Na­tional liv­ing in a hous­ing bub­ble

Kapi-Mana News - - CONVERSATIONS - GOR­DON CAMPBELL TALK­ING POL­I­TICS

Does the con­stant rise in house prices help or harm the elec­tion prospects of the Na­tional gov­ern­ment? Even the win­ners who have seen as­tro­nom­i­cal rises in the value of their houses may be feel­ing a few mis­giv­ings about whether the cur­rent price bub­ble is sus­tain­able. Yet the ev­i­dence that hous­ing af­ford­abil­ity will be a crunch is­sue at this year’s elec­tion is not en­tirely con­vinc­ing – if this were true, you’d think Labour would be do­ing a lot bet­ter in the polls by now.

In that re­spect, is Na­tional’s re­cently an­nounced pro­gramme of build­ing 34,000 houses likely to make much dif­fer­ence on the hous­ing af­ford­abil­ity front? Hardly. Only 13,500 of this pro­jected new build will be state houses/so­cial hous­ing, and the gov­ern­ment will re­port­edly be de­mol­ish­ing 8300 state homes over the same pe­riod. The other 20,600? About 80 per cent will be sold pri­vately, at the mar­ket rate. So there’s pre­cious lit­tle joy for as­pir­ing first-home own­ers, given the strato­spheric level of mar­ket prices in Auck­land and – in­creas­ingly – in Welling­ton as well, where house prices have risen by 21.2 per cent over the past year.

Oh, and of that ‘‘sold pri­vately’’ por­tion… some 20 per cent or just over 4000 homes, are be­ing clas­si­fied as ‘‘af­ford­able’’. Un­der a prior gov­ern­ment def­i­ni­tion, this would mean $650,000 in Auck­land. Is this re­ally an ‘‘af­ford­able’’ price? For trust fund kids maybe, but not for many other peo­ple. Ear­lier this year, the in­ter­na­tional hous­ing af­ford­abil­ity think tank De­mographia ranked Auck­land as the fourth most un­af­ford­able city in the world.

Rou­tinely, De­mographia de­fines houses cost­ing three times the me­dian in­come or less, as ‘‘af­ford­able’’. A house cost­ing five times the me­dian in­come is deemed ’’se­verely un­af­ford­able’’. In the lat­est De­mographia sur­vey, how­ever, house prices in Auck­land last year were run­ning at ten times the me­dian in­come.

Ad­mit­tedly, this is not an ex­act science. Is me­dian in­come re­ally the best mea­sure, given that – as Ki­wiblog’s David Far­rar has re­cently ar­gued, it in­cludes the too young and the re­tired old in its net? Still, it is the in­ter­na­tional stan­dard. More­over, Ca­reers NZ has cal­cu­lated that the pre-tax me­dian fig­ure for wage and salary in­come in 2016 was $48,800 a year, mi­nus any over­time and bonuses.

So to be gen­er­ous… let’s call $50,000 the me­dian in­come. On an al­legedly ‘‘af­ford­able’’ $650,000 house, that would still mean house prices in Auck­land are run­ning at 13 times the me­dian in­come. Even if we’re re­ally gen­er­ous and as­sume ev­ery prospec­tive home buyer is ac­tu­ally a cou­ple earn­ing $50,000 each, that would still mean that an al­legedly ‘‘af­ford­able’’ $650,000 home is priced at 6.5 times the house­hold in­come of even those for­tu­nate few. That’s ‘‘se­verely un­af­ford­able’’ by the usual global def­i­ni­tion.

De­spite the emo­tion gen­er­ated by this is­sue, Na­tional does not ap­pear to be­lieve that many votes are at stake. First, the gov­ern­ment de­nied a hous­ing cri­sis ex­isted. It has since ad­vo­cated an anti-reg­u­la­tory re­sponse, as if Auck­land’s hous­ing price rises were mainly a zon­ing prob­lem fix­able by a burst of rib­bon de­vel­op­ment out at the city’s edges. The lat­est house build­ing pack­age has a sim­i­lar air of un­re­al­ity about it.

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