Speaker 1: Cielda. I'm Chelsea Daniels and this is the Front Page,
Speaker 1: a daily podcast presented by the New Zealand Herald. The
Speaker 1: government has unvowed grand plans to flood the market with
Speaker 1: more houses, announcing new changes to planning rules that will
Speaker 1: require councils to plan for thirty years of housing growth.
Speaker 1: It comes after Housing Minister Chris Bishop said he wants
Speaker 1: to see house prices fall. He's already getting his wish though,
Speaker 1: with prices dropping to a point that in some of
Speaker 1: the country's biggest cities homeowners are delisting their properties rather
Speaker 1: than selling for a discount. So we're flooding the housing
Speaker 1: market work in a country where owning a property is
Speaker 1: the cornerstone of our economy. Today, on the front page,
Speaker 1: Opus Partners economist Ed McKnight joins us to give his
Speaker 1: take on the state of the property market. Ed, can
Speaker 1: you give us a lay of the land? How house
Speaker 1: prices faring on average at the moment?
Speaker 2: Well, we had a bit of a bump between May
Speaker 2: last year and right up until February this year in
Speaker 2: twenty twenty four, but since February we've actually been on
Speaker 2: a bit of a slow decline. So if I take
Speaker 2: people back a couple of years. We all know that
Speaker 2: the housing market peaked in end of twenty twenty one,
Speaker 2: kind of November twenty twenty one, and for eighteen months
Speaker 2: after that, house prices fell about eighteen percent. So this
Speaker 2: big drop the largest drop we've actually ever seen in
Speaker 2: the history since we started tracking house prices back in
Speaker 2: nineteen ninety two. So we had this massive drop. Then
Speaker 2: house prices for about nine months they crept up just
Speaker 2: over five percent, and now they've gone down about three
Speaker 2: percent in the last couple of months. So we've had
Speaker 2: this big drop, a little bit of a recovery, and
Speaker 2: now a bit of a slide.
Speaker 1: I understand in areas like Northland and Auckland, for example,
Speaker 1: people actually delisting their homes because the prices aren't high enough.
Speaker 1: Are things really that bad at the moment?
Speaker 2: Well, the interesting thing is before we ran the start,
Speaker 2: nobody had actually ever looked at this before. And the
Speaker 2: truth of the matter is, over the last call it
Speaker 2: seven years, somewhere between a third and forty percent of
Speaker 2: properties come to mark it and are then eventually delisted.
Speaker 2: So we have this idea that, yeah, if a property
Speaker 2: comes to market, it will definitely sell, but most of
Speaker 2: the time a third of properties don't end up selling
Speaker 2: because sellers will say, well, you know, I'm not really
Speaker 2: sure if I'm happy selling it for that price. Now,
Speaker 2: at the moment we have seen a bit of an
Speaker 2: increase over the last six months. We were seeing more
Speaker 2: properties be delisted, but it isn't that high by historical
Speaker 2: standards now as you've identified Auckland and Northland though, that's
Speaker 2: where we're seeing most properties be delisted at the moment.
Speaker 2: Some places like Wellington only fourteen percent of properties are
Speaker 2: being delisted, so there's a very high sell through rate
Speaker 2: in the capital. At the moment.
Speaker 1: We seem to be always bothered about something, right, house
Speaker 1: prices are too high. Now they're too low, and people
Speaker 1: are delisting and investors are getting worried. When do you
Speaker 1: think we'll actually be happy.
Speaker 2: Never. We'll never be happy with house prices. And the
Speaker 2: reason is that somebody is always going to be grumpy
Speaker 2: about something. Even if you take the interest rate debate.
Speaker 2: It's so funny. I was on news talk, said b
Speaker 2: talking about interest rates falling, and anybody with a half
Speaker 2: sized mortgage at the moment is really excited about interest
Speaker 2: rates falling. Oh, gosh, yes, that will save us so
Speaker 2: much money. Well, we had one person call up and say, no,
Speaker 2: I don't want the interest rates to go down because
Speaker 2: I'm a retiree. I've got a lot of money in
Speaker 2: the bank at the moment and I want to earn
Speaker 2: a decent income of it. So whenever somebody's happy about something,
Speaker 2: whether it be interesst rates falling or house prices going up,
Speaker 2: somebody else is always going to be unhappy. And those
Speaker 2: are the voices we tend to hear most loudly, because
Speaker 2: when people are happy, they don't shout from the rooftops
Speaker 2: about it. When someone's grumpy, though, you know you're going
Speaker 2: to hear about it.
Speaker 1: The governments announced its plans to flood the market with
Speaker 1: housing by freeing up more land for housing developments with
Speaker 1: the plan of making land and housing cheaper.
Speaker 3: These targets will require councils to live zone feasible development
Speaker 3: capacity to provide for at least thirty years of housing
Speaker 3: demand at any one time. Feasible development capacity means housing
Speaker 3: capacity that is commercially viable for a developer to build
Speaker 3: at a profit. In effect, this will flood the market
Speaker 3: with opportunities for development and over time drive down land
Speaker 3: prices and the cost of housing.
Speaker 1: What do you make of these changes and do you
Speaker 1: think it will actually work well.
Speaker 2: I think the Housing Minister christ Bishop is talking a
Speaker 2: big game, and certainly he's incentivized to do that. Lots
Speaker 2: of people want house prices to be stable over the
Speaker 2: very very long term. I think there will be some
Speaker 2: benefits to it. For instance, they're saying they are going
Speaker 2: to remove any minimum requirement about how big a house
Speaker 2: or an apartment has to be. That will mean we
Speaker 2: get more smaller sized departments built. On top of that,
Speaker 2: councils won't be able to have a say in terms
Speaker 2: of whether apartments have to have balconies or not, or
Speaker 2: how large those balconies have to be. With all of
Speaker 2: those rules gone, we should see some cheaper and certainly
Speaker 2: smaller apartments coming through. And at the margin, yeah, maybe
Speaker 2: a couple more developers will build those sorts of properties,
Speaker 2: and that will be good for people who are okay
Speaker 2: and happy to live in slightly smaller properties. I always
Speaker 2: take what politicians say with a grain of salt, because
Speaker 2: they're very good at saying that they're going to do
Speaker 2: something big and meaningful and then it doesn't always materialize,
Speaker 2: and I'll give you an example of that. The Housing
Speaker 2: Minister is saying that they want every single council in
Speaker 2: the country to open up or zone two years of
Speaker 2: population growth, and often christ Church is the shining example
Speaker 2: that the government holds up because immediately after the earthquakes
Speaker 2: they zoned for thirty years of population growth. There was
Speaker 2: a lot of housing being built and for a time
Speaker 2: house prices were pretty flat down in christ Church. But
Speaker 2: what a lot of people miss is that during the
Speaker 2: COVID boom from twenty nineteen onwards, christ Church house prices
Speaker 2: actually increased at a much faster rate than the likes
Speaker 2: of Wellington, Auckland or Dunedin. And so I'm not sure
Speaker 2: whether zoning a whole heap of land is going to
Speaker 2: fix all of the problem, but it will certainly help.
Speaker 1: We've already seen the growth of new builds in Auckland,
Speaker 1: for example, outpaced population growth. So what do we need
Speaker 1: to keep building more houses?
Speaker 2: Well, if I take you back a couple of years,
Speaker 2: every single media outlet, including the Herald, was talking about
Speaker 2: a massive housing crisis and we needed to build more
Speaker 2: and more and more homes. I think this is just
Speaker 2: part of the catch up.
Speaker 1: Do you worry about their plan to remove the urban
Speaker 1: rural boundaries?
Speaker 2: I worry more about the infrastructure. It's quite interesting because
Speaker 2: if you remove the rural urban boundary, you're going to
Speaker 2: get more housing sprawl, right, so you are likely to
Speaker 2: see more housing built out Pocono Way just south of Auckland,
Speaker 2: and also down in Poocacoe and some of those more
Speaker 2: rural communities. Now, that obviously has benefits and drawbacks. The
Speaker 2: benefit is that if I am a person who is
Speaker 2: willing to live an hour out of the city because
Speaker 2: I want a standalone house where property prices are a
Speaker 2: bit cheaper and I want that kind of lifestyle, I
Speaker 2: kind of think, well, why do we have all of
Speaker 2: these rules in place? But we also know that we're
Speaker 2: not so good at building infrastructure here in New Zealand.
Speaker 2: So all good, we're going to get rid of the
Speaker 2: rural urban boundary. But now it's Auckland Council and Auckland
Speaker 2: Council rate payers who are now responsible for building that
Speaker 2: infrastructure that goes in there to support those houses. Now, yes,
Speaker 2: the developers have to pay some taxes what's called development
Speaker 2: contributions in order to build those properties, but often my
Speaker 2: understanding is that a lot of that infrastructure is ultimately
Speaker 2: financed by the poor old ratepayer.
Speaker 1: Those plans to decide the minimum size of new apartments,
Speaker 1: could that see kind of like an influx of shoebox
Speaker 1: style apartments, the ones that we see I'm thinking in Japan,
Speaker 1: you know, one by one meter, et cetera.
Speaker 2: Well, that is the risk if you don't have a
Speaker 2: rule in place. A developer will build them if they
Speaker 2: think they can sell them, and if they think they
Speaker 2: can make more money by selling those shoe box apartments
Speaker 2: compared to building something else. So ultimately it comes down
Speaker 2: to what are home buyers or investors willing to purchase.
Speaker 2: And if an investor is buying those kinds of shoebox
Speaker 2: apartments and saying, yeah, okay, I'll buy that at whatever
Speaker 2: price the developer are selling it for, whether people are
Speaker 2: actually willing to rent those properties, I can ciertably foresee
Speaker 2: a future where there are a lot of studio apartments built.
Speaker 2: Investors then purchase them, and there we have new stories
Speaker 2: about how small these properties are and the rents that
Speaker 2: people are paying for them. But it ultimately comes down
Speaker 2: to what are people willing to build, what are people
Speaker 2: willing to buy? And what are people willing to rent?
Speaker 1: The average wage in New Zealand is currently what about
Speaker 1: fifty three thousand dollars? Doesn't that put the dream of
Speaker 1: home ownership out of many young Kiwi's grasps. This idea
Speaker 1: of a kind of nuclear family of the fifties and
Speaker 1: sixties isn't really the benchmark anymore, is it. People are
Speaker 1: staying single and childless for longer. What are the options
Speaker 1: out there when a home costs roughly a million dollars,
Speaker 1: say for a single woman working as a host in Auckland, Well.
Speaker 2: It's very difficult if you're a single person. But that
Speaker 2: median wage is quite misleading when we're thinking about house prices,
Speaker 2: because we've got to think about, well, what is the
Speaker 2: average household income? The average household income in New Zealand
Speaker 2: is actually about one hundred and thirty k. Just over that,
Speaker 2: the average household income in Auckland does about a hund
Speaker 2: fifty nine thousand dollars.
Speaker 1: Would you look that It'd be couples though, wouldn't it.
Speaker 2: Yeah, that'd primarily be for couples, And so certainly if
Speaker 2: you are a single person it is very, very difficult
Speaker 2: if you think about the average household, though, buying your
Speaker 2: first property is still achievable, and we actually see that
Speaker 2: in the numbers. In fact, almost a quarter of properties
Speaker 2: purchased over the last six months have been purchased by
Speaker 2: first home buyers. Now, of course there are as many
Speaker 2: properties being transacted at the moment because it's quite a
Speaker 2: slow market, but first home buyers are getting out there
Speaker 2: and doing their best, actually buying up quite a large
Speaker 2: percentage of homes, a larger percentage of homes than they
Speaker 2: almost ever have been. So it's a great time to
Speaker 2: be a first home buyer.
Speaker 1: When we look at those figures on first home buyers, though,
Speaker 1: there's no differentiation between whether it's a couple or a
Speaker 1: single person.
Speaker 2: Definitely not. And what I'd say there is that buying
Speaker 2: a house is a single person is difficult and probably
Speaker 2: has always been difficult. If you're a couple, it obviously
Speaker 2: is a lot easier. But what I'd also say that
Speaker 2: is the median age of buys their first home is
Speaker 2: currently thirty seven in New Zealand, and I think we
Speaker 2: sometimes think that, oh, well, you know, the average person
Speaker 2: buys their first home in their twenties and then gradually
Speaker 2: pays it off. It's actually quite a bit older. So
Speaker 2: I'm often saying to people, well, if you're purchasing it
Speaker 2: thirty five or thirty six, that's still great. That is
Speaker 2: below the average. And hey, if you're forty buying your
Speaker 2: first home, it's actually not that late because the average
Speaker 2: or median firm and buyer is aged thirty six point
Speaker 2: seven years old.
Speaker 1: That makes me actually feel a little bit better. Do
Speaker 1: you think I should stop buying avocado and toast?
Speaker 2: I think that buying avocadao toast isn't necessarily the issue.
Speaker 2: I don't even think avocadavo toast is as popular as
Speaker 2: it used to be. But back around that kind of
Speaker 2: twenty fifteen twenty sixteen, it was incredibly popular. That's what
Speaker 2: all of us millennials were out there buying at the cafes.
Speaker 2: And there's probably some grubby old sixty five year old
Speaker 2: who owns fifty proper that they bought for you know,
Speaker 2: a couple of rasberries back in the fifties probably said
Speaker 2: something along those lines which it came up for. But
Speaker 2: I do want to dig into that point around well,
Speaker 2: what about the single people? It obviously is very difficult.
Speaker 2: Whenever you look at any piece of data, you can
Speaker 2: look at it in two ways. Right. You can say, Okay,
Speaker 2: it's very difficult for single people to go out and
Speaker 2: purchase their first time but that is absolutely true. But
Speaker 2: there are also some positive signs out there that I
Speaker 2: don't think get enough media attention, like the average age
Speaker 2: to buy your first time, or like the fact that
Speaker 2: the average household income in New Zealand is around that
Speaker 2: one hundred and thirty two k, even though the median
Speaker 2: wage is fifty three grand.
Speaker 1: More people are being pushed into the rental market. I
Speaker 1: see a record four hundred and ten thousand rental bonds
Speaker 1: were lodged by November twenty twenty three. That's up thirty
Speaker 1: eight percent from twenty ten. Some of these new housing
Speaker 1: developments are built to rent schemes. Is that a good
Speaker 1: idea when so many people aren't able to get onto
Speaker 1: the property ladder already?
Speaker 2: I think it's definitely there important because the truth of
Speaker 2: the matter is not everybody is able to purchase their
Speaker 2: own home, certainly not straight away. And one of the
Speaker 2: things I've got to remember is even when home ownership
Speaker 2: was at its highest in New Zealand, twenty six percent
Speaker 2: of households still rented. Now it's not just because some people,
Speaker 2: no matter what happens, they're not going to be able
Speaker 2: to get a mortgage. There's kind of a stage of
Speaker 2: life thing here. So when I was twenty two years old, yes,
Speaker 2: I was renting because I didn't have the deposit yet
Speaker 2: to go ahead and purchase the first time. When I
Speaker 2: was at university, there was no way in hell I
Speaker 2: was going to be able to purchase the first time.
Speaker 2: Of course I had to rent. So there's this section
Speaker 2: of the population that, no matter what's happening to house prices,
Speaker 2: around a quarter of us will always need to be
Speaker 2: able to rent. And as New Zealand's houses get older
Speaker 2: and older, yeah, we need new houses being built so
Speaker 2: we can have somewhere safe, warm and dry to rent.
Speaker 2: So I think it's important that there are people out
Speaker 2: there building new properties for renters.
Speaker 1: So you know what the new government's thinking and what
Speaker 1: their approach is. Labour's still working on its future tax
Speaker 1: policy plans, but Finance spokesperson Barbara Edmunds has hinted that
Speaker 1: there needs to be a change to discourage property investment.
Speaker 4: We need to remove this incentive that the tax system
Speaker 4: provides for qs to invest in property. Yeah, a seller
Speaker 4: in wag Juna who's a cleaner gets every dollar of
Speaker 4: what they've earned tax, but doesn't get the capital tax.
Speaker 4: We get higher wages when we produce more things, so
Speaker 4: there has to be a balance there.
Speaker 2: She says.
Speaker 1: New Zealand's obsessed with housing investment. Is this a fair
Speaker 1: assumption and could this possibly ever be curbed?
Speaker 2: I do think Kiwis are very interested in property, but
Speaker 2: I think that's because we need it. Everybody talks about, oh,
Speaker 2: property investors are making so much money. But there's a
Speaker 2: flip side to this as well, which is that New
Speaker 2: Zealand needs regial accommodation right and it can't be provided
Speaker 2: by the government. If you think about all of the
Speaker 2: properties that are actually provided out there for renters, only
Speaker 2: fifteen percent is provided by the government or by community
Speaker 2: housing providers. Eighty five percent of rental accommodation is provided
Speaker 2: by mums and dads who put their own house on
Speaker 2: the line most of the time to borrow a lot
Speaker 2: of money to go and buy a house. Now do
Speaker 2: they expect or do they hope that they're going to
Speaker 2: make a few bob out of it and that it's
Speaker 2: going to help them for their retirement. Absolutely, they hope that.
Speaker 2: But at the same time, we need people out there
Speaker 2: owning rental accommodation, and in many cases, I think of
Speaker 2: it a bit like the supermarkets. So we need people
Speaker 2: who are going to be out there providing food so
Speaker 2: we can all cook dinner on a Wednesday or Thursday
Speaker 2: night before we sit down and watch some Netflix. But
Speaker 2: is it fair that the supermarkets make money? I guess
Speaker 2: we need the supermarkets to make some amount of money.
Speaker 2: We can argue how much it is, but we need
Speaker 2: owning a supermarket to be profitable so that there are
Speaker 2: supermarkets that provide us with food and groceries.
Speaker 1: And do home owners looking to sell have to wait
Speaker 1: for ends rest rates to fall before listing their properties
Speaker 1: or should they just buy the bullet now if the
Speaker 1: market is truly set to be flooded by new homes.
Speaker 2: In many ways, I think it depends what you're trying
Speaker 2: to do. You know, most people say, well, if you're
Speaker 2: buying and selling in the same market, so if you're
Speaker 2: selling your own home to go and buy something, it
Speaker 2: doesn't really matter. But the way that I think about
Speaker 2: it is. If you are trying to buy a bigger, better,
Speaker 2: more expensive house, it's generally better to do it when
Speaker 2: house prices are lower, because that upgrade isn't quite as
Speaker 2: expensive and you've got more time to do it now.
Speaker 2: If you're doing the opposite, if you're downsizing, you generally
Speaker 2: want to do it when house prices are really high,
Speaker 2: because then you're maximizing the difference between what you sell
Speaker 2: for and what you buy for.
Speaker 1: And for those looking to buy their first home like
Speaker 1: me in Auckland, is there any hope there at all?
Speaker 1: Or do I need to consider moving to perhaps to
Speaker 1: the West Coast.
Speaker 2: I don't know how much you d your situation, Chelsea,
Speaker 2: but I can tell you there is hope out there
Speaker 2: for you. And I think it's important that we acknowledge
Speaker 2: both the bad side, as often happens, but also a
Speaker 2: good data that says, actually, it's a great time to
Speaker 2: be a first home buyer. There are fewer properties out
Speaker 2: there that are going up for auction now. First home
Speaker 2: buyers hate auctions because every time you put your hand
Speaker 2: up it's an unconditional offer. That means that before you
Speaker 2: even raise your hand at auction, you as a first
Speaker 2: home buyer need to get a pre approval from the bank.
Speaker 2: That takes time. You've got to do all of your
Speaker 2: checks beforehand, like getting a building inspector getting your lawyer
Speaker 2: to look at the property. And if you do that
Speaker 2: for a couple of different auctions, it starts to get really,
Speaker 2: really expensive. So the fact that it's taking longer for
Speaker 2: properties to sell, the fact that fewer properties are coming
Speaker 2: up at auction, the fact that there is a higher
Speaker 2: percentage or a very high percentage of first home buyers
Speaker 2: purchasing properties at the moment, they make out a big
Speaker 2: part of the market. I think it's really good for you,
Speaker 2: and we need to acknowledge that it is a buyer's market,
Speaker 2: so you, as a buyer have the upper hand.
Speaker 1: Thanks for joining us. Ed that's it for this episode
Speaker 1: of The Front Page. You can read more about today's
Speaker 1: stories and extensive news coverage at enzied Herald dot co
Speaker 1: dot nz. The Front Page is produced by Ethan Sills
Speaker 1: and sound engineer Patti Fox. I'm Chelsea Daniels. Subscribe to
Speaker 1: the Front Page on iHeartRadio or wherever you get your podcasts,
Speaker 1: and tune in on Monday for another look behind the headlines,