BNZ Economist Tony Alexander provides an enlightening piece on why a housing market goes into overdrive. While this is written with reference to the Auckland market, I can apply some of what to a more localised level. Continue reading
Tony Alexander’s BNZ weekly overview contains some interesting points with regard to housing affordability:
If the housing problem is home affordability then special generalised Auckland (or national) imposts such as minimum deposit rules will make things worse for the already cash/deposit-strapped group we want to be able to afford houses. One instead will need to take buyers out of the market which are not the ones we think deserve to buy affordable housing. That means something like a law banning second property purchases, banning purchases by foreigners, and forcing people to sell houses they own but are not occupying – perhaps because they are overseas.
A capital gains tax (CGT) would have little impact as people would simply not sell existing holdings thus worsening listings. Plus we have seen LAQC and depreciation changes have no impact on investor willingness to buy property. And Australia has a CGT but affordability is also poor in the major cities. So CGT will not solve the affordability problem and neither will higher interest rates by definition.
Affordability can only be improved by boosting cheap supply or stripping out non-desired buyers which sounds a bit too much like social engineering for Kiwis to tolerate. Only a radical cheap supply boost will improve affordability.
Regardless of any solutions or ideas, the bottom-line still remains same and is quite simply acquisition of real estate. The sooner you own a slice of NZ real estate the sooner you are on the property ladder. Maybe we have just become so used to buying what we can’t afford or without having to pay the price of saving before we buy? Perhaps a simpler and more affordable option for the first home and low income Auckland buyer is to purchase a property (or even two) outside of the Auckland market?
I must take my hat off to a young lady (barely 20 years old) who last night secured her first home from me in a respectable neighbourhood for well under $300,000. While getting plenty of moral support from Mum and Dad, she had largely saved the deposit herself – obviously seeing the price of saving well worthwhile, proved quite clearly with a 4.00am start for work this morning. Now isn’t that the true Kiwi can-do attitude?
What do you think should be done to improve housing affordability in New Zealand? I’d like to know your thoughts.