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

 

Future Brighter Money: RBNZ Releases New Bank Note Designs

New Zealand’s banknotes are getting brighter and better, with the Reserve Bank today unveiling more vibrant and secure banknote designs which will progressively enter circulation later next year. More>>

ALSO:

Commerce: Supermarket Inquiry Finds No Breaches By Countdown

The Commerce Commission inquiry into anti-competitive behaviour by Countdown supermarkets, alleged by former Labour Party MP Shane Jones, has found nothing to warrant prosecution, although it warns supermarkets to take care in the way they communicate... More>>

ALSO:

Crown Accounts: English Flags ‘Challenge’ To Budget Surplus

Finance Minister Bill English is warning next month’s half yearly fiscal and economic update from the Treasury may not forecast a budget surplus, saying that returning the government’s accounts to surplus in 2015 will be “a challenge”, given the decline in commodity prices and weak global inflation. More>>

ALSO:

March 2015: Netflix To Launch In Australia And New Zealand

World’s Leading Internet Television Network to Offer Original Series, Movies, Documentaries, Stand-Up Comedy Specials and TV Shows for Low Monthly Price More>>

ALSO:

Price Of Cheese (Is Up): Dairy Product Prices Fall To Five-Year Low

Dairy product prices fell in the latest GlobalDairyTrade auction to the lowest level in more than five years, led by declines in rennet casein and skim milk powder. More>>

ALSO:

Gordon Campbell: On The Australians Scoring Trade Points Against Us With The Chinese

It hasn’t been a great year for Trade Minister Tim Groser... To top it off, Australia has just signed a FTA with China that has far better provisions on dairy exports than what New Zealand currently enjoys in our own FTA with China. More>>

ALSO:

Iwi & Local Consultation: Oil And Gas Block Offer 2015 Begins

Energy and Resources Minister Simon Bridges today announced the start of the Block Offer 2015 process for awarding oil and gas exploration permits. More>>

Industrial Action: Stats NZ Throwing Public Money Away Duplicating Data

The Public Service Association (PSA) says Statistics NZ are throwing money away by collecting the same data twice for official statistics such as the Consumer Price Index... As part of the ongoing industrial action, field interviewers who are PSA members are continuing to collect data, but are not sending it through to Statistics NZ. More>>

ALSO:

Other Stats:

Space: Rosetta's 'Philae' Makes Historic First Landing On A Comet

After more than a decade traveling through space, a robotic lander built by the European Space Agency has made the first-ever soft landing of a spacecraft on a comet. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news