Cielda. I'm Chelsea Daniels and this is the Front Page, a daily podcast presented by the New Zealand Herald. The government has unvowed grand plans to flood the market with more houses, announcing new changes to planning rules that will require councils to plan for thirty years of housing growth. It comes after Housing Minister Chris Bishop said he wants
to see house prices fall. He's already getting his wish though, with prices dropping to a point that in some of the country's biggest cities homeowners are delisting their properties rather than selling for a discount. So we're flooding the housing market work in a country where owning a property is the cornerstone of our economy. Today, on the front page, Opus Partners economist Ed McKnight joins us to give his take on the state of the property market. Ed, can
you give us a lay of the land? How house prices faring on average at the moment?
Well, we had a bit of a bump between May last year and right up until February this year in twenty twenty four, but since February we've actually been on a bit of a slow decline. So if I take people back a couple of years. We all know that the housing market peaked in end of twenty twenty one, kind of November twenty twenty one, and for eighteen months
after that, house prices fell about eighteen percent. So this big drop the largest drop we've actually ever seen in the history since we started tracking house prices back in nineteen ninety two. So we had this massive drop. Then house prices for about nine months they crept up just over five percent, and now they've gone down about three percent in the last couple of months. So we've had this big drop, a little bit of a recovery, and now a bit of a slide.
I understand in areas like Northland and Auckland, for example, people actually delisting their homes because the prices aren't high enough. Are things really that bad at the moment?
Well, the interesting thing is before we ran the start, nobody had actually ever looked at this before. And the truth of the matter is, over the last call it seven years, somewhere between a third and forty percent of properties come to mark it and are then eventually delisted. So we have this idea that, yeah, if a property comes to market, it will definitely sell, but most of the time a third of properties don't end up selling because sellers will say, well, you know, I'm not really
sure if I'm happy selling it for that price. Now, at the moment we have seen a bit of an increase over the last six months. We were seeing more properties be delisted, but it isn't that high by historical standards now as you've identified Auckland and Northland though, that's where we're seeing most properties be delisted at the moment. Some places like Wellington only fourteen percent of properties are being delisted, so there's a very high sell through rate in the capital. At the moment.
We seem to be always bothered about something, right, house prices are too high. Now they're too low, and people are delisting and investors are getting worried. When do you think we'll actually be happy.
Never. We'll never be happy with house prices. And the reason is that somebody is always going to be grumpy about something. Even if you take the interest rate debate. It's so funny. I was on news talk, said b talking about interest rates falling, and anybody with a half sized mortgage at the moment is really excited about interest rates falling. Oh, gosh, yes, that will save us so much money. Well, we had one person call up and say, no, I don't want the interest rates to go down because
I'm a retiree. I've got a lot of money in the bank at the moment and I want to earn a decent income of it. So whenever somebody's happy about something, whether it be interesst rates falling or house prices going up, somebody else is always going to be unhappy. And those are the voices we tend to hear most loudly, because when people are happy, they don't shout from the rooftops about it. When someone's grumpy, though, you know you're going to hear about it.
The governments announced its plans to flood the market with housing by freeing up more land for housing developments with the plan of making land and housing cheaper.
These targets will require councils to live zone feasible development capacity to provide for at least thirty years of housing demand at any one time. Feasible development capacity means housing capacity that is commercially viable for a developer to build at a profit. In effect, this will flood the market with opportunities for development and over time drive down land prices and the cost of housing.
What do you make of these changes and do you think it will actually work well.
I think the Housing Minister christ Bishop is talking a big game, and certainly he's incentivized to do that. Lots of people want house prices to be stable over the very very long term. I think there will be some benefits to it. For instance, they're saying they are going to remove any minimum requirement about how big a house or an apartment has to be. That will mean we
get more smaller sized departments built. On top of that, councils won't be able to have a say in terms of whether apartments have to have balconies or not, or how large those balconies have to be. With all of those rules gone, we should see some cheaper and certainly smaller apartments coming through. And at the margin, yeah, maybe a couple more developers will build those sorts of properties, and that will be good for people who are okay
and happy to live in slightly smaller properties. I always take what politicians say with a grain of salt, because they're very good at saying that they're going to do something big and meaningful and then it doesn't always materialize,
and I'll give you an example of that. The Housing Minister is saying that they want every single council in the country to open up or zone two years of population growth, and often christ Church is the shining example that the government holds up because immediately after the earthquakes they zoned for thirty years of population growth. There was a lot of housing being built and for a time
house prices were pretty flat down in christ Church. But what a lot of people miss is that during the COVID boom from twenty nineteen onwards, christ Church house prices actually increased at a much faster rate than the likes of Wellington, Auckland or Dunedin. And so I'm not sure whether zoning a whole heap of land is going to fix all of the problem, but it will certainly help.
We've already seen the growth of new builds in Auckland, for example, outpaced population growth. So what do we need to keep building more houses?
Well, if I take you back a couple of years, every single media outlet, including the Herald, was talking about a massive housing crisis and we needed to build more and more and more homes. I think this is just part of the catch up.
Do you worry about their plan to remove the urban rural boundaries?
I worry more about the infrastructure. It's quite interesting because if you remove the rural urban boundary, you're going to get more housing sprawl, right, so you are likely to see more housing built out Pocono Way just south of Auckland, and also down in Poocacoe and some of those more
rural communities. Now, that obviously has benefits and drawbacks. The benefit is that if I am a person who is willing to live an hour out of the city because I want a standalone house where property prices are a bit cheaper and I want that kind of lifestyle, I kind of think, well, why do we have all of these rules in place? But we also know that we're not so good at building infrastructure here in New Zealand. So all good, we're going to get rid of the
rural urban boundary. But now it's Auckland Council and Auckland Council rate payers who are now responsible for building that infrastructure that goes in there to support those houses. Now, yes, the developers have to pay some taxes what's called development contributions in order to build those properties, but often my understanding is that a lot of that infrastructure is ultimately financed by the poor old ratepayer.
Those plans to decide the minimum size of new apartments, could that see kind of like an influx of shoebox style apartments, the ones that we see I'm thinking in Japan, you know, one by one meter, et cetera.
Well, that is the risk if you don't have a rule in place. A developer will build them if they think they can sell them, and if they think they can make more money by selling those shoe box apartments compared to building something else. So ultimately it comes down to what are home buyers or investors willing to purchase.
And if an investor is buying those kinds of shoebox apartments and saying, yeah, okay, I'll buy that at whatever price the developer are selling it for, whether people are actually willing to rent those properties, I can ciertably foresee a future where there are a lot of studio apartments built. Investors then purchase them, and there we have new stories about how small these properties are and the rents that
people are paying for them. But it ultimately comes down to what are people willing to build, what are people willing to buy? And what are people willing to rent?
The average wage in New Zealand is currently what about fifty three thousand dollars? Doesn't that put the dream of home ownership out of many young Kiwi's grasps. This idea of a kind of nuclear family of the fifties and sixties isn't really the benchmark anymore, is it. People are staying single and childless for longer. What are the options out there when a home costs roughly a million dollars, say for a single woman working as a host in Auckland, Well.
It's very difficult if you're a single person. But that median wage is quite misleading when we're thinking about house prices, because we've got to think about, well, what is the average household income? The average household income in New Zealand is actually about one hundred and thirty k. Just over that, the average household income in Auckland does about a hund fifty nine thousand dollars.
Would you look that It'd be couples though, wouldn't it.
Yeah, that'd primarily be for couples, And so certainly if you are a single person it is very, very difficult if you think about the average household, though, buying your first property is still achievable, and we actually see that in the numbers. In fact, almost a quarter of properties purchased over the last six months have been purchased by
first home buyers. Now, of course there are as many properties being transacted at the moment because it's quite a slow market, but first home buyers are getting out there and doing their best, actually buying up quite a large percentage of homes, a larger percentage of homes than they almost ever have been. So it's a great time to be a first home buyer.
When we look at those figures on first home buyers, though, there's no differentiation between whether it's a couple or a single person.
Definitely not. And what I'd say there is that buying a house is a single person is difficult and probably has always been difficult. If you're a couple, it obviously is a lot easier. But what I'd also say that is the median age of buys their first home is currently thirty seven in New Zealand, and I think we sometimes think that, oh, well, you know, the average person buys their first home in their twenties and then gradually
pays it off. It's actually quite a bit older. So I'm often saying to people, well, if you're purchasing it thirty five or thirty six, that's still great. That is below the average. And hey, if you're forty buying your first home, it's actually not that late because the average or median firm and buyer is aged thirty six point seven years old.
That makes me actually feel a little bit better. Do you think I should stop buying avocado and toast?
I think that buying avocadao toast isn't necessarily the issue. I don't even think avocadavo toast is as popular as it used to be. But back around that kind of twenty fifteen twenty sixteen, it was incredibly popular. That's what all of us millennials were out there buying at the cafes. And there's probably some grubby old sixty five year old who owns fifty proper that they bought for you know, a couple of rasberries back in the fifties probably said
something along those lines which it came up for. But I do want to dig into that point around well, what about the single people? It obviously is very difficult. Whenever you look at any piece of data, you can look at it in two ways. Right. You can say, Okay, it's very difficult for single people to go out and
purchase their first time but that is absolutely true. But there are also some positive signs out there that I don't think get enough media attention, like the average age to buy your first time, or like the fact that the average household income in New Zealand is around that one hundred and thirty two k, even though the median wage is fifty three grand.
More people are being pushed into the rental market. I see a record four hundred and ten thousand rental bonds were lodged by November twenty twenty three. That's up thirty eight percent from twenty ten. Some of these new housing developments are built to rent schemes. Is that a good idea when so many people aren't able to get onto the property ladder already?
I think it's definitely there important because the truth of the matter is not everybody is able to purchase their own home, certainly not straight away. And one of the things I've got to remember is even when home ownership was at its highest in New Zealand, twenty six percent of households still rented. Now it's not just because some people, no matter what happens, they're not going to be able to get a mortgage. There's kind of a stage of
life thing here. So when I was twenty two years old, yes, I was renting because I didn't have the deposit yet to go ahead and purchase the first time. When I was at university, there was no way in hell I was going to be able to purchase the first time. Of course I had to rent. So there's this section of the population that, no matter what's happening to house prices, around a quarter of us will always need to be
able to rent. And as New Zealand's houses get older and older, yeah, we need new houses being built so we can have somewhere safe, warm and dry to rent. So I think it's important that there are people out there building new properties for renters.
So you know what the new government's thinking and what their approach is. Labour's still working on its future tax policy plans, but Finance spokesperson Barbara Edmunds has hinted that there needs to be a change to discourage property investment.
We need to remove this incentive that the tax system provides for qs to invest in property. Yeah, a seller in wag Juna who's a cleaner gets every dollar of what they've earned tax, but doesn't get the capital tax. We get higher wages when we produce more things, so there has to be a balance there.
She says.
New Zealand's obsessed with housing investment. Is this a fair assumption and could this possibly ever be curbed?
I do think Kiwis are very interested in property, but I think that's because we need it. Everybody talks about, oh, property investors are making so much money. But there's a flip side to this as well, which is that New Zealand needs regial accommodation right and it can't be provided by the government. If you think about all of the properties that are actually provided out there for renters, only fifteen percent is provided by the government or by community
housing providers. Eighty five percent of rental accommodation is provided by mums and dads who put their own house on the line most of the time to borrow a lot of money to go and buy a house. Now do they expect or do they hope that they're going to make a few bob out of it and that it's going to help them for their retirement. Absolutely, they hope that. But at the same time, we need people out there owning rental accommodation, and in many cases, I think of
it a bit like the supermarkets. So we need people who are going to be out there providing food so we can all cook dinner on a Wednesday or Thursday night before we sit down and watch some Netflix. But is it fair that the supermarkets make money? I guess we need the supermarkets to make some amount of money. We can argue how much it is, but we need owning a supermarket to be profitable so that there are supermarkets that provide us with food and groceries.
And do home owners looking to sell have to wait for ends rest rates to fall before listing their properties or should they just buy the bullet now if the market is truly set to be flooded by new homes.
In many ways, I think it depends what you're trying to do. You know, most people say, well, if you're buying and selling in the same market, so if you're selling your own home to go and buy something, it doesn't really matter. But the way that I think about it is. If you are trying to buy a bigger, better, more expensive house, it's generally better to do it when house prices are lower, because that upgrade isn't quite as expensive and you've got more time to do it now.
If you're doing the opposite, if you're downsizing, you generally want to do it when house prices are really high, because then you're maximizing the difference between what you sell for and what you buy for.
And for those looking to buy their first home like me in Auckland, is there any hope there at all? Or do I need to consider moving to perhaps to the West Coast.
I don't know how much you d your situation, Chelsea, but I can tell you there is hope out there for you. And I think it's important that we acknowledge both the bad side, as often happens, but also a good data that says, actually, it's a great time to be a first home buyer. There are fewer properties out there that are going up for auction now. First home buyers hate auctions because every time you put your hand
up it's an unconditional offer. That means that before you even raise your hand at auction, you as a first home buyer need to get a pre approval from the bank. That takes time. You've got to do all of your checks beforehand, like getting a building inspector getting your lawyer to look at the property. And if you do that for a couple of different auctions, it starts to get really,
really expensive. So the fact that it's taking longer for properties to sell, the fact that fewer properties are coming up at auction, the fact that there is a higher percentage or a very high percentage of first home buyers purchasing properties at the moment, they make out a big part of the market. I think it's really good for you, and we need to acknowledge that it is a buyer's market, so you, as a buyer have the upper hand.
Thanks for joining us. Ed that's it for this episode of The Front Page. You can read more about today's stories and extensive news coverage at enzied Herald dot co dot nz. The Front Page is produced by Ethan Sills and sound engineer Patti Fox. I'm Chelsea Daniels. Subscribe to the Front Page on iHeartRadio or wherever you get your podcasts, and tune in on Monday for another look behind the headlines,