Declining Home Ownership
25 June 2002
Declining Home Ownership A Reflection Of Social And Economic Issues,
Not Desire - REINZ
The decline in home ownership levels in New Zealand is a reflection of changing social and economic conditions - not a disaffection with home ownership - according to a Massey University/Real Estate Institute of New Zealand Survey of those renting property in the private sector.
While home ownership in New Zealand has fallen from a world high of 73.7 percent in 1986 to 66 percent by 2001, 60 percent of those surveyed said they planned to own their own home. Of these 30 percent aimed to own within 3 years.
This latest survey of 350 people renting properties was designed to identify the motives and circumstances of those renting rather than owning property, and was carried out in May by a team led by Professor Bob Hargreaves from Massey University’s Department of Finance, Banking and Property in Palmerston North.
The National President of the Real Estate Institute of New Zealand (REINZ), Mr Rex Hadley, today welcomed the research findings “because although they paint a rather sad picture for some of those renting because of economic necessity, they also confirm that the ethic of home ownership is alive and well with the vast majority of those renting planning to achieve home ownership as soon as they can.”
Mr Hadley says much has been said about our “excessive’ levels of home ownership from a savings perspective.
“There are no shortage of critics of New Zealand’s relatively high level of home ownership which is claimed to show a lack of savings, and those people tend to hold up the higher personal savings of some Asian and European countries, and their proportionately lower levels of home ownership, as a good example.
“Interestingly enough, the international benchmarks for the survey showed Singapore has the world’s highest levels of home ownership as well as having a high level of personal savings.”
Mr Hadley says the belief in home ownership as a form of savings is underlined by the survey with only 7 percent of respondents believing they can receive better returns elsewhere.
International figures show New Zealand shares the same level of owner occupation as the United Kingdom, is higher than Germany on 51 percent, but lower than Australia on 70 percent, Ireland on 80 percent and Singapore on 90 percent, all countries with reputedly a better savings ethic than New Zealand.
“This survey clearly shows that New Zealanders prefer to own their own homes but are finding that goal increasingly harder to achieve, with financial constraints and job security being the two largest impediments to achieving home ownership.”
The survey identified insufficient job security as an important reason for not buying a house with 62 percent of respondents specifically citing lack of job security as the main employment-related reason determining their decision not to buy.
Financial constraints were illustrated by the finding that 44 percent found they were unable to save a deposit because of insufficient income while an additional 27 percent identified the need to clear existing debt as their primary financial goal.
In overall rankings, financial circumstances were cited by 71 percent of respondents as reasons for not buying a home while other factors such as career and lifestyle scored less than 15 percent each.
The overall conclusions of the survey were that:
Factors driving the trend to renting, include
- Labour market changes, including corporate downsizing and global competition, and shorter worker contracts - Societal changes, with families forming later and delaying marriage and children. More solo parents and single person households.
Factors found appealing about home ownership, include
- Lifestyle - Security of tenure
- Pride of ownership - Status
- Ability to alter to suit - Property owning democracy
- Investment “good’ (ownership) - Consumption “good’ (provides shelter, privacy, a desirable location, and superior amenities)
Mr Hadley said that the encouraging finding was that 43 percent of respondents agreed or strongly agreed that buying a house was a priority, and 60 percent of respondents strongly disagreed or disagreed with the proposition that home ownership tied them down.
When asked whether renting gave more money for personal consumption, 55 percent strongly disagreed or disagreed, suggesting, “the home ownership and saving ethic in New Zealand remains intact” according to Mr Hadley.