'Millions' will never be able to afford a house

, posted: 8-Oct-2006 10:43

While it's prudent to take long-term predictions with a massive pinch of salt, there's probably a grain of truth in Anne Gibson's story for the Herald. In fifty years, home ownership in New Zealand could drop to forty per cent - that is, sixty per cent of the population will be renting according to the pessimistic story.

If the population continues to grow it'll be more than the 2.6 million people the Herald article mentions but even if that figure is overly pessimistic, it's worth taking the dropping home ownership rates seriously.

For starters, renting in New Zealand is still seen as a temporary state in most people's lives. As a consequence, you're not guaranteed long-term tenancy nor are there any standards for the houses and flats rented out. Finding a good rental and keeping it is touch and go.

In the long term, for young people not to be able to buy a house will have tremendous sociological impact. If you're in your twenties, starting out in life and trying to cope with New Zealand's low wages and salaries yet high cost of living, what are you going to do? Stay in the country and rent substandard accommodation, or do the sensible thing: head overseas where pay is better and you can afford to buy property. As a corollary of that, should you want to return to New Zealand after your OE, chances are that you will have the money required to buy an expensive house here.

It's not desirable however to encourage young people to take flight just so that they'll stand a chance in life against the generations before them who were lucky enough to have an affordable property market. Many young people who leave do so permanently. Apart from personal reasons, New Zealand doesn't have the career opportunities you get overseas. Maybe you'll come back here to raise a family, but for many it'll be at the cost of career progress and earnings.

There are also those who for various reasons cannot go overseas, but have to stay behind. They'll form a permanent underclass, unable to ever have the security and wealth that returning Kiwis and other overseas migrants have. Once that underclass hits a certain size, social strife will inevitably follow.

There needs to be several policy initiatives urgently to stop all this. First, the least popular one, and thus not likely to happen until after the next election: capital gains tax on property.

Second, wages and salaries need to go up at the lower end. Kiwis earn too little - and it's ridiculous that income tax bites people on low money like $30k a year (this is what many recent uni grads are offered).

Third, more houses have to be built. Not a pretty solution, but if the population continues to climb, what alternative is there? It would help a huge amount if instead of bickering, delaying and sabotaging, our civil leaders were to rush through important and well overdue infrastructure projects. That would mean we wouldn't all have to live in Auckland, simply because the country's transport and communications infrastructure is so patchy.

Who will have the balls to do any of the above?

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