Home ownership rate slumps under 50%

Property

Census figures show home ownership rate for adults falls below 50% for first time; home ownership rate for under 40s slumps to 22.1%

18th Mar 14, 12:57pm by Bernard Hickey

By Bernard Hickey

Home ownership rates for those in child-bearing age ranges have collapsed in the last 12 years from 35% to 22% since house prices took off in the early 2000s, while home ownership rates among those in or near retirement have remained firm as the percentage of properties owned by landlords has risen.

Figures from the 2013 Census show home ownership rates have fallen sharply in the last 12 years to their lowest level ever as the proportion of properties owned by rental investors has risen. The slump in homeownership rates has hit the youngest groups hardest.

The Statistics NZ figures show the home ownership rate for those aged over 15 fell to 49.8% in the 2013 Census from 52.2% in the 2006 Census and 54.9% in 2001. The figures are adjusted for those people who owned trusts. The home ownership rate for households, as opposed to adults, fell to 64.8% from 66.9% in 2006, including those who owned their homes directly or through a trust.

The average home ownership rate for those aged between 15 and 40 fell to 22.1% by 2013 from 35.3% in 2001.

Home ownership rates were highest and fell the least for those aged 70-74 at 77.5%, down from 80.6% in 2001.

"A drop in home ownership occurred across all age groups, from those in their 20s to those in their 70s. The largest falls were for those in their 30s and 40s," Statistics NZ said.

"In 2013, 43.0 percent of people aged 30–39 years owned their home – down from 54.6 percent in 2001. For those in their 40s, 60.8 percent owned their home in 2013, down from 71.5 percent in 2001," it said.

The Census also found the number of unoccupied dwellings rose 16.4% to 185,448 between 2006 and 2013, with three quarters of those because the house was empty, rather than than because the occupants were away on Census night. The largest driver of that growth was Canterbury, where the number of unoccupied buildings rose 10,200 or 56.3% to 28,317 because of the earthquakes. There were 24,496 empty dwellings in Auckland on Census night, which was virtually unchanged from 2006.

There were 453,135 households that were renting on Census night, up 16.7% from 2006. Of those 63,810 were renting either from Housing New Zealand or Councils.

The number of households that were owned by private landlords rose 34.4% between 2001 and 2013 to 355,554. The Census found there were 215,283 households owned by family trusts, up 28% from 167,925 in 2006.

The proportion of dwellings owned by private landlords rose to 24.4% in 2013 from 19.6% in 2001.

Reaction

Green Party Housing Spokeswoman Holly Walker said the figures showed more families were being locked out of housing market and faced rapidly rising rents.

Walker said the home ownership rate for those aged 30-39 had fallen to 43% from 54.6% in 2001, while the number of private rentals had risen 19% and the median rent had risen 40%.

“These new figures show that National has failed to make owning a home affordable for Kiwi families,” she said.

“Under National, house prices have risen by 50% in Auckland, far outstripping incomes. With poorly implemented Loan to Value Ratios making it even harder for a young family to buy a house, no wonder homeownership is plummeting."

Walker said the fall in the percentage of people in their 30s who owned their own home was a real concern.

"Traditionally, people would be buying a house and settling down to start a family in their 30s, but that has become an unaffordable dream for many," she said.

Green policy was for a Government loan to buy a Government-built house and restrictions on non-resident purchases of houses.

English agrees housing too expensive

Finance Minister Bill English said rejected the focus on the figures showing home ownership rates falling below 50%. He referred to overall figures showing 64.8% of households (including those under 15) owned their own home, down from 66.9% in 2006.

"If we want to see more home ownership, we've got to do more the affordability of housing in New Zealand. It's just too expensive and we're putting in place policy to increase the supply of housing to reduce the pressure for increased prices," English said.

English said house price increases in recent years had made it more difficult for first home buyers, coming on top of big increases from 2002 to 2008.

"New Zealand needs to shift its view about how we plan our cities so that more people can have access to home ownership," he said.

Foreign ownership

English was then asked about the BNZ survey of estate agents that found they thought 25% of non-resident buyers were from China and 6.4% of buyers were non-residents.

English said the Government had no plans to follow the Australian example of limiting non-resident purchases to new homes or reviewing compliance with those rules.

"We're keeping an eye out for it. The survey information shows it's pretty low numbers of people," he said, adding it was only information available.

"It would be good to know a bit more about it, but we still think it's a distraction from the main issue, which drives all house prices, which is the lack of flexible supply of new housing."

26% rise?

Meanwhile, Labour Housing Spokesman Phil Twyford accused Housing Minister Nick Smith of misleading Parliament on March 13 when he said the REINZ had advised him Auckland house prices had risen 26% under the National Government.

The REINZ Stratified Index for Auckland shows prices have actually risen 54% between November 2008 and February 2014. The Median price rose 46% from November 2008 to November 2013.

Twyford asked Smith, who was represented by Social Development Minister Paula Bennett, about the incorrect figure. The exchange is referred to in the video above. Bennett said Smith's office had used the median price over the period of a full year.

Smith said the median price in Auckland had risen 40% from February 2009 to February 2014.

"Nick Smith has made it up and deliberately misled the House, the media and the public to cover up for his failed housing policy that is driving up house prices and rents. His housing policy is also shutting out first home buyers and handing the market to speculators to make a killing," Twyford said.

Bennett said house prices had risen by more under the Labour Government from 1999 to 2008. The REINZ Stratified Index shows Auckland prices rose 77% from November 1999 to November 2008.

House price index

Select chart tabs

Source: REINZ

(Updated with reaction, detail, video, English comments chart)

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20 Comments

by James007 | 18th Mar 14, 1:01pm 1395100897

Wondered when someone was going to pick this up - is low home ownership linked to increasing net wealth?

by bob | 18th Mar 14, 1:31pm 1395102677

This is for individuals - people over 15. A 6.4% drop in 8 years. Household ownership rate is 64.8%, down 3%, in the same period which isn't quite so dramatic.

People-who-don't-own-their-homes must be crowding into fewer households than previously.

Also Auckland is the only region with no increase in 'unoccupied dwellings' in last 8 years.

by bob | 18th Mar 14, 1:44pm 1395103469

The spreadsheet shows 78,330 new houses in Auckland region 2001-2013 and population increase of 255,279. That's 3.2 people per dwelling - compared to national aveage of 2.7.

So there's no housing shortage?

by Didge | 18th Mar 14, 1:35pm 1395102922

A very good point James. Furthermore, although I cannot supply written empirical evidence it seems very probable that a higher percentage of home ownership correlates with more aesthetic houses and their sections. In other words much more desirable suburbs. Indeed, there are many other probable benefits to having higher levels of home ownership.

by bob | 18th Mar 14, 1:51pm 1395103877

Interestingly in Europe the highest home ownership rates are in the worst economies. Spain, Italy, Hungary, Ireland and Romania have highest. Germany, Austria, Netherlands and Scandanavia have the lowest home ownership rates.

by scarfie | 18th Mar 14, 9:08pm 1395130090

Seems good evidence to me that housing doesn't make an economy and that houses have essentially become a method to redistribute wealth.

by Boatman | 18th Mar 14, 1:50pm 1395103837

Good, so about half of all Kiwis are landlords .

The other half , not so good .

Maybe this explains why more than half of all Kiwi's would never vote for Capital Gains Tax , and prefer to see John Key stick around.

Now lets see the rants

by bob | 18th Mar 14, 1:54pm 1395104053

No - this is individual rate, household owenership rate is much higher. Only 30 something % of houses could be renters (although a component of these households pay no rent).

by Boatman | 18th Mar 14, 2:05pm 1395104726

Ah , the penny has dropped , helped when I re-read the article

Thanks

by bob | 18th Mar 14, 3:18pm 1395109102

Even Bernard's misleading headline isn't true - it' wouldn't be the first time home ownership was below 50% -

"Until the 1930s the majority of households enumerated in New Zealand were living in

someone else’s dwelling. Not until the 1936 census would half the country’s households (50.2 %) report ownership of their usual residence;"

by Brendon | 18th Mar 14, 4:08pm 1395112113

But back in the 1930's housing and the capitalist system was in such bad shape that the NZ Labour party was elected for the first time and they introduced State housing. Starting a 50 year cycle of improving conditions for the average kiwi. Giving home ownership to the majority of kiwis and saving the capitalist system. A fact rarely acknowledged by right wing ideolouges.

by bob | 18th Mar 14, 4:48pm 1395114500

Still it isn't the first time ownership rates were below 50% though.

Home ownership peaked around 1986 and can't see how home ownership relates to provision of state housing?

by Brendon | 18th Mar 14, 5:05pm 1395115526

Bob you are right. Bernard should have been more careful with his article headline .

Originally State housing was not for the poor but the typical worker. Anyway State housing and the success of the Labour party spurred the National party into action and there was many pragmatic solutions (low interest loans, new infrastructure -commuter rail to Wellington, Motorways to Auckland etc) to encourage kiwis into home ownership until as you say the mid 80s.

Then governments forgot they have a responsibility to set the conditions for the housing market to work. They got captured by fads like 'sustainable' 'liveability' and 'compact' cities.

Now we are where we are.

by Brendon | 18th Mar 14, 5:15pm 1395116128

Read Chris Harris for a left wing view of how this went.

Lost city: Forgotten plans for an alternative Auckland

I am not advocating this as a solution but it clearly demonstrates the cities we know are created in large part by a series of political decisions....

by waymad | 19th Mar 14, 11:01am 1395180080

Um, when ya drags the interactive thingo on the graph object all the way to the left, and Then look at the curve, it can be seen by the ol' eye-o-meter that the major rise (index Nov 2000 around 1571 (mouseover, tells one exactly), and was 3381 at Nov 2007 (a local peak, by the looks) - was concentrated in the Labour years.

And Ah do recall one major, major driver of this rise.

The Welcome Home (or whatever they called it) incentive - criterion - can ya Fog a Mirror? - dished out guaranteed munny to those what couldn't qualify in any other way.

In Christchurch at the time (2001) it was perfectly possible to buy a shack for less than $50K. Small, imperfectly maintained, but a Hoose, nevertheless.

The day after this fabulously dopey scheme was introduced, all house prices started with a 1. Literally. Browse some RE ads of the era for confirmation....

No-brainer, really. Because no matter how awful the FHB's history, current earnings and potential looked, good ol' Nanny State stepped in with the first hundred grand regardless.

Instant re-pricing signal. And it went on from there....

Wheeee!

by Brendon | 19th Mar 14, 11:45am 1395182714

Waymad can you find a link or reference to this effect or the welcome home incentive. I was out of the country earning good foreign cash to repay my nursing student loan. But instead of repaying the loan I returned to Christchurch in late 2002 and put a deposit on a house because I had noticed house prices were rising fast. I didn't know the cause.

I suspecct I am the last generation of nurses (middle income earners) who will be able to afford to buy a home without assistance from partners or families.

Look at the trap some are in.

A nursing colleague rents in Halswell. A fringe suburb in Christchurch. He has worked himself out of Zimbawe through brains, good character and diligence. Obviously he has little in financial backing from family. He has been renting a 3 bedroom home in Halswell for his young family. They are now well established in the area, in particular the kids are doing well at the local school. When they first rented it cost $280 per week. Then a few years ago it was increased to $360 a week. A month or so ago his landlord sold up making a very healthy capital gains profit. The new landlord increased the rent to $450.

Mike Greer from Mike Greer Homes the biggest builder in Canterbury puts it simply.

"Honestly the main problem is land costs. Land costs are just rocketing," Greer says.

Ten years ago he bought sections in Milnes Estate in Halswell for $70,000 and now sections in Aidanfield across the road were fetching $240,000.

by B-Rocker | 19th Mar 14, 11:37am 1395182230

None of this is surprising.

One of the major changes over the last 30 odd years was the introduction of easy credit. This meant that to compete for a house (and it only takes one other person bidding) you had to bid up to the maximum amount that your income allowed you to over the next 30 years. Take away the easy credit, and your maximum bid depended more on how much savings you had.

This inevitably saw the banks loan book increase, and houses prices increase. The winners were the banks and the original house owners. The losers were the first home buyers.

Now that we seem to have tapped that resource and come to the limits of lending, the homeowners are now searching for buyers offshore in order to keep up the value of houses. I know they say that non-resident buyers are only a small proportion, but I'd like to see some statistics about recent immigrants and home ownership, because to me that's the same thing. I think you'd find a worrying proportion.

Dramatically curbing immigration (if only into Auckland somehow) I think is much needed.

The other major change has been in the workplace, where gradually through technology firms have been able to centralise their work, especially administration and support. This has meant that whereas before you had workers spread all over the country, you now have workers far more concentrated in major cities e.g. Auckland.

When young people go to Auckland, this is out of necessity to find a job, not because they really love sitting in traffic. And then following on from that, you need to live where you work, therefore more competition for a small area of housing.

Labour can't point any fingers, because it has happened over their time too. The answer does not lie with more handouts and enabling the demand side.

We need to:

1. Increase the supply of housing.

2. Limit immigration that competes with domestic home ownership.

3. Incentivise firms to establish themselves in regions e.g. APN in Whangarei.

As for number 1, does anybody know why apartments are not feasible? Is there not enough demand? If not, then we have to expand the city limits to allow more houses to be built.

by dh | 19th Mar 14, 12:08pm 1395184120

The problem with the "easy credit" argument is that NZ house prices have gone up much faster than NZ debt. "Easy credit" works great for explaining other countries problems very clearly, but in NZ something else was elading the housing market and debt was following along behind it at a lower level than expected compared to other countries.

by B-Rocker | 19th Mar 14, 12:26pm 1395185182

Which is why I gave other factors as outlined above. There is no problem with the easy credit argument, as it has definitely been a huge factor in house price increases (not the only factor though).

by Brendon | 19th Mar 14, 12:40pm 1395186049

B-Rocker re your work argument I made the same point to Alan Johnson the Salvation Army policy analyst who present the Sally armies annual report to the Christchurch Housing Forum. He said the housing situation had improved except in Christchurch and Auckland which was only 45% of NZ. But elsewhere in his report he said the majority of job growth was in Auckland and Christchurch.

So I pointed out that housing affordability is a problem for the property less working class because they need to go where the jobs are. If the places with jobs are the places with unaffordable housing we do have a problem....

I think the solution is build satelite towns or cities that have such good transport links you can access most of the hub city in under an hour commute. (Google Alain Bertaud for why) You would then provide affordable housing on affordable land by either compulsory purchase or by zoning a massive amount residential so that there is no artificial scarcity value. Or some combination of both, say, compulsory purchase for a high density hub but no urban growth boundaries around it.

I think the infrastructure costs and public debt to pay for it would be less than letting this private debt boom continue.