New NZ PM facing immense pressure over housing

By Leith van Onselen

Yesterday’s release of the 2017 Demographia International Housing Affordability Survey has stepped-up pressure on New Zealand’s National Government, and new Prime Minister Bill English, to undertake genuine housing market reforms in a bid to restore some semblance of affordability.

The latest Demographia report showed New Zealand’s Median Multiple (median house price divided by gross annual median household income) jumping from 5.2 to 5.9, pushing New Zealand to second spot out of the eight countries surveyed (see next chart).

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New Zealand’s biggest and most expensive city, Auckland, also climbed to fourth spot on the rankings of most unaffordable housing markets, up from fifth position in 2016:

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Demographia’s finding that New Zealand’s housing market has become increasing unaffordable was backed-up by newly released RBNZ data, which showed the value of New Zealand’s housing stock hitting a new all-time high relative to the size of the nation’s economy, surging to an unprecedented 391% of GDP as at September 2016, up from 351% the year prior:

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A poll in December from Roy Morgan Research suggested that new Prime Minister Bill English needs to find a solution to New Zealand’s growing “housing crisis”, with 27% of respondents citing housing affordability (17%) and homelessness/housing shortages (10%) as the key problem facing the nation – well ahead of the other issues.

The concerns are loudest in Auckland, where housing ranked as the key concern among 37% of residents, namely housing affordability (25%) and homelessness/housing shortages (12%).

Yesterday, the ACT Party’s leader and sole MP, David Seymour, publicly attacked the National Government for its failure to address the housing crisis during his State of the Nation address in Auckland. From Newstalk ZB:

Given the average National MP owns 2.3 houses, Mr Seymour stated, it’s possible they just don’t care about housing affordability.

He also said their lack of ambition is not surprising, given their belief that rising prices would keep the economy buoyant, and therefore would keep them popular.

Mr Seymour said it will go down as one of the most cynical pieces of politics in New Zealand’s history.

“They’re now in big political trouble because they can’t credibly say they’re going to fix something that they’ve been denying was a problem for a long period of time, when the majority of even their  supporters think it is a problem.”

Mr Seymour said the Government will only be able to successfully address housing affordability with ACT’s help.

“We’re going to actually accept that there’s a problem. We’re going take serious action including new legislation on urban planning, new funding for infrastructure, and new ways of consenting builds so that there will actually be a supply of housing in New Zealand.”

Prime Minister Bill English has a good understanding of the impediments to affordable housing in New Zealand. After all, he did pen the introduction to the 9th Annual Demographia International Housing Affordability Survey, whereby he noted among other things:

“Housing affordability is complex in the detail – governments intervene in many ways – but is conceptually simple. It costs too much and takes too long to build a house in New Zealand. Land has been made artificially scarce by regulation that locks up land for development. This regulation has made land supply unresponsive to demand. When demand shocks occur, as they did in the mid-2000s in New Zealand and around the world, much of that shock translates to higher prices rather than more houses. It simply takes too long to make new land available for development”.

Now that Mr English is Prime Minister, he must turn his concerns into concerted policy actions to return New Zealand’s housing back to more affordable levels. Otherwise, he will eventually experience pain at the ballot box.

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Comments

  1. Great work Leith … and thank you.

    I think the yapping has gone on long enough !

    Here is what former PM Key had to say back in 2007 when he was Leader of the Opposition … JOHN KEY – HOUSING REFORM – 2007 …

    https://www.youtube.com/watch?v=cWPgoAI1cLE

    … and check out the screeds and screeds and screeds of stuff at my archival website PERFORMANCE URBAN PLANNING …

    http://www.performanceurbanplanning.org/

    There is a broad consensus across the country on whats required to deal with these issues.

    The only obstacles are political incompetence and inertia.

    • I think the yapping has gone on long enough !

      But that’s all these discussions ever are, is talk, talk talk, followed by 0 action. Which is why it will remain this way until it all implodes. It’s now becoming politically unpalatable to not recognise the problem, so current governments will just talk talk talk about supply response being needed, no talk of tax issues, no talk of foreign buying driving prices higher, poor lending standards from banks etc.. no no no. None of that will be discussed.

      instead it will all be discussions around supply so their developers can lick their lips knowing they’ll be given the green light for the next lot of shit shacks to go up.

  2. Bill English! What a guy. This sort, to be precise:

    “Prime Minister Bill English is distancing himself from registered financial service provider Fullerton Markets, which by its own admission, has breached New Zealand law…(It) has posted photos of its Singapore-based CEO Mario Singh with Prime Minister Bill English….Fullerton Markets says it operates out of Wellington specialising in currency (forex) trading, the derivatives product CFDs….”

    In Bill English we have another “Leader’ who will do precisely NOTHING unless it involves actions that assist a privileged few. I give you Bill English – the man who helped oversee the scrapping of regulations that should have seen the creditors of South Canterbury Finance limited to Government Guaranteed $1,000,000 each ( itself not an insignificant sum) and yet when push-came-to-shove the amount was uncapped, allowing at least one reputed party to receive +$60,000,000 of their funds back, and those who’d sold their bonds ahead of that decision at -30 cents in the dollar looking rather stupid, all at the New Zealand taxpayers’ cost.
    Bill English…..savior of the New Zealand economy?! Don’t make me laugh…or is that cry?

    NOTHING is going to get done to solve the Kiwi Crisis, which is at its heart is a massive household debt crisis. NOTHING.
    So don’t get carried away. Perhaps David Seymour, the leader of a minnow party that is supposed to be Bill English’s parties ally, has a better vision?

    One obvious response is, who cares? New Zealand currently has one of the lowest rates of elder poverty in the world. If you own your home then you can live on a $385-a-week State pension. But if you have to pay rent, you’re in big trouble.

    Only 60 per cent of people in their forties own their home. When that generation retires, there will be a lot more people in trouble. Some people think the housing market is a young person’s concern, but it spans across generations. I am hearing from people up and down New Zealand. It comes from people you’d least expect. From employers worried about their staff. From grandparents worried about their grandchildren, and from voters from Epsom to Invercargill. It is the feeling that New Zealand is no longer a place where anyone who works hard can own their own home.

    http://www.act.org.nz/posts/david-seymour-state-of-the-nation-speech

    • ResearchtimeMEMBER

      This is the great lie… The market is in imbalance! Its pure demand and supply, the pricing could be imbalance, but demand is not. The source of demand?

      Don’t address that (the source of that demand – and they won’t) – then every other measure is a nothing!!!!

      A growing country will always run behind. This is the nature of things…

      • The issue in Auckland is that supply is artificially restricted. This is the fault of the Auckland City Council.
        If you had ever been there you would see the suburbs are filled with thousands of quarter acre blocks with one small 3 bedroom post-war weatherboard on it, generally surrounded by lots of nicely mown grass.

        So many of these blocks could easily have apartments built on them, instead they have one little old lady rattling around in a house, wondering how she is going to find the energy to mow all that ruddy lawn. She can’t downsize to an easily maintained ground floor apartment because they simply aren’t available.

        I grew up in Auckland and have only returned once in the last 20 years. There has been virtually no development or change in the city in that time. With the exception of the waterfront at the bottom of Queen st, Auckland has been in stasis since I left.

      • kiwikarynMEMBER

        Not just Auckland Bubbley, that’s NZ all over. Same in Christchurch. All these stupid planning rules that say a house can only take up 40% (or whatever) footprint of a section blah blah blah. In Chch post earthquake they made an exception for newly built multi-title townhouses on a block – but only people aged over 60 are allowed to live in them. These small townhouses would be perfect for first home buyers, single people, couples without kids, or single parents with a child – but they are restricted to the elderly for some bizarre reason. Now having built a whole ton of them they sit there empty and devaluing, because it turns out there are not enough elderly people to buy them. Meanwhile all the other categories of people are priced out of the market, and would otherwise jump at buying a two bedroom brand new property in a nice area for $350k or thereabouts. Stupidity at its finest.

  3. And as has been pointed out before, Wendell Cox calculates the “national median multiple” simply by averaging the median multiple of all cities. It is not weighted by population of each city. If it were, NZ’s national median multiple would be much higher due to Auckland being disproportionately larger than all other cities.

  4. I’m constantly amazed at the distorted reality that many people in Auckland operate under. A big portion of the populace who have been “winners” in the great property inflation genuinely believe they are living in one the great Global cities!!

    Portions of this Nouveau riche have disappointingly disregarded any sort of social empathy in the name of believing they are some sort of Ayn Rand hero who has achieved their “success” by genius and work ethic.

    These people talk about the lazy poor and how Auckland is not for everyone. “People who can’t afford this city should look elsewhere” is a favourite calling cry from this species. Interestingly we find people are starting to come to this conclusion as all sorts of vital professions like nursing, teaching etc are suffering big crisis’s due to shortage as these ‘unsuccessful’ people leave Auckland.

    “We’ll bring in immigrants to fill the shortages” is the rallying cry to such minor concerns as little Jimmy having to share his teacher with 40 other students. The historically high and sustained levels of immigration are choking up already under pressure roading/health and housing infrastructure. “That’s fine, it’s a badge of honor about how successful Auckland is that these people want to come” as a common chirp.

    So we continue to pile 70,000 ‘new people’ a year from various desperate parts of the world. If I was these people anywhere would seem better than I was….

    These new people buy zombie business that make no money to satisfy immigration requirement and inhabit them for 2-3 years before getting citizenship. At this point these “badge of honor” people head over to Australia under CER policy as freshly minted NZ citizens and sell the Zombie company to the next batch of new people. As Fitzsimmons would say “gotta love this city!!”.

  5. reusachtigeMEMBER

    LOLOLOLOLOLOL!!! Less than half the people actually give a sh1t! The reality is that all right thinking people want property to boom as high as possible so as to maximise profits. But nah, let’s concentrate on the loser minority in a loser circle-jerk!

    • Actually all the right thinking people want to see a guillotine wheeled out into the town square, or perhaps anywhere in an unaffordable suburb for a visual spectacular every Saturday morning instead of auctions. Nothing to do with jealousy just justice and accountability, balancing the books upon those that have taunted us for a very long time.

  6. Sydney’s housing market second most expensive in the world | Daily Mail Online

    http://www.dailymail.co.uk/news/article-4149942/Sydney-s-housing-market-second-expensive-world.html

    … extract …

    … The survey compares major housing markets based on the ‘median multiple,’ a figure that is derived by dividing median house prices by median household incomes.

    Sydney scored a median multiple of 12.2, which means that a household would need to pool its gross annual income for 12 years to pay for a home up-front.

    Demographia considers a score of three or less affordable; anything over five is rated ‘severely unaffordable.’

    ‘These are lunatic figures, there’s no other way to describe it,’ Mr Pavletich told Daily Mail Australia.

    He went on to call Sydney’s housing market ‘a crisis situation.’ …

    … While state residents wait to see if the new premier can offer solutions, Mr Pavletich had one piece of advice for young families trying to start a life in Sydney: ‘Keep renting.’

    ‘Young people just want to avoid committing themselves to artificial bubble prices. They’re going to be faced with a life sentence of having to pay back excessive housing costs.’ … read more via hyperlink above …

    Demographia in the news …

    https://www.google.co.nz/?gws_rd=ssl#q=demographia&tbm=nws

  7. kiwikarynMEMBER

    Luckily they are going to change the bankruptcy rules to one year. That’s almost as good as having a non-recourse mortgage 🙂