House prices to double in seven years, and there's nothing Ardern can do about it. - Property Expert
A property investment expert says New Zealand house prices will more than double in the next decade, and there’s not a thing the Government can do about it.
But Ashley Church, former head of the Property Institute of New Zealand, says that isn’t necessarily a bad thing.
His comments come after data from both the Real Estate Institute of NZ (REINZ) and Trade Me found the median price of a home in Auckland is now more than $1 million and nationwide above $700,000.
“House prices are going to continue to increase. Here’s a prediction for you – in seven to 10 years’ time, house prices around the country – the median house price will be at least twice what it is now,” Church told The AM Show on Wednesday.
“That’s a reality. It doesn’t matter what the Government does, it doesn’t matter what the Reserve Bank does. We’ve got 50 years of empirical data that tell us that that’s what’s going to happen.”
REINZ data shows the median house price doubled during the previous Labour Government’s nine years in power – from 1999 to 2008 – to $349,000. After a few stagnant years in the wake of the global financial crisis, they started rising again – more than doubling in just nine years from $350,000 in 2011 to $725,000 today.
Data shows in past decades they have sometimes tripled, but typically during times of high inflation.
They jumped nearly 20 percent in the past 12 months, defying predictions of a COVID-related crash, whilst inflation was at just 1.4 percent.
Prime Minister Jacinda Ardern last week said the median price “cannot keep increasing at the rate that it is”.
“I’m sorry, they’re going to continue to increase,” said Church. “You can’t fix it. Do something to look after the people who are most vulnerable in home-buying society – first-home buyers.”
REINZ has suggested reviewing the thresholds for the Government’s HomeStart scheme, which tops up low- to middle-income first-home buyers’ deposits with up to $5000 (buying an existing home) or $10,000 (new builds). Homes have to come in below price thresholds – the highest being $650,000 for a brand new build in Auckland.
“The latest house price rises have meant that only 33 percent of properties sold are now below the threshold, down from 40 percent just four months ago,” said chief executive Bindi Norwell.
“If you’re in Queenstown-Lakes, Porirua City or Wellington City, less than 10 percent of properties selling in the current market are below the local thresholds making it extremely difficult for first home buyers in these areas. It’s not much better in Auckland, Kapiti or Hamilton with 12 percent 13 percent and 16 percent of properties respectively being eligible for a HomeStart grant.”
Church said while REINZ is correct the thresholds are now too low, tinkering with HomeStart won’t change a thing in the long run.
“The solution is not to find little incremental changes such as the sort that’s being recommended here. The solution is to say if we accept that house prices are going to double, what we need to do is focus on the most vulnerable group in society when it comes to home-buying, and that’s first-home buyers. We need a comprehensive range of solutions to basically do what we can to get those people into the market.
“It’s never a coordinated approach – it’s always throwing a few crumbs, usually for political purposes. Maybe we need a department for first-home buyers, a Ministry for First-Home buyers. We need things like rent-to-buy schemes, we need comprehensive subsidies maybe in the form of suspensory reloans.”
Last year, Statistics NZ said only 62 percent of households own the home they live in – down from 69 percent in 1999 and nearly 74 percent in 1991. Last year, the number of households renting was increasing twice as fast as those who own.
“There are massive beneficial impacts on society in getting people into their own home,” said Church. “We need to continue that trend this country’s been so proudly following for the past 100 years.”
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While many young Kiwis say they’re being priced out of the market, Church says it’s “not necessarily a bad thing for house prices to go up”.
“We’re the fifth-wealthiest nation on the planet, and that’s primarily because we have house prices that are stronger than they are in a lot of other countries. Provided the market doesn’t crash – and it hasn’t for the last 50 years – there’s actually an argument that says house prices increasing are a good thing. It’s about making sure that everybody can participate in that home ownership democracy.”
Rather than the Government finding a fix, Church says prices will just keep going up until no one can afford to buy.
“We will get to a point eventually where that equation simply gets too great – where the difference between what you’re earning and what house prices cost is too great and it will be impossible to buy… That will be the moderator that will finally fix the market. The market fixes itself.”