The median house price in Auckland is now equivalent to 11.3 years of average income in the region. But even a significant drop in Auckland house prices of 20% between 2016 and 2020 would still leave this ratio at 8.6 years, which would be highly unaffordable.
Central and local government’s current efforts to boost the supply of new housing in Auckland will only go a small way to addressing the region’s housing crisis.
“New Zealanders’ aspirations of the size of house they can own, and particularly the amount of land that comes with that house, are not realistically aligned with our actual incomes and wealth positions. Land prices are particularly critical in Auckland, and by clinging to the Kiwi dream that we should all be able to own our little piece of New Zealand, a significant proportion of society is effectively being priced out of the housing market,” Infometrics Chief Forecaster Gareth Kiernan (pictured) said.
At a nationwide level, section prices rose from 27% of the average house price in 1984 to 55% by 2006.
“Home buyers’ expectations need to be realigned to a greater acceptance of terraced housing and apartments as liveable options,” Kiernan said.
“The reality is that, in larger urban areas overseas, having your own private yard is simply not viable for most of the population. New Zealanders need to accept the need for a more intensive dwelling stock – both potential buyers, as well as existing property owners who can be resistant to more intensive housing developments in their neighbourhoods.”
The need for densification in Auckland has been well signalled by planners and policymakers.
Infometrics believes it is important that high-density housing is built to a high quality, and that prices of units are not set at overinflated levels.
The reputation of apartment living suffered during the building boom in the first half of last decade, with construction typified by small and low-quality units that were not really fit for purpose, which were then sold at high prices as developers aimed to make as much profit as possible in a relatively immature market.
The second area where Infometrics believes a change needs to take place in how the property market functions is to improve the attractiveness of renting as an accommodation option.
Rental regulations that heavily favour landlords are a significant factor making renting a less appealing option than homeownership, while the absence of a comprehensive capital gains tax on property also boosts the attractiveness of homeownership compared to many other investment options.
“Leasing conditions in New Zealand are set up firmly in the favour of landlords and offer tenants little security of tenure," Kiernan said.
"The structure of the rental market in New Zealand is in stark contrast to what can be seen across much of continental Europe.
“On average, people are now paying an additional $11,300 per year above the cost of renting to service their mortgage.
"Changes need to be made to reduce the perception of inferiority that renting has suffered in this country, including the introduction of regulations that encourage longer-term leasing arrangements.”
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25 Comments
I suspect that apartments appropriate for reasonable living (180 m2 for a family) cannot be built at an affordable price and certainly not comparable to our grossly over inflated building costs for stand alone dwellings. It appears that the only way that the council can make it work is to artificially constrain land supply so that house prices become so stupidly high that the only option left to residents is to pay ridiculous prices for the ghastly shoe boxes that are being offered. The best thing that people can do is accept that they will never own a home worth living in, in Auckland and shift out. Most people would be better off living in their own home outside Auckland, either unemployed or working for a significantly lower salary, than trying own or rent a house in Auckland. The place is just not a workable proposition for normal people.
$7,600, gosh that is quite expensive. I have just put a 30 tube one on our house. Less than $3,000 for the parts including a mid tank element. Installed the hardware myself. Less than $200 for the sparky and $400 for the plumber. One thing I will say is that they are great and it should be mandatory that all new houses should be engineered to facilitate solar installation. Clearly making full installation mandatory is a bit tough when some folks are struggling to afford the new house.
180m2? My wife, my 16 yr old son our 7 yr old daughter and I live in a 100 sq m townhouse with one bathroom and it's fine.
Auckland should be delivering 3 bed 100 Sq m single storey townhouses on 250 Sq m for 450-470k max.
They are are doing this in outer suburbs of Aus cities for less than 400k. I say 470k max given our higher building costs
Looking around various sites, there is no longer a kiwi way of life - it's all glossy stories, and wheres the next event party.
They'll only just complain when the bills come.
It's Greece 10 years ago, all over again. even with the imminent rural collapse matching as well.
I really enjoy renting. My landlord just increased my rental by ...15%, today in the morning there was 9.8C in the lounge and 10.2C in the bathroom! He will never install the heat pump as ... he does not have to. I can't do it as it is a 'permanent installation'... of course i can put to electric heaters in each area but can't afford to pay $1000/month for electricity...
What house has a warm lounge or bathroom in the morning? Even insulated houses which have had a few rooms heated in the evening would have the lounge and bathroom down to those sorts of temperatures in the morning.
With a bathroom, in my view its always better to open the windows during the shower time and blast the steam out the window and later on close it up again. Zip to the warm lounge after the shower. No need to waste heat on the bathroom at all.
Have eastern curtains open, with double glaze windows and ranch slider/french doors.
insulated roof & floor & sourthern wall.
follow previous rules about humidity removal.
Add some form of floor surface heating. in slab heating, pumped heated water, IR lamps on timers that power up 30-60 minutes before rising.
Heat pump that comes on 30 minutes before rising.
equals warm house in morning. aspect and tree/bush arrange is also quite important.
They will not drop in Auckland - too much pressure from the level of migrants pouring in by the plane load and not enough homes being built to keep up with this. Nobody moving to Australia, interest rates now at 4.85% for 2 years fixed and a government that has no answers.
Comments like this scare the crap out of me, because it is representative of one of the main drivers of these unsustainable returns - the complete mispricing of risk by bandwagon jumpers. Prices will most certainly drop (plummet may be a better word) the very moment the market re-rates Auckland property, which could happen for any number of reasons. As soon as people start to get the idea that they'll achieve negative capital growth over a 5 year or so horizon, watch the bids drop out and the prices follow. Real estate is no different to any other speculative market - it just takes a bit longer for things to happen due to the reduced liquidity and longer information time-frame.
Yup. These markets don't stabilize, it's either up or down. Sentiment driven.
Once sentiment changes and taxi drivers aren't talking about their property investments it'll crash, hard. The question is, how high can it go? I suspect with hot Chinese money pouring in it will go stratospheric.
Articles like this make me damn grumpy......I feel like Gareth is in grooming the populace mode into accepting the absolute stuff ups of the Politicians and bureaucracies involved.
I think most people agree that house prices are ridiculous.....but advocating that people have no other option than to accept terraced houses and apartments has an agenda behind it!!
People have to live somewhere it is a human need for survival.....however they are being told by a variety of people and organisations that this is where and how you will live......this breaches people's ancient rights, NZBORA, Magna Carta, Universal Declaration of Human Rights and every other facet of being a FREE human.....it is people who are manipulating where others can live, what they can live in, how that building will be built etc and no one not even an economist can see through this stupid game that is being played with people's lives!!!
The housing market is as crooked as a dogs hind leg and everyone's blaming everyone else......I would suggest Gareth that you read some history, read the original text of the Magna Carta....ALL the problems we have now we have had before because some people are unable to stop themselves from interfering in the lives of others!!!!
People who have dreams of live vibrant cities actually have dreams of controlling the rest of a populace to create their vision!!!....using verbal diarrhea to capitulate the people into accepting individual/groups visions is brain washing and forcing concepts upon free people!!!
The fact is there is absolutely no need for house prices to be where they are..... So why would you want to force people to live in terrace houses and apartments?
This is a rigged market! It is rigged by breaching every human right endowed to man at birth!!
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