New Zealand property bubble
The property bubble has produced significant impacts on inequality in New Zealand, which now has one of the highest homelessness rate in the OECD[2] and a record-high waiting list for public housing.
[clarification needed][3] Government policies have attempted to address the crisis since 2013, but have produced limited impacts to reduce prices or increase the supply of affordable housing.
Although the indigenous Māori population traditionally lived communally, European settlers – many fleeing the slum conditions of Victorian Britain – established a trend favoring individually-owned houses, each built on a separate section of land – the fabled quarter acre, in a similar vein to the American white picket fence.
The local real-estate sector promotes myths of moving onto (and up) the property ladder[9] accordingly, and New Zealand politicians foster the idea of a stable democracy rooted in property-ownership.
[10][11][12] In 1977, the Town and Planning Act was passed, which began to make it easier for NIMBYs to oppose new housing nearby and force down-zoning.
[19][20] Many investors who lost heavily in the 1987 crash never returned to the sharemarket, instead opting for the apparently safer option of property investment.
[21][22][18][17] In 1989 Parliament passed the Reserve Bank Act, which emphasised keeping a lid on inflation and on interest rates, which in turn reduced the costs of borrowing for fixed assets such as houses.
[38] That same year, the International Monetary Fund ranked New Zealand at the top for housing unaffordability in the OECD,[39] and has called for taxation of property speculation.
[49] NIMBY sentiment among established home-owners—particularly towards attempts to relax building density rules in Auckland such as the Unitary Plan[50]—has also been pointed to as a major factor in the housing bubble.
[51][52][53][54][55][13] In response, a YIMBY movement of mostly younger people has emerged to call for actions against housing unaffordability, including upzoning.
[65] The substantial growth of property prices over recent decades has significantly influenced the distribution of wealth in New Zealand.
[66] Rising prices have been attributed to various factors including deregulation, mass immigration and politics, with considerable debate over how to address the issue due to its large size relative to the economy.
In 2017 the United Nations recommended that the New Zealand Government review the designation of Ihumātao as a Special Housing Area, drawing attention to potential breaches of human rights.
[71] In 2019, after protestors were served an eviction notice and police presence escalated, the prime minister announced that no development would take place at Ihumātao while the government attempted to broker a solution.
[75] The Reserve Bank has suggested that the targeted restriction for Auckland properties in 2015 may have contributed to price inflation in other regions.
The purpose of the NPS-UDC, introduced in 2016, was to ensure that sufficient development capacity was provided by local authorities, to meet demand for land for housing and commercial use.
The law allows non-residents to own up to 60% of units in new-build apartment blocks, however, they are not permitted to buy existing homes.
[78][79] However the Ministry of Business, Innovation and Employment refuted this emphasis, saying that New Zealanders returning from overseas make up much of the inflows, and that there was a need to allow in "skilled migrants required to ramp up housing supply".
[81][82] The bright-line test introduced under the previous administration was extended to five years, to reduce incentives for speculative investment in property.
The scheme planned to boost housing supply by giving property developers more incentives to deliver affordable homes rapidly.
[90] The revised policy dropped the target to build 100,000 houses in ten years and introduced rent-to-buy and shared-equity options to improve affordability.
[100] Later in the year, a bipartisan agreement on Medium-Density Residential Standards (MDRS) was drafted and signed by the Labour and National Parties in Parliament to relax urban density rules.
[101] Two years later however, the National Party backed out of the agreement, claiming their own housing policy was "more ambitious and allowed discretion and flexibility for councils.".
[105][106][107][108] Land value taxation has been suggested by a series of commentators, including Dr. Arthur Grimes and Dr. Andrew Coleman,[109] Dr. Ryan Greenaway-McGrevy,[110] economist Shamubeel Eaqub and Bernard Hickey.
According to the report, insufficient supply of developable brownfield and greenfield land was a major contributor to house price growth between 2000 and 2015.
It proposed reform in a range of areas: In 2017 the Reserve Bank of New Zealand published a consultation paper on debt-to-income limits, as a tool to restrict credit growth and mitigate the risk of mortgage defaults during an economic downturn.
[112] According to investment manager Brian Gaynor in 2012, a 10% drop in house prices would wipe out $60 billion of New Zealanders' personal wealth, which would exceed the losses from the 1987 sharemarket crash.
[16] Steve Keen, one of the few economists to forecast the Great Recession, warned in mid-2017 that New Zealand would be one of many nations to experience a private debt meltdown involving housing, and that "the bubble will burst in the next one to two years".
