New Zealand housing “a ticking time bomb”

Tracy Watkins, editor of the Sunday Star-Times, published an impassioned article on the corrosive impact New Zealand’s multi-decade house price boom is having on society, which she labels a “a ticking time bomb”.

According to Watkins, homeownership was once a “rite of passage” for Kiwis, but has become a “thing of the past” as New Zealand’s housing market has become “among the most unaffordable in the world”.

New Zealand home ownership rate

New Zealand’s home ownership rate has fallen sharply.

While the overall home ownership rate has fallen from 74% in 1990 to 64.5% in 2018, as illustrated in the above chart, the impact has been most severe for younger Kiwis, according to Watkins:

In 1991, 61 per cent of people aged 25 to 29 years lived in an owner-occupied home. By 2018, this had dropped to 44 per cent. Similarly, for those aged in their late 30s, the rate dropped from 79 per cent in 1991 to 59 per cent in 2018.

This home ownership data also understates the situation, since New Zealand house prices have soared nearly 40% since 2018. Thus, the situation would be far worse today. Moreover, far fewer people in New Zealand own their homes outright.

Regardless, the rapid appreciation in dwelling values combined with the falling home ownership rate has caused a “growing divide in New Zealand, between the propertied class, and the rest”, and this presents a “ticking time bomb” for New Zealand’s future:

Increasingly, you need parents, or family, with property to have any hope of getting onto the property ladder – and that’s an advantage that carries over into retirement as well, with the number of people retiring either dependent on rental accommodation, or still paying a mortgage, on the rise.

It’s a ticking time bomb for the future.

The soaring cost of housing has also damaged the attractiveness of New Zealand, which is why so many young Kiwis leave for greener pastures and better opportunities. It also means New Zealand is a poor option for the increasing numbers of people retiring without owning their home:

For many, many families, New Zealand is no longer a great place to be a child – and in the future not such a great place to grow old either.

The reality is despite record low employment, the problems of entrenched poverty, and housing inequality, are bigger than they ever were…

Neither of which is going to be much comfort to the Kiwis for whom a Lotto win is the only path to a comfortable old age.

Many of the same issues apply in Australia. The difference is that Australia still has some relatively affordable cities, such as Brisbane, Adelaide and Perth. By contrast, New Zealand’s dwelling values range from expensive to absurd after experiencing insane growth in 2021, as illustrated below:

New Zealand dwelling values

Source: CoreLogic

Finance commentator Bernard Hickey once said that “New Zealand is a housing market with an economy attached”. The statement is truer today than ever.

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  1. The Travelling PhantomMEMBER

    “Finance commentator Bernard Hickey once said that “New Zealand is a housing market with an economy attached”. The statement is truer today than ever.”

    He Should have added Australia too in that sentence

  2. The Grey RiderMEMBER

    “New Zealand is a housing market with an economy attached”…good quote. Same applies to Australia.

  3. kiwikarynMEMBER

    We spend all our taxpayer dollars on growing young Kiwi’s to adulthood, educating them, then we pack them off overseas so their skills can benefit countries like Australia, the UK and USA. Then we replace them with low skilled immigrants from the third world. I’m sure thats going to work well for New Zealand in the long term. Maybe NZ will be next on China’s takeover list after Taiwan, when they get bored with the Solomon Islands.

  4. In the 1930s some countries spent big on armaments to successfully lift much of their population from the depths of the depression. By the end of the 30s many more countries were beginning to do this as well as spend on infrastructure such as railways and dams. By the mid- 1940s most broke free of the depression through increased war spending and enetered a long boom…. Not so New Zealand.

    NZ sank into the depression like most places, but spent big on forestry, logging, sawmilling, and house construction. This spending created a cycle of employment and the employment meant people could afford to buy the homes being built. NZ got out of the depression by building homes not guns and tanks, and at the end most people owned or were buying their own affordable home. Whatever happened to the place?