Wellington
When Olivia Hollywood began hunting for her first house in Wellington early last year, she was optimistic that half a million New Zealand dollars ($362,000) would get her on the property ladder. After eight months attending packed viewings and watching homes auctioned at vastly inflated prices, Hollywood abandoned the search.
Since then, average prices in the Wellington area have gained another 13 per cent to exceed NZ$607,000. The couple is among thousands of Kiwis for whom home ownership is looking increasingly distant.
“It was frustrating for us because we did expect it was going to be quite easy,” said Hollywood. “We decided it was just too crazy for us and we’d rather sit tight for a couple of years and save up a bit more.”
As ownership falls to the lowest since 1951, housing affordability is firing up voters ahead of New Zealand’s general election on September 23. The government is under attack for failing to respond to price surges that have forced many to ditch their property dreams. New Labour leader Jacinda Ardern has made housing a key issue, helping restore the main opposition party in opinion polls.
“The government’s response has been too slow and inadequate for many because they’ve seen house prices rising very fast,” said Raymond Miller, professor of politics at Auckland University. “Some voters might well have a feeling of being let down by what they see as indifference to their plight. It’s the government’s Achilles heel.”
Prices across New Zealand have risen 34 per cent the past three years, fanned by record immigration, historically low interest rates and a supply shortage. That’s seen the portion of owner-occupied properties slump to 63 per cent of the nation’s 1.8 million homes in the second quarter, down from a peak of 74 per cent in the early 1990s.
In response, the ruling National Party has made more land available for development and increased deposit grants to first-home buyers. But it’s done little to curb immigration that’s added 201,000 to the population the past three years, while a policy of taxing profits on investment properties sold within two years of purchase has been criticised as too mild.
Labour is pledging a more aggressive solution. It’s promising to ban property sales to non-resident foreigners who it says have fanned price pressures, and will extend the period in which investors will be subject to tax to five years. It wants to curb immigration, and plans to build 100,000 homes over 10 years and sell them at affordable prices.
“We’re going to get the government back into the business of building large numbers of affordable homes for first-home buyers like governments used to in this country,” Labour’s housing spokesman Phil Twyford said. “The government has had nine years and they’ve just tinkered around the edges.”
Many New Zealanders are motivated to save for a home where they can bring up a family just as their parents and grandparents did. National will be wary that disillusioned homebuyers may turn their back on the party, thwarting its efforts to win a rare fourth term.
Home-loan interest rates are near 50-year lows and rising household incomes make mortgage payments more manageable. House-price inflation is slowing and a report predicted 196,500 homes will be built in the six years through 2022.
The Treasury Department has cut its forecasts for residential investment, and now projects a contraction in 2018, citing a lack of workers and bankers’ reluctance to lend to developers. It also expects the Reserve Bank to raise interest rates from mid-2018.
