Thought for this Day: Empty Houses as Second Residences

Thursday, 26 March 2015, 3:18 pm
Column: Keith Rankin

On 23 March I wrote in Scoop about Graham Adams' article in North and South (April 2015), which attributed Auckland's housing crisis to easy credit. In the same edition of that magazine is an article ("Running on Empty") by Joanna Wane that features my views about the matter of houses in Auckland being empty much of the time.

It's good that outlets like North and South are investigating the issue in a serious way, and not just accepting the usual platitudes about the need to open up more land on the city fringe and build more houses there. Further, as long as houses bought for high prices are rented out and in a way that facilitates the requirements of Auckland residents, then there is no housing crisis, only a financial bubble. It doesn't matter who our landlords are so long as they are good landlords.

The issues then are those around the wider issue of people demanding multiple residences rather than investment properties to let. And the issue of people being poor landlords offering insecure tenancies.

In New Zealand we are familiar with the notion of households owning second homes as second residences. The best example is the traditional seaside bach or crib, casually known these days as the beach house. Generally both home and holiday house are fully furnished by the owner, and neither house is suitable for normal letting to renters. (Normal letting is of unfurnished properties.)

By and large this has not been a major housing problem, in that these second houses have been located in the main in places with few jobs and therefore little demand for long-term rental accommodation. The problems have been more environmental, with houses empty of people most of the time displacing nature. And there is the social environmental problem of winter ghost towns. Certainly this social problem is eased by short-term rentals of such furnished properties, though these renters of course are mainly people on holiday who already have a home.

When however we think of this multiple-residence phenomenon more globally, we can see that New Zealand as a whole can be to residents of Sydney or Singapore or Shanghai (or any number of other places) much as Waihi Beach can be to residents of Auckland; a location for a global holiday home. Here the problem of course is that every Auckland home that is a second residence is one house less that is available for Aucklanders to live in as their primary residence.

We note of course that people who own second residences globally may themselves be New Zealanders, in many cases expatriate Kiwis. And, being largely people with high means – including the means to get highly leveraged loans – these people are substantially property speculators as well as multiple residence households. In noting this, we also remember that New Zealand residents who purchased coastal property (and often built very flash – though often empty - beach houses) were also ate least as much property speculators as people simply seeking weekend solace by the ocean.

Managed well, the global 'Book-a-Bach' set can provide useful short-term furnished rental properties in Auckland and other cities which have many visitors who might want to stay for a month or two. Nevertheless, many of Auckland's properties that are empty for most of the time will be furnished but unavailable to rent. The earnings available from short term rentals may barely compensate for the inconvenience, and will be small bikkies compared to the anticipated leveraged capital gain.

The other important group of empty properties is houses in poor state of repair sitting on appreciating land. These properties are attractive for speculative land-banking purposes. Too much hassle to let; no hurry to rebuild. They may just sit there in their near-dereliction, until sold on to a buyer with a use for that land in mind. That buyer might just be a foreign resident planning to build a holiday home in Grey Lynn or Sandringham; not someone who has any interest in housing Aucklanders.

ENDS

© Scoop Media

Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

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