What's Really Happening in the NZ Property Market 2014
We hear all about it in the media, NZ house prices particularly in Auckland are reaching record levels each month.
Why is it happening? We know it stems from an under supply and a consistent high demand of homes but what is causing this demand and shortage issue?
According to Shamubeel Eaqub, principal economist at the NZ Institute of Economic Research, Blame it on the Kiwi culture of home ownership and housing investment. Blame it on the tax system. Blame it on easy access to mortgage finance.
Why? Because regulation overly favours mortgages over other types of lending. Attractive tax advantages of real estate investment. The alternative of renting isn't as attractive compared to owning a home.
According to Corelogic, Thirty years ago, an average house cost two - three times the average household income. By 2007, an average house cost more than six times household income.
So who's buying? 45% goes to investors, about 8% of purchases are possibly being made by overseas cash buyers and the rest are purchases moving from one property to another.
Did you know? In 1991, 76% of homes in NZ were owner occupied, but by last year, that was down to 63%. Home ownership rates are now the lowest since 1951.
In the 1990s, a household on the average income needed 30 years to save a deposit and pay off a mortgage. In Auckland today, it is an estimated 50 years.
A few recommendations from Mr Eaqub to curb this can be viewed here: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11293868