Housing Crisis in New Zealand
Just when you thought life could not get more complicated, New Zealand is experiencing a net migration gain.
Other than the pressure this is putting on our isolation capacity, it will shortly pass into pressure on our already under-resourced housing market.
For many years there have been rumours of ghost houses in New Zealand. These are not just the unoccupied holiday homes of the rich and famous who think having a bolt-hole in New Zealand for an emergency (such as the paparazzi hunting you, your Government going rouge, or a pandemic) but for those who think having a safe house in New Zealand makes economic sense. Certainly, one reason for the change to property ownership rules under the Overseas Investment Act was to curb this growing trend.
A couple of years ago, we met a person whose friend own 40 ghost houses in New Zealand. While none technically belonged to her, legally her name was on every title. None of those homes were occupied, but purchased for friends and family still living in the old country. This was a safety net, and a means to preserve cash offshore without attracting income tax, yet likely to receive capital growth over time, and also potentially out of reach of a Government seizing their assets. As the owner was a New Zealand resident, the OIA rules do not appear at face value to apply. Although we suggest that they will and they do, if you are buying as an undisclosed agent for a non-qualifying non-resident.
In March 2020 Newsroom quoted a Statistic 2018 report that estimated 40,000 ghost homes in Auckland alone. With Stuff quoting the same report to say there were just under 200,000 such homes across New Zealand. One can only assume that more homes were bought immediately before the OIA rules changed.
We predict that the New Zealand Government is going to have to move in the next 12 months to do something about this. Those properties could house a lot of people, quickly. This might have to be a “vacancy tax”, a compulsory sale notice or a requirement to rent or occupy. The Government and the private sector cannot build enough houses in the next 12 months to provide for the existing market and new and returning migrants. On the other hand, there are a lot of holiday homes that will almost certainly come on the market before the end of the year as investors try to exit the market. But these houses are not in core cities, but in rural idylls close to beaches and ski resorts. And mostly expensive, or the opposite - not capable of meeting new tenancy regulations.
People have to live somewhere. And the more new and returning migrants the more pressure there will be on all economic sectors of the housing market. We suggest that most migrants are returning New Zealanders, probably with spouse and kids in tow and are here for the medium term while COVID-19 continues to take a hit on health, safety and jobs elsewhere. While there is an argument that many New Zealand residents on visitor and work visas will leave, in our view they will try very hard to stay put, and no-one can blame them for that. Besides, again, the typical working visa migrant is not living in the main cities but in rural towns and smaller cities, not where professionals returning to New Zealand expect to live.
That’s our simplistic view of the coming housing crisis (or more like the increasing housing crisis). We don’t have an answer to ghost homes, nor where all this new building is going to be, but new and innovative thinking is required, and very soon. Words like, emergency powers, Resource Management Act, infill housing, rezoning, innovative building products and processes, kitsets and relocatables all come to mind. Infrastructure, waste water, passive houses, smaller houses and footprints, grey water, solar and wind technology, new suburbs, new schools and parks, shops and medical and social support are all required to get us over the line. While this Government may be unwilling to use terms such as KiwiBuild, there is going to have to be someone with the courage and vision to restart that conversation.
Posted: Wednesday 22 July 2020