Why Is There Still a Lull In The Home-Ownership Market?

A supply and demand imbalance appears to be unfolding in New Zealand and migration, renting, aging populations and tourism are the culprits in the most recent report from Stats NZ.

74% of houses in the 1990s were owner-occupied, this has decreased to 64% since 2018. This rate has been steady since 2013 despite house prices increasing significantly. Lower interest rates have allowed first home buyers to get on the ladder this year, additionally the possibility to purchase a new home with as little as 5% via the government backed First Home Loan scheme has also helped.  

In the report, there is evidence that more first-home buyers are getting into the market with this September being the highest since 2005.

But while this figure has increased, the proportion of younger people owning their own home has decreased since the 1990s. Less than half of those in their 20s own a property (compared to 61% in 1991). 

A big factor that has an impact on home ownership rates is rental costs and the significant difference renters have to pay in rent now compared to two decades ago. The cost of living has also kept increasing and often at a rate more than household incomes have. These are two factors that have had an impact on homeownership rates across the country but particularly in the  Auckland region.

This isn’t the only reason the numbers have gone down though. Supply and demand has become so unbalanced it’s reported that an estimated 318,000 people arrived in New Zealand between 2013 to 2018, compared to just 25,300 between 2006 and 2013. Housing has simply not been able to keep up with the demand.

Tourism has played a big role in the cost of houses in key regions like Queenstown where the Otago and McKenzie district holds 40 rentals to every 100 homes. Airbnb has played havoc on the market with many overseas investors buying properties to then rent during peak seasons. 

With COVID restricting borders, many Airbnbs have now come onto the market for reasonably affordable prices. It’s not known how long this dip in the demand for rentals will remain in the region and whether those buying up the property are still likely to rent out later.

So, what does all this say about the market?

It reaffirms there is a supply and demand problem out there and that this may be reflected in the house prices. The government has shown a few times that they are aware of this and working on solutions, but rental costs are becoming challenging to control and cap.

It also reiterates that setting financial goals, having a plan to build up a house deposit (eg KiwiSaver funds, savings and low debt levels), can be what sets you apart during the loan application process. It highlights how valuable the Christchurch market can be for first time buyers with the Canterbury region remaining strong as an affordable housing market. 

First home buyers should consider what will happen once the borders open and then look at plans should they not be able to get a house before then. 

If this is something you’re interested in exploring and learning more about, you can reach out to our knowledgeable and approachable team today.