Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Embrace falling home affordability, says NZIER

Embrace falling home affordability, says NZIER

By Pattrick Smellie

July 18 (BusinessDesk) - Despair over the inability to afford a house is misplaced and should be embraced as an opportunity to invest in more wealth-creating activity, says the principal economist at the New Zealand Institute of Economic Research, Shamubeel Eaqub.

"The fixation with home ownership is causing social inequity and despair," said Eaqub, releasing a new study on New Zealand's "crippling" home affordability problem.

“People fear being locked out of a traditional route to financial security, as almost 70 percent of New Zealand’s household net wealth is stored in housing. At today’s prices, an average Auckland home will take 50 years to pay off on an average Auckland salary. In the early 1990s, the average Auckland home took 30 years to pay off.”

"Home ownership rates are at their lowest since 1951," said Eaqub, "but rather than obsessing about that, it is a trend New Zealanders should embrace.
“Economies prosper when people invest in business, not just housing. We need to create level-playing fields for different types of investment, and parity between renting and owning, to support a much needed cultural change around housing.”

New Zealand had one of the least "renter-friendly" regimes in the world, reform is needed to stop banks favouring home mortgages over other forms of lending, and the tax system contains advantages for real estate that don't exist for other classes of investment.

Planning rules also need to improve the supply of land and housing supply, which is currently slow to respond to signals that more housing is required to meet population growth and household composition changes.

"There is no easy or quick fix to New Zealand's over-valued housing market," the report, titled "The Home Affordability Challenge", concludes. "Not one single change will be enough. The solutions need to be a complementary set - it's like taking a Swiss Army knife to a knotty problem."

The report identifies a "culture of home ownership and housing investment" as being one of the factors causing the affordability problem.

However, over-exposure to property values carries risks for financial, economic and social stability in the event that house prices drop dramatically, with some measures showing New Zealand houses are over-valued on a globally comparable basis by about 26 percent. Auckland's siting on a narrow isthmus tends to push land prices higher because it is physically constrained, making efficient investment in roading and public transport difficult, the report suggests.

It also says "Australia and New Zealand are some of the most ‘restrictive’ rental jurisdictions from the viewpoint of the renter. Lease terms are short, tenants can be asked to move with short notice, leases can be terminated on almost any condition as long as notice is given, and personal customisation is often difficult."

Changes to prevailing lease conditions would make renting less unattractive, and the report notes that rents have remained stable while the cost of buying a home has increased in recent years.

Fears that an influx of foreign investors is boosting house prices are "unfounded," the report says.

"The most commonly described foreign investor is someone who comes with a wad of cash or has borrowed large chunks of money offshore to buy a house in a posh suburb and leave it empty. The data simply do not support these anecdotal observations."

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Must Sell 20 Petrol Stations: Z Cleared To Buy Caltex Assets

Z Energy is allowed to buy the Caltex and Challenge! petrol station chains but must sell 19 of its retail sites and one truck-stop, the Commerce Commission has ruled in a split decision that acknowledges possible retail price coordination between fuel retailers occurs in some regions. More>>

ALSO:

Huntly: Genesis Extends Life Of Coal-Fuelled Power Station To 2022

Genesis Energy will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they'd be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up. More>>

ALSO:

Dammed If You Do: Ruataniwha Irrigation Scheme Hits Farmer Uptake Targets

Enough Hawke's Bay farmers have signed up for water from the proposed Ruataniwha Water Storage Scheme for it to go ahead as long as a cornerstone institutional capital investor can be found to back it, its regional council promoter announced. More>>

ALSO:

Reserve Bank: OCR Stays At 2.25%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.25 percent, in a decision traders had said could go either way, while predicting inflation will pick up as the slump in oil prices washes out of the data and capacity pressures start to build in the economy. More>>

ALSO:

Export Values Down: NZ Posts Biggest Annual Trade Deficit In 7 Years

New Zealand has recorded its biggest annual trade deficit since April 2009, reflecting weaker prices of agricultural commodities such as dairy products, beef and lamb, and increased imports of vehicles and machinery. More>>

ALSO:

Currency Events: NZ's New $5 Note Wins International Banknote Award

New Zealand’s new Brighter Money $5 note has been named Banknote of the Year in a prestigious international competition. The $5 note was awarded the IBNS Banknote of the Year title at the International Bank Note Society’s annual meeting. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news