Soon You'll Need $1 Million to Buy a Home in New Zealand

Auckland's average house price has just topped $975,000 and it's still rising. With high investor demand, low interest rates, and record high immigration it's projected to crack a million dollars later this year. Yep, you'll soon need upwards of a $1 million to get a bog standard house in a bog standard neighbourhood.

Only four years ago, the average Auckland house price was $560,000. And while real estate has been surging, pay cheques have not kept apace. The median home price is now 10 times the median income. This makes Auckland the fourth least affordable city in the world to buy a home—just behind Hong Kong, Vancouver, and Sydney.

But while Auckland dominates the headlines, it's getting much harder to buy in the rest of the country too. Investors, taking advantage of low interest rates, are scooping up already-sparse listings elsewhere. Average values in Hamilton rose 29 percent over the last 12 months, in Tauranga it was 23 percent. June saw New Zealand's average home value hit $590,909—13.5 percent higher than a year earlier.

As a result, the idea of home ownership is fast becoming a pipedream for most young people. Many have resigned themselves to the idea of forever being in Generation Rent.

The latest figures from the International Monetary Fund (IMF) ranks New Zealand dead last in a list of 30 countries on price-to-income ratio. To scrape together a deposit in New Zealand, you have to work a lot longer than in Australia, the United Kingdom, and Germany.

While this issue has been steamrolling over the aspirations of low income earners for months—even years—politicians at both the national and local level have been slow to address it. At the same time, homeowners already in the market sat back and happily watched the value of their assets skyrocket.

But over recent weeks there's been a marked change in mood. First former Reserve Bank chief economist Arthur Grimes made a speech, outlining his plan to fix the housing crisis by building 150,000 new homes in Auckland and pushing house prices down by 40 percent. While this may sound extreme, it would bring them back to the more affordable level of five times median household income.

Grimes grounded his argument on the much needed, and largely ignored, idea that policy on housing affordability was based in value judgement. "My personal value judgement [is] that it's great for young families and families on lower incomes to be able to afford to buy a house if they wish to do so," he said.

Prime Minister John Key dismissed Grimes' idea as "crazy," shooting back that, "it would leave an enormous number of people who have just entered the market with huge losses."

Prominent political journalist and commentator Fran O'Sullivan, herself a baby boomer, then weighed in on the debate in the New Zealand Herald saying, "It is a pretty crap society that pulls the ladder up on younger people or those less well off just because they want to preserve their new unearned wealth."

O'Sullivan's colleague, political editor Audrey Young, said the government is now seen as "too relaxed about the biggest problem it faces." She said Key's new plan to kickstart more home construction in high growth areas of the country was well overdue. The $1 billion fund for infrastructure—like water and roading to support new residential developments—will be shared across Tauranga, Auckland, Queenstown, Christchurch, and Hamilton councils.

"We're not popping the champagne corks just yet," Auckland's deputy mayor Penny Hulse told VICE. The fund, which is in the form of a 10-year-loan, is a blip on the $17 billion infrastructure bill the Auckland Council is already facing.

Hulse, who is watching her own 30-year-old son and his young family struggle to find a home in Auckland, is one of the few politicians willing to say she wants to see a fall in house prices. "Actually, yes. We have to think about what a good Auckland of the future looks like," says Hulse. "The paradigm is people of my age who have a house and feel secure make Auckland feel economically sound as they watch house prices go up. The other half, without homes, are breaking up."

Until now, policymakers have been largely catering to the winners in the market. "People in their 20s and 30s need to reclaim the democratic deficit," says Hulse. "We need them to be saying, 'We want our voices to be heard'."

Hulse attributes the soaring housing market to a perfect storm of huge population growth combined with a building slowdown triggered by the Global Financial Crisis (GFC). Net immigration is running at a record high, hitting 68,000 people coming into New Zealand in the last year.

At 1.5 percent of the population, that is nearly three times higher than immigration levels in the UK, which was a major factor in Brexiters voting to leave the European Union. Last week the Deputy Reserve Bank governor Grant Spencer called for the Government to review migration policy, due to the upwards pressure immigration is having on the housing market.

Hulse says the emphasis needs to be instead on ramping up the building industry. How exactly Auckland Council intends to make it "quicker, easier and faster to build houses" will be revealed when the Unitary Plan is released in August.

Leroy Beckett of youth lobby group Generation Zero told VICE the youth voice isn't being respected in the housing discussion. "The needs of people who don't own homes are being undervalued compared to those who do. Politicians need to stand up to residents groups and lobbyists who are benefitting from this crisis and standing in the way of the solutions."

So what's the solution? "It needs to be a team effort," says Beckett. "The government needs to work with councils and developers to make sure affordable housing is being built where people want to live. They need to empower Housing New Zealand to help people in desperate need by building more houses.

"Councils need plans to offer real housing choices close to public transport routes. We also need tighter demand controls in the short term to reduce price inflation as a result of rampant investor speculation."

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