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The competition for scarce rental housing in Auckland has been intense for several years and appears to be getting worse.
This week we have reported the lengths that accommodation seekers are having to go to in the hope of impressing an owner or letting agent. Being well-presented and employed is just the beginning.
Hopeful tenants are sending full CVs and photographs in advance of the viewing, when they are likely to be in a crowd of hopefuls, all “explaining your professional job and how you are hardly ever home and just want a clean and tidy place”, as one flat-hunter told us.
They are, of course, making offers above the stated rent. They have bid up the average weekly rent for a three-bedroom home in Auckland to $500, compared with $350 in the country overall. Many of these people are obviously in a position to buy a home but, as we reported yesterday, there is a shortage of houses offered for sale and that also is getting worse.
Normally in these circumstances the demand would bid up the price of houses too but that is not happening. Auckland house prices went so high during the last property boom that they far exceeded sensible affordability levels as a proportion of incomes.
In the four years since the bubble burst, house prices in this country have dropped only 4.4 per cent.
In December the Economist calculated that New Zealand homes are overvalued by 25 per cent, putting it in the company of Australia, Canada, Britain and much of western Europe where house prices have not plummeted as they did in the United States.
The financial magazine said householders in these countries still carried extremely high debt and it believed the “bursting of the housing bubble is only half-way through”.
Four years seems a long time to hold an investment home if it has been highly geared with debt for a quick capital gain. Doubtless rent increases have helped sustain the property in the meantime but clearly New Zealand investors are not as vulnerable to debt as the Economist supposed.
First-home seekers waiting for prices to collapse might wait a long time.
The Real Estate Institute’s index for Auckland was back at its 2007 peak in December and more houses were sold than in any December since the crash.
But the excess of demand over supply remains so great that agents are listing buyers rather than sellers and cold-calling property owners in an attempt to find stock.
The only practical answer to high rents and unaffordable prices is to increase the supply of new houses.
If young adults today are to aspire to home ownership as their parents could, the building industry has to be expanded and governments must ensure that nothing stands in the way of construction of the type of houses these people want.
Their need is too important to be fodder for a political argument between land developers and city planners as to whether urban limits or land banking are aggravating the housing shortage.
Nor should their plight be made an argument for the “compact city” plan, as Auckland’s mayor has claimed.
Some home-seekers might like the high-density developments the Auckland Council wants to encourage in places well served by public transport, others might have other plans.
The Productivity Commission has recently reported on the limited capacity of the country’s building industry and the high costs of materials, problems that will be exacerbated by the scale of reconstruction needed in Christchurch eventually.
But with a concerted effort by planners, bankers, building companies and council consents, the supply of sought-after houses could surely be improved.
It would be a stimulant for the rest of the economy too.
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Housing need goes beyond role of politics | Katonah NY Real Estate
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