Editorial: When even a house on Struggle Street is hard to get
For young people and those on low incomes trying to find themselves a decent home, the trends have been heading in the wrong direction over the past few years. Median house prices in Christchurch have doubled from $210,000 a decade ago to $420,000. Rents have risen over the same period from $250 more than $400 a week on average. The cost of building a standard house has gone up from $800 a square metre to more than $1700. Added to this are the loan-to-value ratios applied by the Reserve Bank, which makes it harder for people with low deposits to obtain a mortgage. For those who can get a loan, interest rates are on the rise. For the fabled Kiwi-Battler family, getting into a house, even on the lower-priced Struggle Street, is more difficult than it used to be.
The problem is not confined to Christchurch, although the problem has been made more acute here by the loss of 11,000 homes following the earthquakes. When issues of housing affordability and availability are discussed, Christchurch is now almost routinely bracketed with Auckland, where the problems are more long-standing. But, with some regional exceptions, this is generally a national issue. Some years ago, the Master Builders Association estimated that New Zealand needed 25,000 new homes a year to keep pace with expected demand. National residential building consents bottomed out at 14,500 in 2009; they have picked up since then to about 2000 a month, but demand still outstrips supply. That is the root cause of why New Zealand real estate is considered over-valued. It is also why the so-called housing bubble is unlikely to burst any time soon.
It is frustrating - to say the least - that a developed country the size of New Zealand with a relatively low population cannot adequately shelter all its citizens, without overcrowding and without individual families having to fork out a greater share of their income to keep a roof over their heads. The pressure is such that housing is in danger of distorting the national economy, which is one reason why the Government was so quick to intervene in Christchurch's consenting crisis last year. The bottom line is that there are still not enough houses. The good news is that the upswing in residential construction is now gaining pace.
The Christchurch situation is reflected in the rapid growth of the outlying areas, particularly in Selwyn and Waimakariri. Property prices are cheaper there and, while Christchurch city rents have increased, government reports note that rent rises in the outer districts have cooled. That brings other problems, as the congestion on the Northern Motorway makes obvious. That assumes, however, that commercial activity must be mainly confined to the main city centres - in the longer term, regional development and the connectivity of ultra-fast broadband might allow people to have the best of both worlds out of town. Rolleston's Izone industrial park and proposed inland port are local examples of the types of development that could allow people to live and work in flourishing semi-rural centres. If that dynamic extended to more distant parts of heartland New Zealand, where property values are declining in some cases, housing pressures would diminish.
The Kiwi-Battler family, meanwhile, should be prepared to compromise. The expectations of previous house-buying generations were lower than today, in an era when when en-suite bathrooms were virtually unheard of. The virtues of buying a doer-upper in a lower-priced neighbourhood and working towards a better home through sweat equity and old-fashioned home economics still apply. For would-be homeowners, getting on the housing ladder might mean finding that lowest rung, at least to begin with.