Young squeezed out of buoyant housing market
For immediate release
Monday, September 1, 2003
Young people squeezed out of buoyant housing market
First home buyers are increasingly being shut out of the New Zealand housing market and consigned to the long term rental of homes owned by other people, according to United Future Revenue spokesperson Gordon Copeland.
"A combination of factors, perhaps unique in New Zealand's history, have come together to generate a mini economy arising from the increasing propensity of New Zealanders to buy up residential property for investment purposes.
"This activity has helped to crank up the price of housing stock right throughout the country, creating record high levels of mortgage debt and leaving first home buyers out in the cold.
"This in turn holds up rental prices and enables investors to achieve a rate of return as good or better than that available from other forms of investment," said Mr Copeland.
"This may be great for investors but the downside is that more and more New Zealanders are finding home ownership completely beyond their reach.
"In addition young families who are able to find the deposit for a first home are faced with the stress of endeavouring to service a huge mortgage which greatly reduces their ability to meet day to day living costs and raise the kids.
"Day after day the housing boom is written up in the press as if it were a road to wealth for all New Zealanders but any such analysis overlooks the negative consequences of the situation we now face. There is a very real downside to it and I worry about the impact of it all on New Zealand families."
Mr Copeland pointed out a recent ASB Bank survey shows that at existing housing price levels the 20 percent deposit required for a new house is now equal, on average, to two and a half times the average annual salary.
"Also average mortgages are now 14 percent higher than they were last year so whether renting or owning, the financial pressure placed on young couples and their families is hugely negative.
"Faced with these realities Government should not stand idly by.
"Rigorous analysis needs to be undertaken concerning the factors which have led to this situation, (e.g. NZ interest rates the highest in the developed world but still low in relation to what kiwis have traditionally had to pay, and a concentration of household investment in rental properties because of low interest and stock market returns etc), followed by an overhaul of Government policy to ensure we do not deny the possibility of home ownership to the next generation of NZ families."