WELLINGTON - Desperation among homebuyers is pushing New Zealand house prices to record highs, overshadowing Government's efforts to rein in the red hot market and putting in jeopardy a key policy promise by Prime Minister Jacinda Ardern.
Nearly 15,000 homes sold for more than NZ $1 million during the last 12 months, compared with just 5,500 in 2020 according to the Real Estate Institute of New Zealand's Million Dollar Price Report.
A derelict home sold as too dangerous for the public to enter in Wellington for 70 years after it was declared too dangerous to enter - for almost NZ $1 million - a price far higher than expected.
The new owners didn't step foot inside before purchasing it; even we could not enter, said Ray White of the real estate group Ben Atwill, which made the sale. From what I see, there is no stopping premium dollars from coming through.
Such runaway house prices have made the New Zealand property market one of the most unaffordable in the world, and measures introduced by the government and the central bank have so far done little to cool demand.
This is largely because of pandemic-induced policies that have translated into cheaper mortgages, while locking out new affluent investors and investors to upsize their homes and build up portfolios of rental investment properties, while locking out low and mid-income earners https: www.reuters.com world the-great-booth how-new-zealands- much - inspiring-covid 19 - response-helped-fuel-housing- crisis - 2021 -
The government has tried to rein in the market with policy tweaks by applying new taxes for property investors and putting checks on flipping activity, in which investors buy a house, quickly renovate it and sell it for a large markup. Such investment has pushed house prices up by nearly 30% to a national average of NZ $820,000, on top of a 90% rise in the preceding decade.
Homebuyers don't want to miss out on what looks like a gold rush, and there is no sign investors are going offshore in a hurry, said independent economist Tony Alexander who publishes a survey of real estate agents with REINZ.
The national bank of New Zealand said this week that it was concerned about high-risk borrowing and that house prices were above sustainable levels. It is proposing tighter mortgage lending and debt-to-income restrictions https: www.reuters.com - article New Zealand-lending - Rbnz-IdUSL 4 N 2 P 93 NK.
Economists expect the bank to raise interest rates in an open general meeting of the Bank on August 18, 2018.
The Reserve Bank has highlighted that it is not seeing as much reaction to the changes made so far, said Brad Olsen, Principal Economist and Director at Infometrics. The risk of having such a huge pile of debt has continued to ring alarm bells.
Housing has become a policy headache for Ardern, who secured a second term in office last year on the back of her success handling the coronavirus pandemic. New Zealand has about 2,500 coronavirus cases, with the last one in February.
Opinion polls this week showed her party's popularity dropped since the election, while her rivals gained support.
When she was elected in 2017, one of the issues in her platform was ending the free run of property investors and building affordable homes.
But her centre-left government's flagship affordable-housing project, Kiwibuild, foundered. The government has not been able to remove the red tape around land approval, making land artificially scarce. Private developers say the costs and consent process make properties unaffordable.
Ardern has so far refused to introduce a capital gain tax to cool the market.
Olsen said capital gains tax is a political dynamite. A lot of people own homes so the housing issue is inextricable linked to politics.
The Human Rights Commission launched an inquiry into the housing crisis https: www.reuters.com world asia-pacific new-zealand human-rights commission-launched an inquiry-into- housing-crisis - 2021 - 08 - 02, saying it was causing a humanitarian crisis as young people were being denied of their basic right to live in a decent home.