'Ownership dream unrealistic'

NO PLACE TO CALL HOME: House prices will go up, wages won't, and it will eventually be impossible for New Zealanders to buy their own home, commentators say.

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House prices will go up, wages won't, and it will eventually be impossible for New Zealanders to buy their own home, commentators say.

Massey University professor Bob Hargreaves said home affordability in the six months to November improved by over 2 per cent but it was a temporary surge in a gloomy long-term picture for aspiring home owners.

The small jump in affordability was contradicted by a Barfoot and Thompson report showing Auckland house prices were back to levels seen at the peak of the 2007 boom.

Sales in December averaged $552,933, the highest in two years, managing director Professor Peter Thompson said.

He said sales volume had decreased dramatically, but that simply showed owners were not accepting lower offers.

Hargreaves said it would get progressively harder to buy a house over the next five years, with house prices more likely to rise than drop, interest rates only able to go up and wages remaining static. "Plus the fact that most of the people operating in the housing market are not first-home buyers, they are existing investors. The house prices will go up."

He said property ownership ratios had been decreasing for some time, while remaining high in the older demographic. "If people want to get a house, they will get there, it just takes longer. Whereas people were buying them in their 20s when I was younger, it is now more like your late 30s or 40s."

Talk about property taxes from the Government was the one unknown that could change the market but Hargreaves said it would take a brave politician to make such a move.

"If you are a politician wanting to get re-elected, are you going to do something which destroys people's property values given that two-thirds of families are home owners."

Property commentator Olly Newland said New Zealanders would inevitably realise the home ownership dream was unrealistic.

"A lot of people will come to the correct conclusion that renting or leasing is cheaper and we'll end up with a large number of landlords and people will see leasing as a way of life, just as you lease cars and televisions."

He admitted most people aspired to own their own home but what had driven that beyond reasonable expectations was that two incomes were needed to own a home.

"That's changed a lot in my lifetime. That's because people spend more, and expectations rise; instead of one set of knives and forks they want five, instead of one TV they want three."

The only thing that could stave off that eventuality was a massive deflation in house prices or a jump in incomes.

"But the Reserve Bank cannot afford to have property prices collapse because that would turn the whole country upside down, so they'll do anything, suppress interest rates and the like."

Hargreaves said a housing crash was unlikely, given people did not need to sell their houses, as shown by the Barfoot and Thompson figures.

With stronger-than-expected migration and a population growing naturally by about 1 per cent a year, there was a gradually increasing demand, he said.

Alternative investments such as equity markets were a non-starter because unlike their international peers New Zealand banks did not lend money without property as a security, Newland said.

The same was true with small business loans. "You are forced to own property so you can get a loan to open a business. It's a crazy system. If you say I have a business with a great idea [as security], they are not interested. It's self-perpetuating; you have to have property."

It was common overseas to borrow money to invest in shares, but it was unheard of in New Zealand.

- © Fairfax NZ News