Daily Management Review

Despite Covid-19 Recession, House Prices Surge In New Zealand, Deepening Affordability Crisis


Despite Covid-19 Recession, House Prices Surge In New Zealand, Deepening Affordability Crisis
Despite the global recession inflicted by the Cvoid-19 pandemic, house prices in New Zealand have increased to touch record levels. This development has prompted economists and experts to warn that the surging property market will cause damage to the long-term economic wellbeing of the country as well as further widen the inequality in the society.
It should be mentioned that even prior to the present surge, the house prices in New Zealand ere already amongst the most unaffordable in the world. So far this year till September, there as an 11 per cent rise in median prices, while the median home price in Auckland has reached almost $1m ($660,000).
Compared to August’s prices, there was a 2.5 per cent rise in home prices across the country in September.
But while investors have been attracted back into the market because of the cheap loans and looser lending requirements that were aimed at stimulating the economy during the pandemic, many fear that the rise in prices would increasingly leave behind first-time buyers and lower-income groups.
Record growth was being witnessed in mortgage lending and prices were being driven up as most of it was chasing existing houses, said Shamubeel Eaqub, an independent economist and author of Generation Rent.
He said that after regulators removed a requirement to have a 30 per cent deposit prior to purchasing an existing house, investors have been given a big advantage. That measure was aimed to encourage investment in new houses so that a chronic shortage could be eased. It was however later lifted to stimulate the market during Covid-19.
Eaqub says that price hike of as much as 40 per cent was reported in some small towns driven by rental yields as high as 10 per cent.
“It’s good for people who own houses but it’s terrible from an equity perspective,” he said. “For first-home buyers and young people, it gets further out of reach. This just worsens everything we have been experiencing for the last 30 years. The lot of Generation Rent has just got a lot worse.”
According to Eaqub, also in the market are those first-time buyers who believe that if they are unable to purchase a house now they never will.
In the quarter to September, New Zealand was pushed into a sharp recession with a record contraction of GDP at 12.2 per cent. But  Eaqub said that a recovery as helped by the loosening of regulations on mortgage lending.
“There’s still nearly 75,000 who have lost their jobs, really tough for them but for the other more than 2 million workers things are pretty good.”
A recent survey by Demographia International revealed that one of the most unaffordable housing markets in the world as in New Zealand. It also revealed that homelessness in the country had increased to more than 40,000, or 1 in 100 Kiwis over the past decade.
The housing shortage has been described as “a human rights crisis” by the United Nations. “They allowed the perfect storm, and that’s successive governments,” said UN special rapporteur on the right to adequate housing,