New Zealand is in the grip of a really bizarre housing crisis.
It is well documented that Australia has some seriously pricey homes, thanks to hot money washing into the country to take advantage of its burgeoning currency and strong trade relationship with China.
What is less well known, and has been revealed in a survey by US consultancy Demographia, is that New Zealand real estate is less affordable than Australia’s, based on a comparison of house prices with median income. Housing in major Kiwi urban centres now stands at 6.7 times gross median income, compared to 6.5 times in Australia.
Hong Kong is the world’s costliest property market, according to Demographia. That is understandable, as Hong Kong is tiny and crowded.
But New Zealand has more sheep and cows than people, and an enormous amount of uninhabited land. According to government data, the land where Lord of the Rings was filmed to take advantage of its stunning, empty landscape, has an average 0.5 people per square kilometer. Which means every Kiwi, on average, has an area bigger than Vatican City to themselves. Nor is the Kiwi economy booming. GDP inched up 0.2% in the three months to last September, compared to the same time last year.
As this chart from Demographia shows, between 2004-2012, Kiwis’ dwellings have inched up to become more expensive, compared to incomes, than Aussie homes.
The problem New Zealand has is one of extremely low housing availability. As Kiwi Deputy Prime Minister Bill English writes in the forward to the Demographia survey: “It costs too much and takes too long to build a house in New Zealand.”
He explains that heavy bureaucracy around land planning means developers end up waiting too long to get permission to build homes. He adds that building materials cost more than in Australia. Land, he says, has become “artificially scarce,” by “regulation that locks up land for development.”
While that is English’s view, Kiwis are deeply divided on why land in this country where it so plentiful has become extremely expensive. Developers and right wing politicians blame a bureaucracy that is too concerned with environmental protection. The country’s opposition Labour Party says the government has not pursued enough affordable housing policies.
As this columnist says in the New Zealand Herald, “the real problem is persuading developers to forgo large profits and to build for the lower end of the market.”