction in their wealth, their ability to fund their retirement and quite possibly has tax implications for everyone. The point is, do we take from those who have been diligent or benefited from past favourable conditions to make it easier for others now? Its hard to contemplate purchasing a house when the price mountain is a large one to climb. Ultimately, to purchase a house, everyone has to save. That means sacrificing things. Every dollar saved is a step along the road. Flatmates combine to rent a property. Prospective owners can do the same thing to leverage income capacity and deposits. Granted, this is a much more hefty commitment than a flatmate arrangement, but it is a step and any step onto the ladder is one to prevent the goal drifting further away. Tinkering with things is not without peril. If interest rates are slashed, borrowing becomes more affordable, but the dollar drops, real NZ wealth in an international sense drops and houses also become more affordable to foreigners (trade aside), cue more foreign ownership. If we make it unfavourable to investors with capital gains taxes or inability to write off interest and the landlords sell to owner occupiers, then there is a shortage of rental property and rents rise. If incomes rise, or taxes are cut, some people will save and get ahead, others will spend and wont. Lifes tough, save hard. Theres no free lunch.
Michael
What you need to understand when trying to buy your first home, is that you have to start somewhere. You cant just buy a large house with a pool or buy into a beautiful area, if it's your first home. You cant have everything like the new LCD or stereo. If you want it bad enough, you will get it. I did!
Brian MacCormack
What planet is the coauthor of Demographia International Housing Affordability Survey on? "Excessive land use regulation had strangled subdivision expansion and artificially pushed up prices." We are level pegging with London for affordability! Need I remind readers that it has a population of about 12 million.Is he telling us that London has more land per head than us? Yes;no doubt Londoners earn more than us,but has anybody considered the likelihood that they may earn more because of better use of resources.It costs a lot more for infrastructure and services for a small city such as ours spread over such a large area.Apart from low wages the reason real estate is so unaffordable is that NZ has subsidised speculation in real estate.If you work you're taxed at 20-33 per cent or more.If you invest in real estate youre not.If you invest in an overseas share fund youre taxed,in some cases,as I understand,in unrealised gains. This will more than likely result in repatriation of a lot of investers funds which will more than likely be invested in real estate. My guess is that with more money staying in the country the exchange rate will be pushed up,thus leading to artificially low interest rates.Not to mention the fact that high interest rates make it hard for our farmers to remain competitive.So why not subdivide the farm? In addition we off loaded a lot of our state houses,so instead of providing paid for housing to low income people our government pays them an accomodation supplement to pay their rent to a private landlord.If the governments paying your rent are you going to care how much the rent is?
Harold Chambers
The article suggests to me this study is being (mis)used to promote a developers agenda. How does the high cost to average income ratio in NZ support the hypothesis that there is not enough land being made available for housing? West Europeans live in far greater housing density that NZers and I would suggest have better societies for it. Greater London has 6 times the population of Auckland on a similar area of land, and I believe London has as much or more public open spaces than Auckland. In terms of urban design we are missing something. I could rant on about changes to come with massively increased fuel and food prices (scenario of peak oil and gas - the implications for transport are obvious, for food less so - natural gas = fertiliser = ability to massively increase output per hectare of land). This lifestyle of easy motoring and cheap food is going to change dramatically. In the future are going to need to live close to where we work and grow food close to where we live. Opening up more of the best farmland for urban sprawl will not help. Julie Anne Genter has already eloquently stated a case against sprawl a la the American model. Others seeking to buy homes have pointed out the effects of immigrants. Returning NZers with pockets full of USD or Sterling have a similar effect. Personally I think a capital gains tax is well overdue and is the only thing that will help in the short term by reducing the speculative aspect of property accumulation by the already rich; mortgage interest tax relief will only bid prices up further (look at the UK for a test case on that one). In the longer run, we need to completely redesign the way we live. It is time to wake up to probability that the car based suburban experiment of the past 60 years will soon have run its course. The sooner we start accepting that well constructed low rise (3 -4 storey) high density housing is desirable, (not isnt Coro St hideous!) the better.
Jackie
All I know is I have lived in London for ten years and I can not afford to move home!!!
Glenn Le Gros
As in USA introduce a 40 per cent Capital Gains Tax if a home is resold within 2 years. Put more liablity on the sellers of property by introducing a sellers disclosure statement that they must fill out and sign. Overhaul the Real Estate industry. Have specialist buyers agents and specialist seller agents. Make dual agency illegal. Relax Resource Management act to make land more available for development. Also, make the process less expensive and easier to subdivide rural land (I have so far spent $30,000 and taken 2 years to get to the hearing stage of helping my parents subdivide a 5 hectare property with road frontage in Rodney county).
George
With the current tax regime & mediocre salaries (compared to whats offered overseas) it's a wonder anyone can afford their own property For a start, lower income taxes.
Kai Liu
Its very naive to think that cutting immigrants and releasing more land for developing will solve the current housing crisis. Housing will be less affordable without the economic development brought forth by immigration and unlimited use of limited resource. Developing affordable housing is one of the reasonable solutions. We have to compromise our kiwi dream of a stand-alone house with a garden if you want to own a place of your own.
Russell
The NZ house market seems completely sound to me. I have just bought my 20th rental property and while I am almost drowning in debt things should soon come right as my portfolio experiences the captial gains that I have come to expect from NZ property - well this is what the real estate agent told me anyway. Diversification? not likely mate, all your eggs in one basket I say. Now, where are my trustworthy debt ridden tenants of the type that keep bleating on about not being able to afford a house?
M
As a 32 year old living (in Auckland) from abroad for 2.5 years I have to call attention to the significant social implications this has. I have lived in 5 cities all over the world and have never seen a place become such a ghost town so fast. The high cost of living is killing the generation from 25-35. As Bollard has said older generation are benefiting from the transfer of wealth from the younger generation. More and more debt needs to be taken on if you want to even try to buy a house/property. That in itself is debilitating and engenders lots of sacrifice. In the 2.5 years I've been here I've seen fewer people of my generation out and about. We're cutting costs to try to afford the housing while older generations are reaping the rewards of the boom. And most of the houses or rentals are not well made at all! You're paying more for less! This boom has nothing to do with productivity either which is worrisome to me. I am now giving serious thought about whether I should stay here due to this. When you have such high property prices that causes such a social crisis (I really believe that) who wants to stay here? I can move to Brisbane and my money will go much much further. In sum higher housing costs in a city which lacks most of the infrastructure of other similar cities, doesn't have much of a cultural offering, has unpredictable weather, and, to top it off is incredibly frustrating from a single person's standpoint is not going to be 'sticky' enough for younger generations. There' an ache here amongst my cohorts I dont experience anywhere else and they are yearning for other places. How do you build a great city if you can't keep the most productive or those with great potential here? And the biggest problem is that the ones who are in charge of change are from a generation benefiting the most sot hey do not feel how acute the pain is.
Michelle Taylor
An average income of $57,000? A few big-wigs skewing the figure? You have to be stupid to believe that is a reflection of reality. Your average NZer will be lucky to earn $35,000. So make that over 12 years. The say our population is stagnating. We will never reach 5 million people, we will do a u-turn at about 4.8 million they say. We need immigration to make sure the population increases (and who cares if they are useful immigrants, anyone will do). Your average $35,000 each couple from NZ are faced with two choices. you can either buy a house OR have kids, you cannot do both. My partner and I have one child, we could never afford another. We have a nice house in a bad suburb. My wages cover the mortgage, we live off his. He has a trade and earns $32,000 and I have a professional job and a big student loan all so I can earn $45,000. We are lucky compared with most of our friends who will never be able to have a house. In order to afford to have one child I have never been able to stop working. We saved like mad and I got 3 months off, my stay-at-home friend looks after her during the day as we cannot afford childcare, not if we want to own a car. My mother paid the deposit. You forget about the things like rates, expensive food ($4.50 for 1 cauliflower??), expensive power (babies need warmth and food, FFS, I had a power bill of about $400 in the winter), etc.
We could never have been young with hopes and dreams of a family and a home if it werent for others helping - mum for the deposit, friend for the childcare. What about two people earning $35,000? they could never have both. how do you expect a country to prosper when people cannot reproduce and provide safe and affordable homes for their kids.
I know people better off than us who are on the dole. They have babies in exchange for the DPB etc. They never seem to have a problem buying prams (thanks winz!) or food (thanks winz). They have no incentive to work, they sit and laugh over a beer(thanks winz) about it. I feel so sorry for people who grow up living the dream only to find it shattered. I will miss out on all my babys firsts because I have to sit here at this stupid desk just to pay my excessive mortgage, not to mention the rates and phone about to go up She will never get to go to disneyland... if something happened to one of us we would be screwed, its enough to pay for car insurance, house insurance, contents, forget health or life.We can't get WFF, and even if we could - you know your country is in a sick state when even the working class need handouts.
Catherine
It really grates me that the babyboomer generation was able to buy housing at affordable prices, with nice government grants and free university education. Once they get into parliament then the next generations are saddled with huge debts to be able to complete an education and on top of that the babyboomers use their cheap homes to buy tons of investment properties which price first home owners out of the market. Its pure greed. Its also our free market economy that the government refuses to reign in. When I lived in Europe the rental market was controlled by a number of big companies, not ma and pa investors, the rents were controlled by government caps and people could rent the same house their whole life pretty much. This has been good for society cohensien and community life. For all you property investors out there I wish you could experience the stress of the renters that have to move every few months/years, the uprooting of children having to always move schools. That is why people will take on huge mortgages, they want a stable life for their families.
Des in Auckland
My idea of living and buying a home offshore is becoming more realistic and appealing each day. Growing up here in NZ attending from the early years of primary school right through to tertiary education graduating in an exciting career and working within my profession and also starting up a young family, I am saddened by the fact that my future opportunities in buying a comfortable home for my family and I so far will not be here in NZ unless something happens soon.
Henry Wiley
The price of all commodities whether its bread, international toll calls, petrol or housing is based on a simple market principle of supply and demand. The greater the excess of supply to demand, the lower the price. If demand exceeds supply then prices go up. In Auckland, as in London, Los Angeles, Sydney etc, the high prices are due to the low supply of land. Prices for sections in Auckland have reached ridiculous heights. 1/4 million dollars for a postage stamp 500 square meters and 1/2 million dollars for 1100 square meters. Add the cost of a new house to that and only two or more incomes can afford either. The only solution is for councils to free up land by re-zoning rural areas in a big way, then competitive pressures will bring the prices of land, new homes and eventually existing homes down.
Michael Earley
As a 22 year old who is about to purchase my first home (in Auckland of all places) It is interesting to read the views of most in regard to the article, all of which call for greater government intervention and meddling in to our day to day lifes and business activities. And all of which have the potential for perverse incentives and unintended consequences.
- The racists, nationalists and ignorant among us call for restrictions on immigrants and foreigners purchasing property as apparently this artificially increases the price of property. They fail to recognise that New Zealand is a nation full of immigrants, and removing immigrants from the economy hurts us at all levels of society, also, those who can afford central Auckland property tend to be on a decent income, and citing the brain drain are not the sort of people that we should lose.
- Others dislike property investors and speculators who invest in rental properties i.e. those of whom that are taking responsibility for their own future and retirement. They must remember that if it was not for these property investors, there would be less development, and less rental property available for them. Those on even lower incomes than themselves might struggle to be able to find an affordable property to rent. Also, those whom are providing for their retirement are much less likely to be a drain on taxpayers in the future.
- Wage rises (I'm assuming this refers to government intervention) are inflationary, and all they do is hurt the most vulnerable workers - as the first to be laid off will be the least experienced and youngest as most small businesses dont have an unlimited fund to pay for increased employment costs. One only has to look at the amount of retailers that close on holidays as it is simply too expensive to pay the extra wages. Wage rises have to happen when employees actually add extra value, above and beyond what they are already earning - noone is entitled to additional wages for no reason other than they wish to purchase a house.
- Capital gains taxes only punish those who have been savvy in their investments or added value to their property. A capital gains tax is merely an envy tax, which redistributes wealth from those who have earnt it with their mind, is placed in the consolidated fund and given to those who do nothing but leech off the taxpayer.
- Restrictions on the percentage that people can borrow. i.e. 100 per cent home loans. All this does is prevent those who cannot get a deposit but have a decent income from purchasing. It is up to the lenders to assess the risk, not the government. This would prevent more people from getting into housing, not help them.
Things that will work:
- Looser planning regulations. Council planning and zoning, along with the Resource Management and other pieces of environmental legislation make it harder to develop land, add to the costs, and inflate the price of property - achieving little.
- Removal of school zoning, grammar zone residents will hate this, but zoning *does* artificially inflate housing prices in the central Auckland and other regions.
- Reduction in local government and capping rates. Once you get a home you are stung with thousands of dollars in rates to pay for services you neither want nor need. Reduce local government bureaucracy and make services user pays, that way homeowners are not subsidising the services used by various minority interest groups who are good at lobbying for other peoples money.
- Lower tax rates. Let people keep more of their own money. If they want to have a house they can put this towards mortgage payments and saving for a deposit. My tax covers half of what my monthly mortgage payment would be if I was to purchase a 2 bedroom unit in the city. As with above, I would not be paying for services that I neither want, use or need.
In a nutshell, New Zealand would achieve higher rates of home ownership with less government intervention - not more. People refer to investment vehicles, foreigners, negative gearing etc as distortions to the market, of which none of these are. There is only one thing that can distort the market - and that is government intervention. For those who see the government as an answer to all their problems - they should consider looking at themselves for the answer first.
Jeff
Funny that the Housing Minister, who says hes worried about the problem is also a residential property investor. Is it any wonder we wont see an end to loss making speculative property investments that have capital gain as their only objective? The Minister should consider the enormous social costs of excluding so many New Zealanders from homes of their own.
Andrew Atkin
Because there is an under-supply of affordable housing, and because people will pay whatever they can for a stand-alone house (if they must), the price of housing has increased all the way to what is ultimately affordable. Hence, I believe the best thing we can do for a rapid price-correction, is regulate the banks to reduce effective house affordability. This means making it illegal for banks to lend mortgages above, say, 4x household annual income. This would dictate a rapid correction because it would become literally impossible for homes to be sold at the silly prices that we see today. I know this solution is a bit invasive, but we do have an affordability crisis on our hands. I therefore believe it is warranted as a short-term solution at least. After this we should accelerate land supply (possibly through legislative means), and also hold back on immigration. We can also look at increasing our supply of tradesman, but I think the government is already doing this?
Seine Tauia
I have lived in NZ for 40yrs and all my life I had wanted to buy a home where I can call my own but I can't afford it because the Government takes away too much of my pay. I a solo mother living in Sth Auckland with 3 children. I work t
